The thought of inadvertently disclosing privileged documents to an adversary in litigation has often sent a chill up a lawyer's spine. Would such inadvertent disclosure result in the client's privilege being waived? Will the courts assist and order the documents be returned? Today the High Court confirmed that where privileged documents are mistakenly disclosed, the Courts have the power to correct the mistake. However, lawyers cannot shirk their responsibilities; they must take reasonable steps to ensure mistakes do not occur and must promptly act to correct a mistake once it becomes apparent. We consider the High Court's decision below.

The High Court was given an opportunity to consider issues of inadvertent disclosure in the case of Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited[2013] HCA 46. The case concerned parties in a commercial dispute that were ordered to give general discovery. The appellants' solicitors used an electronic database to review and code thousands of documents. Documents that were subject to client legal privilege were mistakenly coded as "non-privileged" in the lists of documents that were given to the respondents' solicitors. The documents were also inadvertently disclosed on disks that were given to the respondents' solicitors.

As soon as a partner became aware of the mistake, he wrote to the respondents' solicitors claiming that several documents had inadvertently been disclosed contrary to the clients' instructions. He requested that the documents be returned and that the solicitors undertake not to rely on them in the legal proceedings. At no stage was there any dispute that a mistake had been made; however, the request to return the documents was refused on the basis that privilege had been waived.

The appellants sought equitable relief from the Supreme Court of New South Wales and a judge of that Court found that nine documents had been inadvertently disclosed and the respondents' solicitors were effectively ordered to return the disks containing those documents. The Court of Appeal overturned that decision and held that in the circumstances, it would not have been obvious to a reasonable solicitor that the documents had been mistakenly disclosed. The appellants then successfully appealed to the High Court.

The Supreme Court's supervisory powers

The High Court held that the Supreme Court of New South Wales has the necessary supervisory powers to ensure that a party be permitted to correct a mistake in the discovery process. In New South Wales, legislation imposes rules on Supreme Court proceedings that primarily aim to facilitate the just, quick and cheap resolution of disputes.

The Supreme Court's supervisory powers should have been exercised in this case because the circumstances were strongly indicative of a mistake having been made. After the respondents' solicitors received the lists of documents, a senior associate noticed that communications between the appellants and their solicitors were on the list. Some of those communications were marked "privileged" while others were "non-privileged". The senior associate wrote to the respondents' solicitors seeking clarification. The Court found that the inconsistent coding on the lists was a strong indication of a mistake, despite a careful process of discovery.

Although discovery is an intrusive process, the High Court said that it does not affect a litigant's right to maintain confidentiality of documents where the law provides that protection. If a privileged document is inadvertently disclosed, the mistake should ordinarily be corrected and the document returned.

In this case, the Supreme Court was faced with a mistake made during the course of discovery and should have ordered the mistake be corrected. This would have allowed the parties to continue preparing for trial and would have facilitated the just, quick and cheap resolution of the dispute.

Was privilege waived?

The issue of whether privilege was waived in the case should not have been raised, according to the High Court. A mistake was apparent in the circumstances and the respondents' solicitors never disputed that a mistake had been made. They had also been notified swiftly of the mistake. The Court unanimously held that this conduct was not indicative of the appellants having taken a position that was so inconsistent with privilege as to have waived it.

It was important for the outcome of this case that the appellants' solicitors had acted promptly to try and correct their mistake. When an explanation of the mistake was sought, a partner at the appellants' solicitors replied explaining that some of the communications had been mistakenly coded as "non-privileged". Privilege would only have been waived if the solicitors had committed an intentional act knowing that conduct inconsistent with a claim for privilege would result in the claim being abandoned. In this instance, the mistake was apparent and swift action had been taken to redress it; privilege was not waived.

There are limits on when courts will correct mistakes in discovery

While the Court confirmed that a mistake in disclosing a privileged document should ordinarily be corrected and the document returned, it was careful to place some limitations on this relief. Lawyers must still make every reasonable effort to ensure the accuracy of lists of documents that form the basis for inspection of documents by the other side. Mistakes that result from taking shortcuts may not benefit from the courts' assistance. In the case before it, the High Court commented that whilst the appellants' discovery process had been thorough, mistakes still occurred.

The Court also observed that in large commercial cases, mistakes during discovery are more likely to occur. However, an error will only be corrected by the Courts if a party has acted promptly to try and correct the mistake. Assistance may be refused if it would be unfair to the other party to order the return of the privileged documents.

Encouragement Offered To The Legal Profession

The High Court observed that judicial assistance will not be needed to correct inadvertent disclosure mistakes unless a dispute between the parties arises. The Court's decision offered a thinly disguised hint to the legal profession not to allow such disputes to arise. In the High Court's view, parties should privately agree to return documents that have been disclosed inadvertently.

The Court also offered a sobering caution for lawyers involved in disclosure. Conduct rules applying to the legal profession in Queensland and South Australia require a solicitor to return material that is, or appears to be, confidential where the solicitor is aware that the disclosure was inadvertent. The High Court commented that the rule should not even be necessary. Such conduct should be the norm because it permits parties to focus on the real issues in dispute and avoid complications arising from disputes about returning such material. This conduct provides an example of professional and ethical obligations that support the objectives of the proper administration of justice.

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