Graham, Justice Peter --- "Establishing and Maintaining a Claim for Legal Professional Privilege in the light of Telstra Corporation Limited v Minister for Communications, Information Technology and The Arts (No. 2) [2008] FedJSchol 47; [2007] FCA 1445: The Quandary facing In

Establishing and Maintaining a Claim for Legal Professional Privilege in the light of Telstra Corporation Limited v Minister for Communications, Information Technology and The Arts (No. 2) [2007] FCA 1445: The Quandary facing In – House Counsel

In-house counsel may, from time to time, be called upon to give

legal advice
strategic advice, or
a mixture of legal and strategic advice at the same time.

In these circumstances, how does one manage the inherent conflict between becoming embedded in an organisation and still maintaining independence?
Where does legal advice end and business decision-making begin?
Matters warranting reflection include

the presently relevant test being “dominant purpose”, and all that is conjured up by the use of that expression
the, perhaps unfortunate, transmission and copying of emails to all and sundry

Perhaps the best way to introduce my remarks is to refer you to paragraphs 3.83-3.91 of the recently published 561 page report of the Australian Law Reform Commission (No. 107 of 2007) of Professor David Weisbrot AM, Professor Rosalind Croucher and Professor Les McCrimmon entitled ‘Privilege in Perspective: Client Legal Privilege in Federal Investigations’.

That report included material on pages 97-100 under the heading ‘In-house counsel’ and ‘Practising certificate’.
It mentioned an observation of the late Justice Graham Hill of 2 October 1997 that, where an in-house lawyer is actually ‘a player in the transaction’, his or her legal advice will not be privileged.

The report continued ‘However, where an in-house lawyer provides independent advice and is not an active participant in the transaction, then the in-house lawyer’s advice may clearly be privileged’.

The Telstra case

The report then addressed my judgment in the Telstra case. I do not dissent from the cryptic summary which it contains. At paragraphs 3.86-3.88 the Commission summarised the matter as follows:

“3.86 In Telstra Corporation Ltd v Minister for Communications, Information Technology and the Arts (No 2), the Court considered ‘dominant purpose’ in terms of the independence of in-house counsel. In that case, Telstra indicated that the basis for its privilege claim was that the documents were prepared by internal legal advisers for the dominant purpose of providing legal advice. The judgment focused on two key issues: first, the circumstances in which in-house lawyers can make a valid claim of client legal privilege, and second, the need to provide evidence of the independence of in-house lawyers. Graham J set out a test for what is an appropriate degree of independence to apply to the work of an in-house lawyer, stating:

In my opinion an in-house lawyer will lack the requisite measure of independence if his or her advice is at risk of being compromised by virtue of the nature of his employment relationship with his employer. On the other hand, if the personal loyalties, duties and interests of the in-house lawyer do not influence the professional legal advice which he gives, the requirement for independence will be satisfied.

3.87 His Honour stated that the court should not start from the premise that the communications of in-house lawyers are by their very nature communications which attract privilege in the same way that it might for documents which are ‘opinions expressed by identified Senior Counsel’.

3.88 Graham J held that Telstra had merely asserted that the relevant documents were privileged and not provided sufficient information to satisfy the Court of the independence of its internal legal advisers. Telstra had therefore not satisfied the Court that the documents were in fact privileged, and discovery was ordered. …”

Practising Certificates

The Law Reform Commission proceeded to refer to a judgment of Crispin J in the ACT Supreme Court in Vance v McCormack (2004) 154 ACTR 12 where his Honour found that privilege only attached where the lawyer concerned had a current practising certificate or had a statutory right to practice. The ACT Court of Appeal took a different point of view holding that whilst a practising certificate was an important indicator, it was not conclusive on the issue of whether advice was sufficiently independent to constitute privileged legal advice. The Court of Appeal cited a judgment of Justice Gillard in the Victorian Supreme Court in Australian Hospital Care v Duggan (No 2) [1999] VSC 131. In that case advice had been given by an in-house company lawyer who had been admitted to practice and held a practising certificate in the past, but did not hold a current Victorian practising certificate.

Who is entitled to the privilege?

Privilege, if it is available, is invariably that of the client, or, in the case of in-house counsel, the company by which he or she is employed.

Relevant factors

Let me suggest some factors that may be determinative of whether in-house counsel are seen to have the necessary independence for documents recording communications to them or from them to qualify as privileged communications.
(i) the physical location of in-house counsel within the organisation

(ii) the availability and use of letterhead for written communications which set the ‘Legal Department’ apart from the rest of the organisation

(iii) the retention by the business of independent solicitors to provide advice and/or conduct litigation for the business

(iv) the participation of in-house counsel in remuneration schemes whether in the form of cash bonuses or share or option entitlements, which are related to the financial success of the business

(v) whether the principal in-house counsel holds and is required to hold a current practising certificate with consequential professional obligations to the Court

(vi) whether other in-house counsel in the business hold or are required to hold current practising certificates with consequential professional obligations to the Court

(vii) whether the in-house counsel has any exposure to liability for negligence in respect of the advice which he or she gives to his or her company

(viii) the titles given to in-house counsel and recorded on their business cards

(ix) the nature and extent of the participation of in-house counsel in meetings called to address business strategy and on-going business operations

(x) the sharing of draft advices with others:
- are they shared with the principal in-house counsel alone?
- are they shared with the relevant company officer who has sought the advice, in which case –
  are they shared on a ‘have I got the facts right’ basis, or
  
  on a ‘is this the sort of thing you were looking for’ basis
(xi) the use, perhaps indiscriminate and inappropriate, of stamps on documents containing words such as ‘Privileged – brought into existence for the dominant purpose of seeking or giving legal advice’

A sanity check

A convenient way of assessing the independence of in-house counsel may be to compare such counsel with a bank’s credit department. If the responsibility of the in-house counsel is to say, without fear or favour ‘no’ and is respected for it, as might an officer in a bank’s credit department, when assessing a loan that should not be made, then the in-house counsel may have sufficient independence to render documents recording that person’s advice as advice to which legal professional privilege would attach.

Why are any communications privileged?

The public interest in the due administration of justice requires that all relevant material should be available to be taken into account so that an applicant will succeed if he is entitled to do so and will fail if he is not (see Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2004] UKHL 48; [2005] 1 AC 610 at 647).

Having said that, it is also in the public interest that lawyers give their clients sound advice, accurate as to the law and sensible as to their conduct (see Three Rivers at 659). In this regard, a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent.
The obvious tension between the policy of encouraging full and frank disclosure by clients to their lawyers without the apprehension of being prejudiced by subsequent disclosure, and the desirability, in the interests of justice, of obtaining the fullest possible access to the facts relevant to the issues in the case lies at the heart of the problem of the scope of legal professional privilege. Where it applies, it inhibits or prevents access to potentially relevant information (see per Gleeson CJ, Gaudron and Gummow JJ in Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia [1999] HCA 67; (1999) 201 CLR 49 at [35]).
If a communication qualifies for privilege, the privilege is absolute. However, it can be waived by the person entitled to it and it can be overridden by statute, but otherwise it is absolute (per Lord Scott of Foscote in Three Rivers at [25]; see also per McHugh J in Commissioner of Australian Federal Police v Propend Finance Pty Limited (1997) 188 CLR 501 at 552).

Dominant Purpose

Legal professional privilege may be claimed in respect of confidential communications passing between a legal adviser and a client where those communications were made for the dominant purpose of giving legal advice to the client. A dominant purpose will be that which was the ruling, prevailing or most influential purpose.
The relevant time at which a claim for privilege is to be determined is the time when the document came into existence. The relevant question is whether the document came into existence for the dominant purpose of seeking or providing legal advice or assistance. If the document satisfies that description, then it is privileged from production (per Tamberlin, Stone and Siopis JJ in Barnes v Commissioner of Taxation [2007] FCAFC 88 (‘Barnes’) at [5]).

Establishing the claim for privilege

In Barnes their Honours made a series of observations in relation to the sufficiency of the evidence before the trial judge to establish the legal professional privilege claim which was made in that case. Referring to an affidavit claiming privilege, their Honours said at [16] and [18]:

‘16. This affidavit falls far short of providing any adequate basis for claiming privilege in respect of any individual document. It consists of assertions, conclusions and generalised comments. The documents referred to are from a number of sources. … the fact that Mr Barnes’ affidavit does not clarify the reason why any specific document came into existence means that the Court is left to consider the documents on their face and determine as best it can whether the documents are privileged. This is unsatisfactory.
…
18. The authorities emphasise the need for focused and specific evidence in order to ground a claim for legal professional privilege. In Kennedy v Wallis [2004] FCAFC 337; (2004) 142 FCR 185 at 189, Black CJ and Emmett J reiterated the principles that verbal formulae and bare conclusory assertions of purpose are not sufficient to make out a claim for privilege: see also National Crime Authority v S [1991] FCA 234; (1991) 29 FCR 203 at 211 (per Lockhart J); Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 at 689 (per Stephen, Mason and Murphy JJ). Where possible the Court should be assisted by evidence of the thought processes behind, or the nature and purpose of advice being sought in respect of, each particular document. … Simply to show that one purpose for creation of the document was to obtain legal advice or assistance is not good enough.’
Now that the test for legal professional privilege is ‘dominant purpose’ rather than ‘sole purpose’, there may well be many more cases where, upon the hearing of a disputed claim, there will be occasion for a deponent who has verified a list of documents claiming privilege to be cross-examined. Indeed, it would seem, from a procedural point of view, that if production of a document for which privilege has been claimed is sought, it would be incumbent upon the party claiming the privilege to at least read the affidavit verifying the list and thereby expose the deponent to cross-examination (see National Crime Authority v S [1991] FCA 234; (1991) 29 FCR 203 at 211; Hartogen Energy Limited (In liquidation) v The Australian Gas Light Company [1992] FCA 322; (1992) 36 FCR 557 at 561 and Re Compass Airlines Pty Ltd (1992) 35 FCR 447 at 462).
In ‘Discovery and Interrogatories Australia’ Bailey and Evans blandly state under the heading ‘The deponent of the affidavit’ and the further heading ‘Natural person’:

‘If the party is a natural person and not legally disabled then the affidavit must be made by the party.’

Apart from Order 15 rule 9 of the Federal Court Rules, there is no mandatory requirement of general application, that the deponent of an affidavit verifying a list of documents, in respect of which privilege is claimed, be the party himself or herself where the party is a natural person and either a sole applicant or a sole respondent as the case may be.

One can readily appreciate that, as a matter of weight, the interests of a party claiming privilege would be best served by having a natural person applicant or respondent verify his or her list of documents, especially when there are claims of legal professional privilege.
Corporate parties verifying answers to interrogatories are required to do so through the mouth of the person within the corporation with the most proximate knowledge of the facts and matters about which the corporation has been interrogated. Such a person is bound, before verifying the answers, to ensure that the corporation has made detailed inquiry of all servants and agents to enable the best possible answers to be given to the interrogatories in question.
There is much to be said for the proposition that the deponent of an affidavit verifying a list of documents, where legal professional privilege is claimed, should also be the person with the most proximate knowledge of the facts and matters covered by the affidavit whether the relevant party providing the discovery be a corporate party or a natural person.
Direct evidence as to purpose is to be preferred because the ultimate judgment on whether the relevant purpose was the dominant purpose is for the court not the witness. One might expect that a witness could provide evidence of the various purposes for the document being brought into existence and go so far as to identify which of those purposes was the main purpose. Plainly, if there were evidence as to a sole purpose and that evidence was accepted then the dominant purpose test would be satisfied.
The question as to whether privilege will attach to a document is usually determined by considering the purpose which the creator of it had in mind when it was brought into existence. The best evidence as to the purpose of its creation would normally be evidence given directly by the person who created it, provided his or her evidence was specific, not inconsistent with the contents of the document and not weakened by cross-examination. Evidence based on information and belief can be given as to purpose of a document’s creation by someone who did not create it, provided he or she specifies the source of that information and belief. In many cases it may well be impractical to expect that the author or originator of every document should swear an affidavit (per Tamberlin J in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd [2007] FCA 933 ) (‘Hoy’) at [16]).
Under s 75 of the Evidence Act identification of information ‘and belief’ is no longer necessary; identification of the source is all that is required. Section 75 provides:

‘75 In an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.’
In re Southland Coal Pty Ltd (recs and mgrs apptd) (in liq) [2006] NSWSC 899; (2006) 59 ACSR 87 (‘Southland Coal’) Austin J, sitting in the Supreme Court of New South Wales, said at [30]:

‘I reject the submission … that an adverse inference should be drawn from the absence of direct evidence from the authors of the various documents. Given the context in which privilege issues arise … it is … unnecessary for the party claiming privilege to adduce evidence from the author of each document over which the claim is made, especially where there are multiple authors. The process of doing so would, in my opinion, unduly complicate, extend and render unacceptably expensive, the process of determining privilege issues in connection with liquidator examinations [with which his Honour was concerned]. It would be inimical to the just, quick and cheap resolution of disputes, which it is the court’s duty to promote.’
Where there are no practical difficulties associated with a party, who is a natural person, providing direct evidence in support of claims for legal professional privilege, it may be that hearsay evidence, provided in accordance with s 75 of the Evidence Act 1995 (Cth) will be afforded less weight than direct evidence.
In Southland Coal at [28] Austin J opined:

‘… evidence by a lawyer on information and belief about his or her client’s motivation in causing a communication to occur, if allowed, will not of itself be sufficient to establish that the dominant purpose of the communication attracts legal advice or litigation privilege. But the lawyer may be in a position to give admissible evidence about the circumstances surrounding the communication, which will suffice, perhaps together with inferences from the document itself, to establish the privilege. Further, the purpose of a communication between a client and a lawyer can in some circumstances be inferred from the purpose of the lawyer’s retainer …’
With great respect to his Honour I prefer the view that the evidence of a lawyer, if allowed, on information and belief about his or her client’s motivation in causing a communication to occur can be sufficient to establish that the dominant purpose of the communication attracts legal advice or litigation privilege even though its weight may be marginal.
It is for a party claiming privilege to show that the documents for which the claim is made are privileged. He or she may succeed in achieving this objective by pointing to the nature of the documents or by evidence describing the circumstances in which they were brought into existence, but it should not be thought that the privilege is necessarily or conclusively established by resort to any verbal formula or ritual. The Court has power to examine the documents for itself, a power which has been exercised too sparingly in the past, springing possibly from a misplaced reluctance to go behind the formal claim of privilege. It should not be forgotten that in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence (per Stephen, Mason (as his Honour then was) and Murphy JJ in Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 at 689; see also per Gleeson CJ, Gaudron and Gummow JJ in Esso at [52]).
Where there is a disputed claim, the court should not be hesitant to exercise its power of inspection. If the power is exercised, the court will need to recognise that it does not have the benefit of submissions or evidence that might place the document in its proper context. The essential purpose of such an inspection is to determine whether, on its face, the nature and content of the document supports the claim for legal professional privilege (per Young J in AWB Ltd v Cole (No 5) [2006] FCA 1234; 155 FCR 30 at [44] (see paragraph 12)).
If a person claiming privilege asks the Court to examine a document in relation to which a claim of privilege is made, the Court may, in the exercise of its discretion, have regard to whether or not the person claiming privilege has provided the best available evidence to support the claim without resort to examination of the document, before deciding to undertake an examination. The Court may also have regard to whether an opportunity to cross examine the creator of the document on the thought processes leading to its creation was afforded to the party seeking its inspection.

Special considerations for In-house Counsel

In Seven Network Limited v News Limited [2005] FCA 142 at [4] Tamberlin J said in relation to legal professional privilege:

‘4. The dominant purpose test has particular importance in relation to the position of in-house counsel because they may be in a closer relationship to the management than outside counsel and therefore more exposed to participation in commercial aspects of an enterprise. The courts recognise that being a lawyer employed by an enterprise does not of itself entail a level of independence. Each employment will depend on the way in which the position is structured and executed. For example, some enterprises may treat the in-house adviser as concerned solely in advising and dealing with legal problems. As a matter of commercial reality, however, both internal and external legal advisers will often be involved in expressing views and acting on commercial issues.

5. The authorities recognise that in order to attract privilege the legal adviser should have an appropriate degree of independence so as to ensure that the protection of legal professional privilege is not conferred too widely. …’
In respect of the application before his Honour, Tamberlin J said at [38]:

‘… I am cognisant of the fact that there is no bright line separating the role of an employed legal counsel as a lawyer advising in-house and his participation in commercial decisions. In other words, it is often practically impossible to segregate commercial activities from purely “legal” functions. The two will often be intertwined and privilege should not be denied simply on the basis of some commercial involvement. …’
In that case, his Honour proceeded to say in respect of Mr Philip, the chief general counsel for News Limited, at [38]:

‘… In the present case, however, I am persuaded that Mr Philip was actively engaged in the commercial decisions to such an extent that significant weight must be given to this participation. In many circumstances where in-house counsel are employed there will be considerable overlap between commercial participation and legal functions and opinions. As can be seen from the specific rulings below, I am not persuaded that in this proceeding Mr Philip was acting in a legal context or role in relation to a number of the documents in respect of which privilege was claimed. Nor am I persuaded that the privilege claims were based on an independent and impartial legal appraisal.’
In Waterford v The Commonwealth of Australia [1987] HCA 25; (1987) 163 CLR 54 the High Court accepted that in some circumstances legal advice may be accompanied by advice of another kind which can be separated from it. In such circumstances, only the legal advice will be privileged. However, if the legal advice contains extraneous matter which cannot be separated from it, the legal advice will not lose its privilege for that reason (per Mason (as his Honour then was) and Wilson JJ at 66 and per Dawson J at 103).
Legal professional privilege is not limited to express advice about the law. Too literal a requirement of identifying legal advice as express advice about the law would place undue emphasis on formalism and undermine the privilege (per Allsop J in DSE (Holdings) Pty Ltd v InterTAN Inc [2003] FCA 1191; (2003) 135 FCR 151 at [52].

Waiver

At common law, what brings about a waiver of privilege is the inconsistency which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality (per Gleeson CJ, Gaudron, Gummow and Callinan JJ in Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at [28] and [29]).
At [29] their Honours said:

‘Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.’

As Kenny, Stone and Edmonds JJ observed in Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 at [43] where an inconsistency arises, it does not matter that the privilege holder did not subjectively intend to lose the benefit of the privilege.

The status of copies and disclosure of privileged material to litigation funders and public relations consultants

In Spotless Group Ltd v Premier Building & Consulting Group Pty Ltd [2006] VSCA 201; (2006) 16 VR 1 the Court of Appeal in Victoria had to determine whether legal professional privilege extended to copies of documents which were originally privileged and which were sent to Colonial First State Investment Limited, a litigation funding company. The Court was also called upon to decide whether legal professional privilege extended to copies of the documents which were sent to Royce (Vic) Pty Ltd (‘Royce’), a business and communications strategist, to advise the party providing same (the respondent) on how best to deal with the issue of contamination which affected the land on which a building comprising 49 apartments and 81 basement car parking spaces had been constructed and also the underground water located under the property. Royce’s function was to advise the respondent on how best to deal with the issue publicly and with the relevant authorities.
Neave JA considered that legal professional privilege extended to copies of the documents which were originally privileged and which were sent to the litigation funding company to support the funding arrangements for the litigation. Her Honour took a different view in respect of the copies of the documents that had been provided to Royce. Her Honour found that copies of the documents were not provided to Royce for the dominant purpose of obtaining legal advice or for supporting the respondent’s litigation. Rather, the documents were provided to assist Royce to run an effective public relations campaign. Her Honour considered that copies of the documents were not privileged in the hands of Royce.
Chernov JA, with whom Warren CJ agreed, considered that privilege extended to the documents provided to the litigation funder but by a different process of reasoning from that employed by Neave JA. He also found that the copies of the documents provided to Royce were protected from production by legal professional privilege. At [30] Chernov JA said:

‘30 As to the Royce documents, for the reasons I have given, it may be accepted for present purposes that they were forwarded to Royce on a confidential basis and that the reason for the communication was to appraise it of the respondent’s legal position and so facilitate its commission of Royce, within that ambit, to prepare the public relations campaign to meet the negative publicity about the contamination on the respondent’s land and its construction on it of the apartments. … In the circumstances, I consider that for the same reasons that the communication to the financiers did not involve waiver by the respondent, there has been no waiver by it of the privilege in relation to the Royce documents. In my view, there is no inconsistency between the respondent providing the Royce documents to the public relations adviser for information for a limited and specific purpose and insisting on their non-disclosure to the other parties to the litigation on the basis of legal professional privilege. And, for the reasons I have given in relation to the documents that were given to the financiers, there was no unfairness in the respondent continuing to claim privilege in relation to the documents in question.’
The process of reasoning whereby Chernov JA concluded that the documents provided to the litigation funding company were the subject of legal professional privilege which had not been waived was set out at [29] of his Honour’s reasons. It seems to me that the reasoning which his Honour considered appropriate in respect of the documents provided to the litigation funding company did not apply with equal force to the documents provided to the public relations consultant. The purpose of providing the documents to the litigation funding company was the respondent’s pursuit of its litigation whereas the reason for providing the copies of the privileged copies to Royce was unrelated to the pursuit by the respondent of its litigation. Rather, the reason for the provision of the documents to the public relations consultant was to protect the value of the respondent’s unit development which was likely to be adversely affected by disclosure of adverse material in the litigation.
The reasoning of Neave JA in respect of copies of the privileged documents which were brought into existence for the purpose of giving same to Royce has much to commend it. So also does her Honour’s conclusion that if privilege did extend to the copies of the documents made for the purpose of providing them to Royce then that privilege was waived when the documents were given to Royce.

Arguably, the reasons given by Chernov J for finding that the copies of the documents provided to the litigation funding company remained privileged, when provided to that company, did not justify a like conclusion in respect of the copies made available to the public relations company.

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