The decision of the Federal Circuit Court of Australia (FCCA) in Bartolo v Doutta Galla Aged Services Ltd  FCCA 1517 (15 July 2014) highlights the need to carefully consider what documents are to be relied upon in court proceedings, lest legal professional privilege be lost over those communications.
In this case, the defendant employer, in an action alleging unlawful adverse action by it against an employee (in the form of dismissal), was required to disclose a confidential report containing factual findings and advice relating to the allegations (Investigation Report). The Investigation Report had been taken into account by the employer’s Board in recommending that its CEO dismiss the employee.
In this In Brief, we examine the FCCA’s decision and its implications for employers when obtaining legal advice and having investigations conducted in relation to employment issues such as dismissal.
THE INVESTIGATION REPORT
The Board of the employer, Doutta Galla Aged Services Ltd (DGAS), instructed solicitors to investigate allegations against the employee, Bartolo, and provide a report. After receiving and considering the Investigation Report, the Board made a recommendation to the CEO that he dismiss Bartolo.
The minutes from the relevant Board meeting stated that:
“Following the provision of legal advice in relation to the outcomes of the investigation, the following recommendations were agreed to be referred to the CEO: ... Termination of the contract of [the Employee].”
The CEO did not receive a copy of or read the Investigation Report. However, he decided to dismiss the employee in reliance on the Board’s recommendation.
Bartolo brought proceedings against DGAS, alleging that it dismissed him (i.e. took adverse action against him) because he had exercised a workplace right, in breach of section 340 of the Fair Work Act 2009 (Cth) (FW Act). The employer in adverse action claims has a reverse onus of proof to demonstrate that its reasons for dismissal do not include a prohibited reason (FW Act, section 361).
DGAS’s Response to Bartolo’s claim asserted that its CEO made the decision to dismiss taking into account a recommendation of the Board to that effect. The Response noted that the Board’s recommendation had taken the Investigation Report into account, which itself was based on an investigation that had been undertaken by the lawyers for the Board.
APPLICATION FOR DISCOVERY OF THE INVESTIGATION REPORT
Bartolo sought discovery of the Investigation Report on the basis that it was relevant to the CEO’s reasons for the decision to dismiss him. DGAS claimed that the Investigation Report was privileged as it contained legal advice and, therefore, refused to disclose it.
Bartolo contended that the Investigation Report was relevant to the state of mind of both the Board, and the CEO, who had made his decision after receiving the Board’s recommendation. The state of mind of the Board and the CEO had been put into issue by the Response. Once it had been put in issue, Bartolo was entitled to know the state of mind of the CEO and the Board. It would therefore not be fair for DGAS both to rely on the Investigation Report (by referring to it in the Response) and at the same time claim privilege over it.
Bartolo argued that, even if the Investigation Report and any subsequent legal advice were privileged, DGAS had waived that privilege as:
- DGAS had raised the CEO’s state of mind in its pleadings;
- the Investigation Report was relevant or likely to be relevant to the CEO’s state of mind; and
- it would not be fair for DGAS to rely on the CEO’s state of mind, and at the same time claim privilege over the Investigation Report.
DGAS argued that the Investigation Report was privileged because its dominant purpose was the provision of legal advice, notwithstanding that it also had a “fact finding” purpose.
The Respondent also argued that the privilege had not been waived as the CEO had made his decision in reliance on the Board’s recommendation, and not on the Investigation Report. The CEO had not received a copy of the Investigation Report, and the Board had not disclosed to him the substance of the advice contained within it. Therefore, the Investigation Report could not have influenced the CEO’s decision.
LEGAL PROFESSIONAL PRIVILEGE
Lawyer/client communications made for the dominant purpose of the provision of legal advice are privileged – that is, they cannot be disclosed without the consent of the client. The privilege extends to protect supporting documents created for the purpose of preparing those communications.
Legal professional privilege protects the confidentiality of lawyer/client communications. As the privilege is that of the client, a privileged communication cannot be subject to an order for discovery unless the privilege is waived by the client. This can happen if the client expressly waives privilege, or acts in a manner that is inconsistent with maintaining the confidentiality of the communication – for example, by seeking to rely upon it in proceedings.
WAIVER OF PRIVILEGE
The FCCA found that the dominant purpose of the Investigation Report was to provide legal advice to DGAS’s Board. The Investigation Report was, therefore, subject to legal professional privilege.
Despite this, the Court held that DGAS had waived privilege over the Investigation Report. Applying the principle enunciated by the High Court of Australia in Mann v Carnell, Judge Whelan noted that a waiver of legal professional privilege arises from inconsistency between a disclosure of advice by a client and the maintenance of confidentiality over that advice. Considerations of fairness may also be relevant to determining whether any inconsistency arises in a particular case.
A mere reference to legal advice will not give rise to inconsistency, nor will a mere reference to a decision having been made following receipt of advice. However, an inconsistent disclosure may occur where:
- a client has put in issue its state of mind; and
- there is a likelihood that the communication over which privilege is asserted contributed to the development of that state of mind.
In this case, Judge Whelan determined that the Board could not have made its recommendation other than in reliance on the Investigation Report, which recommendation was accepted by the CEO in deciding to terminate Bartolo. DGAS was, in effect, seeking to rely on the Investigation Report in its defence concerning the CEO’s state of mind. Judge Whelan was therefore satisfied that it would be unfair to allow DGAS to do so without disclosing the Investigation Report.
IMPLICATIONS FOR EMPLOYERS
- The decision in Bartolo highlights the risk of one lawyer doing both an investigation and advice on the same matter. One consequence of a lawyer’s advice being discovered is that it might, ultimately, be admitted into evidence. Further, the lawyer could be called as a witness and be cross-examined on the advice.
- An employer should consider this possibility when requesting a written investigation report and legal advice on it. The chances of the employer waiving legal professional privilege in those documents will depend on the risk of either the investigation report or the legal advice ultimately being relied on by the employer to advance its position in any litigation that ensues.
- Employers should also take care when disclosing legal advice that they receive to other persons. If the substance of the advice is disclosed, the confidentiality of the communication and, thus, legal professional privilege, may be lost. Board minutes and papers should be drafted with this in mind, as should correspondence (including emails) attaching or referring to legal advice.