In brief

  • The recent Federal Court decision in Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Limited (No 4) [2014] FCA 796 highlights the limited extent to which privilege subsists in emails and draft transaction documents created by or disseminated to non-legal advisers during commercial transactions.
  • This article sets out practical steps that non-legal advisers and clients can take to minimise the likelihood of sensitive information having to be disclosed.
  • Non-legal advisers and clients working on commercial transactions should be aware that emails and drafts of documents may need to be delivered up to other parties, potentially with adverse interests, if related litigation is commenced.
  • Involving a lawyer in an email chain or in the preparation of a draft transaction document will not necessarily be sufficient to establish legal professional privilege.
  • In June 2014, we published a legal briefing on a distinct privilege dispute between the same parties to this litigation, in which the Court agreed that litigation privilege in a particular report had been waived when the party wishing to claim the privilege provided a copy to its insurer.2

Background

Asahi Holdings (Australia) Pty Ltd (Asahi) and Independent Liquor (NZ) Limited (together, the applicants) acquired shares in Flavoured Beverages Group Holdings Limited and subsequently sued the respondent sellers alleging misleading and deceptive conduct and breach of warranty. In the course of the proceeding, a subpoena was issued to a number of non-legal advisers who had been engaged by Asahi for the purpose of the transaction, including Deloitte Tohmatsu FAS Co., Ltd and Rothschild Australia Limited.

The applicants asserted legal professional privilege in some of the documents produced by the non-legal advisers in response to the subpoenas. The parties asked the Court to consider the privilege claims in relation to 8 sample documents intended to be representative of the totality of the privilege claims. The disputed documents were emails and their attachments, from, sent or copied to non-legal advisers and either did not involve the legal advisers or involved the legal advisers along with a large number of other recipients, including non-legal advisers.

Decision

The key issue for the Court was whether the relevant communications were made for the dominant purpose of the obtaining or provision of legal advice, despite being created by or disseminated to non-legal advisers. The Court pointed out that one practical test of whether a document is created for that dominant purpose is to ask whether the document would have been brought into existence irrespective of the obtaining of legal advice. If so, the document may not be privileged.

The only evidence led in support of the privilege claims was an affidavit of a solicitor acting in the proceeding. The Court did not consider this evidence to be of great weight given that this solicitor had not acted on the transaction and could not speak to the direct knowledge of Asahi or the non-legal advisers as to the purpose of the communications.

The Court assessed each of the 8 sample documents and found that 3 were wholly privileged and did not need to be produced. These were internal emails of the non-legal advisers which included email chains involving legal advice from the legal advisers. Although the most recent emails were between non-legal advisers, the Court found that the non-legal advisers had circulated and considered the legal advisers emails for, or in continuation of, the purpose of the legal advice to Asahi. This finding was supported where the email chains were initiated by the legal advisers, the legal advisers were involved in all emails in the chain, and emails between non-legal advisers specifically referred to the legal advisers’ advice or merely circulated that advice.

The Court found that the other 5 documents were only partly privileged. Where email chains contained communication from or to the legal advisers for the dominant purpose of legal advice, this could be redacted. However where email chains contained communication of commercial, non-legal considerations by the non-legal advisers, this was not privileged and needed to be produced, even if the legal advisers were copied. Significantly, draft transaction documents attached to these emails, and references to those drafts, were not privileged given that there was no evidence that the legal advisers had prepared or given advice in relation to those particular drafts. It was not sufficient that the legal advisers had been involved in earlier and subsequent drafts of the documents.

Practical implications

Non-legal advisers and clients working on commercial transactions should be conscious of the possibility that emails and draft transaction documents created in the context of that work may be required to be produced if any dispute concerning the transaction ends up being litigated. Those involved in commercial transactions can take the following practical steps to minimise the likelihood of sensitive information having to be disclosed.

Emails involving non-legal advisers

  • Lawyers and clients should consider whether it is necessary to involve non-legal advisers in communications relating to legal advice.
  • Non-legal advisers who receive emails containing legal advice to the client should only on-send emails circulating or commenting on this advice where absolutely necessary and ideally only following discussion with the lawyers.
  • Any emails that non-legal advisers do on-send circulating or considering legal advice should specifically refer to the legal advice and make it clear that the dominant purpose (if not the sole purpose) of the email is to facilitate the continuing provision of legal advice by the lawyers.
  • Non-legal advisers’ consideration of commercial, non-legal issues should be contained in separate communications, even if related to or arising out of legal issues.
  • While copying lawyers on email correspondence involving non-legal advisers may support a claim that the communication is privileged, it will not be sufficient in and of itself.

Draft transaction documents

  • Those working on draft transaction documents should not expect that each draft will be protected by legal professional privilege, even where lawyers have been involved in the drafting.
  • Any claim for privilege in a draft transaction document will require evidence that the dominant purpose for creation of that particular draft was legal advice. For example a draft may be privileged if it has been prepared for the client by a lawyer alone without the input of non-legal advisers, or privilege may subsist in a lawyer’s distinguishable handwritten comments on a draft document.