Waiving legal professional privilege over legal advice and otherwise privileged documents or communications can be disastrous, given the sensitive information these materials often contain. This first of a two part article on waiver recaps the governing principles of waiver.
In a sophisticated commercial environment, there are compelling reasons for consumers of legal services to focus on preserving legal professional privilege, as seriously adverse consequences can flow from waiving that privilege.
In this two-part article on waiver of legal professional privilege, we'll first recap the legal principles governing waiver, and identify situations where a risk of waiver commonly arises in the commercial environment. In part two we'll build on this by outlining some practical tips for decreasing the risk of waiver.
Why is waiver a problem?
The immediate consequence of waiver is that material that is potentially highly sensitive may fall into the hands of opponents or competitors. This is a particular problem where formal, written legal advice is concerned, considering that such advice often:
- sets out all facts, warts and all, in relation to a dispute (some of which may not yet be known to your opponent);
- identifies weaknesses in your organisation's position and the strengths of your opponent's position;
- identifies areas of concern about the character, demeanour or credibility of witnesses whose evidence is to be used to prove your organisation's case;
- maps out the legal strategy or tactics to be adopted in relation to a high-stakes dispute; or
- refers to, or is based on, separate legal advice or other privileged communications.
Largely because the law recognises the need for frank communication of this nature between client and lawyer, legal professional privilege is entrenched as a doctrine of substantive law; it is not merely a rule of evidence or procedure.
What is privileged?
Broadly, confidential communications made or prepared for the dominant purpose of either seeking or giving legal advice, or for use in actual or anticipated litigation, will be privileged.
Confidentiality of a communication is an essential pre-condition to the existence of legal professional privilege, at common law and under the uniform Evidence Acts. Once that confidentiality is lost, privilege is also lost, and the document or communication is no longer immune from production. In other words, the privilege is waived.
In practice, waiver of privilege occurs in one of two ways - express waiver or implied waiver.
The easy one: express waiver
Express waiver involves the intentional disclosure of a document or communication that records privileged material, in a manner that destroys its confidentiality. Determining whether an express waiver of privilege has occurred is, generally, relatively straightforward.
The more difficult one: implied waiver
Ascertaining whether there has been an implied waiver can be much more complex. Implied waiver occurs when the holder of the privilege does something that is inconsistent with the maintenance of the confidentiality that the privilege protects - even if the holder did not subjectively intend to waive privilege (Mann v Carnell (1999) 201 CLR 1).
In those jurisdictions which have adopted the uniform Evidence Act (including Federal, NSW, ACT, and Victoria) questions of privilege and waiver are governed by the Act or by the common law, depending on the context in which the question arises. In broad terms:
in the Federal jurisdiction and the ACT, the Evidence Act applies only when evidence is being adduced, whether at trial or in the context of an interlocutory hearing; in NSW and Victoria, the Evidence Act applies to questions of privilege not only when evidence is being adduced, but also during interlocutory steps which require compulsory disclosure of information or documents (including discovery and subpoenas). In NSW, Victoria and the Federal jurisdiction (together with the ACT), the test for waiver set out in section122 of the uniform Evidence Acts is now closely aligned with the common law test.
While not exhaustive, sub-sections122(3) to (5) provide some guidance as to what acts are (or are not) inconsistent with the maintenance of the privilege. However, that guidance does not really break new ground, or necessarily simplify the task of ascertaining whether there has been an implied waiver.
Whether there is a waiver will depend on the particular context and circumstances of a case. In some cases, determining whether there is conduct by the privilege-holder which is inconsistent with the maintenance of privilege will be informed (but not governed) by considerations of "fairness". Accordingly, conduct in relation to privileged material that, in isolation, could be regarded as equivalent will not necessarily produce the same result from case to case.
Where does the risk of implied waiver commonly arise?
Implied waiver of privilege can commonly be a risk where:
- legal advice is referred to in press or stock exchange releases;
- legal advice is referred to in communications with a third party (for example, in support of the privilege-holder's position or to advance the privilege-holder's commercial interests);
- legal advice is discussed in board papers or other internal documents later produced under compulsion, such as by subpoena or during discovery in litigation (without a claim for privilege); or
- in litigation, when a party's state of mind, which appears to have been formed to some extent on the basis of legal advice, is in issue on the pleadings.
Each of these situations involves conduct that tends to jeopardise the confidentiality underpinning the relevant communication, and that conduct may thus be inconsistent with maintaining privilege.
The first three arise reasonably regularly in day-to-day business, and there is recent case law concerning each of them. In our next article we will offer some tips for preserving legal professional privilege in these three situations.