Following a number of recent cases in which parties to regulatory proceedings and investigations have been found to have incorrectly claimed legal professional privilege (LPP), the NSW gambling regulator has found that senior lawyers at Star Entertainment (The Star) made “erroneous claims” of legal professional privilege over key reports prepared by consultants and other documents.
These findings, documented in a report released earlier this month (Report), were made during the regulator’s inquiry into The Star under sections 143 and 143A of the Casino Control Act 1992 (NSW), in which it found The Star unfit to hold a casino licence.
The Report found that the erroneous claims of legal professional privilege were consistent with The Star’s lawyers’ misunderstanding of the circumstances in which it could be claimed.
Different members of in-house counsel for The Star admitted in evidence that there was a practice of marking documents and communications as “privileged” without turning their minds to whether there was a proper basis to do so. The Report noted that this created a risk that a person reviewing the document would assume it is privileged and refrain from producing that document in response to a regulator’s request, in spite of no thought having been applied to the question of whether or not there was a proper basis to claim privilege.
The Star engaged KPMG in 2017 to conduct an independent audit of its reporting entities group, as required by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act). On 3 May 2017, KPMG provided drafts of its reports to the senior executives of The Star to ensure factual accuracy. KPMG then issued the final reports to The Star on 16 May 2018.
The final reports issued by KPMG contained circumstances indicating ‘serious shortcomings’ in The Star’s program under the AML/CTF Act. Such shortcomings included:
- the observation that people could walk into The Star’s casinos with hundreds of thousands of dollars in cash and not be assessed as high risk for that reason alone
- that The Star’s AML/CTF program did not consider counter-terrorism financing at all
- that there was no documented money laundering or terrorism financing risk assessment or methodology in relation to junkets
- that there was inadequate resourcing allocated to the AML/CTF program.
The Star resisted producing the KPMG reports to AUSTRAC on the basis of LPP and AUSTRAC was not given copies of these reports until 16 months later.
The Report found that there was no reason for The Star claiming LPP in respect of the KPMG reports and should have provided AUSTRAC with the KPMG reports immediately.
LPP – when does it apply?
LPP protects confidential communications and confidential documents passing between a lawyer and a client, made for the dominant purpose of the lawyer providing and or the client seeking legal advice or professional legal services, or for use in current or anticipated litigation.
Where legal advice is provided by an in-house lawyer, it must be shown that the document was brought into existence in the course of the performance of the lawyer’s professional role.
Simply marking documents as “subject to legal professional privilege” will not be determinative.
In the current regulatory environment, and given the potential reputational damage to in-house counsel being named in reports for ‘wrongly’ claiming LPP, it is recommended that in-house counsel review the circumstances in which communications and corporate documents will attract the protection of LPP. Other officers and employees should seek legal advice before claiming LPP in any proceedings or regulatory investigations.