In Carey v Korda [2012] WASCA 228, the Supreme Court of Western Australia Court of Appeal confirmed the rights of receivers to claim legal professional privilege.  A little over a year ago, we considered the first instance judgment in a previous TGIF article

THE BACKGROUND FACTS

A number of companies within the Westpoint group (Westpoint companies) were placed into receivership.  The first appellant (Carey) was a director and member within some of these companies.  Carey (amongst others) sought to inspect the Westpoint companies’ financial records under section 421 of the Corporations Act 2001 (Cth).  The records sought included Corrs’ legal invoices for their legal services to the Receivers (Invoices). 

In effect, section 421(2) of the Corporations Act provides that any director, creditor or member of a corporation may, unless the court otherwise orders, inspect certain financial records required to be kept by a managing controller in respect of property of the corporation.

The first respondent (the Receivers) refused to allow inspection of the Invoices on grounds of legal professional privilege. 

At first instance, the Supreme Court held that the Invoices described the nature of the legal advice provided and therefore were privileged.  The Court rejected Carey’s contention that the claim of privilege belonged to the Westpoint companies and not the Receivers, who were mere agents of the Westpoint companies.  The Court held that it was clear from the instructions and the retainer that the Receivers, as principals, retained Corrs to advise them on the relevant receiverships. 

THE PROCEEDINGS

On appeal, Carey again argued that the Receivers were mere agents of the Westpoint companies and accordingly were not the proper parties to claim legal professional privilege over the Invoices.  This argument was made on the basis that the Westpoint companies were the clients of Corrs while the Receivers, as “officers” pursuant to section 9 of the Corporations Act, were fiduciary agents of the Westpoint companies. 

The Court of Appeal dismissed this argument, finding that the additional fiduciary duties imposed under the Corporations Act supported the Receivers’ position that they obtained legal advice as principals, and not merely as agents for the Westpoint companies.

Carey further argued that there was insufficient evidence before the Court to prove the Invoices were privileged.  The Court agreed, finding that whilst it had been established that the Invoices would reveal the subject matter of legal advice obtained, no evidence had been led that the Invoices would reveal such subject matter which was also confidential.  It was held that confidentiality could not be inferred and, in the absence of direct evidence on this point, the claim for privilege could not be made out.

Upon reaching this conclusion, the Court granted the Receivers a further opportunity to submit additional evidence to support their claim of privilege. 

COMMENT

This decision confirms that a receiver will not be denied the opportunity to claim legal professional privilege over receivership documents merely because they are an agent of the company in receivership.  Whilst much will always turn on the terms of the legal retainer in each particular case, this judgment suggests that a receiver may be able to claim privilege where they have sought and obtained confidential advice on matters which concern their personal obligations as a receiver and manager.

The decision also highlights that a person claiming legal professional privilege bears a heavy onus of establishing an entitlement to do so.  In this particular case, the Receivers were fortunate enough to receive a “second chance” at proving their privilege claim.  This may have been allowed by the Court of Appeal because the primary judge had inspected the Invoices and formed the view that they were privileged.  However, parties claiming legal professional privilege should take note that they may not receive such an indulgence.