Special Counsel, Stephen Dowd, analyses recent Federal Circuit Court authority relating to the issue of confidential law firm reports and privilege.

The  Federal  Circuit  Court  recently ordered  an  employer  to  release  a law firm’s report into the actions of an employee which its Board had commissioned.

In Bartolo v Doutta Galla Aged Services Ltd [2014]  FCCA  1317  (15  July  2014) Mr Bartolo, the Director of Residential Care, brought proceedings against his employer, alleging it had taken adverse action against him. As the preparation for the hearing proceeded, Mr Bartolo brought an application seeking disclosure of a written report provided to the employer’s Board by its solicitors. The employer opposed the order, arguing that the report was covered by legal professional privilege.

The employer’s CEO said in evidence that the employer’s Board had requested him to appoint an independent, legally qualified investigator to address certain allegations contained in a damaging email, the subject of this case.

The CEO went on to say that the Board considered the solicitor’s report and, amongst other things, recommended that Mr Bartolo’s contract of employment be terminated.

It was the employee’s claim that certain of the employer’s actions were adverse actions taken against him for reasons prohibited by the Fair Work Act. As such, the onus was on the employer to establish that the reasons for its actions were not prohibited reasons, within the meaning of the Act.

Her Honour Judge Whelan said that in the circumstances it was apparent that:

  • the state of mind of the decision maker was an issue in the proceedings
  • the state of mind of the decision maker was something uniquely within its knowledge and could only be established by evidence given by it.

The judge concluded that the Board made its recommendations, which included the recommendation that Mr Bartolo’s employment be brought to an end, to the CEO following the provision of its legal adviser’s interim investigation report. She went on to say “the outcome of the investigation is therefore clearly relevant to the decision to terminate the applicant’s employment”.

Her Honour noted that there were some contradictions in the evidence concerning the purpose or purposes for which the law firm was engaged. She observed that the potential purposes were:

  • to undertake an independent investigation into the sending of the email
  • to investigate the serious allegations contained within the email
  • to investigate who constructed the email and distributed it
  • to advise the Board on how to address the situation from a legal point of view, depending on the investigation.

Her Honour concluded that the dominant purpose of the confidential communications between the Board and the lawyers it had appointed was the obtaining of legal advice. She went on to decide that where a lawyer’s client has put in issue its own state of mind, as the employer had here, and the legal advice relied upon was given at a time relevant to the formation of that state of mind, legal professional privilege was lost where it was shown that there was a likelihood that the legal advice contributed to the formation of the state of mind. In reaching her decision Her Honour cited the High Court’s decision in Mann v Carnell [1999] HCA 66 [34] where that court said:

disclosure by a client of confidential legal advice received by the client, which may be for the purpose of explaining or justifying a client’s actions, or for some other purpose, will waive privilege if such disclosure is inconsistent with the confidentiality which the privilege serves to protect. Depending upon the circumstances of the case, considerations of fairness may be relevant to a determination of whether there is such an inconsistency.

Her Honour said that it would be unfair to Mr Bartolo, in the sense used by the Court in Mann, to allow the employer to rely on its reasons to dismiss without disclosing to the employee the factual basis upon which the Board formed those reasons.

Conclusion

Some degree of controversy will continue to surround questions concerning the release of reports that employers commission from lawyers. Judge Whelan acknowledged that each case must be decided on its own circumstances. The case highlights the continuing need for employers to:

  • precisely describe the advice they want from their lawyers
  • confer with their lawyers as to whether they should undertake both the investigation, as well as provide legal advice in relation to it
  • specify the dominant purpose of the advice
  • exercise great care in the way in which they disclose reliance on that advice.