In Australia, legal professional privilege is seen as a substantive right that cannot be abrogated by statute. Australia has adopted the ‘dominant purpose test’ (in line with other Common Law jurisdictions) now enshrined in the Uniform Evidence Acts.
In-house counsel conducting internal investigations must be careful to maintain the confidence in the documents or communications over which privilege is to be asserted. The issue of legal professional privilege can be difficult for in-house or corporate counsel, because of the perceived difference in the role that in‑house counsel fulfil, as opposed to an outside lawyer. Throughout investigations, in‑house counsel must be vigilant in maintaining independence and segregating legal advice from other considerations facing the organisation.
Where a decision has been made to investigate an allegation or complaint in-house, and – if the issue was raised by a whistleblower – adequate protections are in place, it is possible that a company-led investigation will not be covered by legal professional privilege. The current trend of decisions in Australia is that a report into an incident or investigation prepared or commissioned by an in-house lawyer may not be considered by a court for the ‘dominant purpose’ of providing advice or for use in litigation. This is because in most cases those reports have multiple purposes.
Even where it is accepted that the chief reason for the report or investigation is for the purpose of providing advice or for use in anticipated litigation, Australian courts have not accepted this as the dominant purpose for the report of an investigation. Why is this? The New South Wales Court of Appeal explained it here, ‘an in-house solicitor is, by reason of his or her position, more likely to act for purposes unrelated to legal proceedings than an external solicitor’ (Sydney Airports Corp Ltd v Singapore Airlines Ltd ). Tamberlin J stated that an in-house counsel ‘may be in a closer relationship to the management than outside counsel and therefore more exposed to participation in commercial aspects of an enterprise’ (Seven Network Ltd v News Ltd ).
To best ensure privilege can be asserted, any investigation has to be properly established so that queries from a regulator can be satisfactorily dealt with.
A word of caution concerning the voluntary disclosure of compliance protocols or manuals to regulators in order to demonstrate that adequate controls are in place: in 2015, the New South Wales Supreme Court held that disclosing a compliance manual (and relying on a course of conduct in obtaining and acting on legal advice in order to substantiate its defence and avoid relief being sought) amounted to a waiver of privilege in relation to that legal advice (Australian Securities & Investment Commission v Park Trent Properties Group Pty Ltd ).
It is important to be absolutely clear in setting out the parameters and scope of any investigation. Doing this at the outset might assist in establishing a claim for legal professional privilege over material produced during the course of the investigation. The following (rather lengthy) example illustrates this point.
In 2014, the Full Court of Australia’s Federal Court came to a decision on Bartolo v Doutta Galla Aged Services Ltd. Mr Bartolo, an employee of Doutta Galla Aged Services (DGAS), challenged DGAS’s assertion of privilege over a report prepared by solicitors commissioned to investigate allegations made against Mr Bartolo. Mr Bartolo claimed that, as the report was made during an investigation separate from the proceedings, it was not produced for the dominant purpose of obtaining legal advice or use in litigation, and he sought disclosure. The Federal Circuit Court held that the dominant purpose of the investigation was to provide legal advice and the report was subject to legal professional privilege. However, the Court found DGAS had waived privilege when it set out the reasons for Mr Bartolo’s dismissal in its defence and referred to the board’s recommendations to dismiss Mr Bartolo – which were based on the findings of the investigation.
The Bartolo v DGAS decision highlights the principles of privilege in relation to documents produced in internal investigations and the circumstances in which such privilege will be waived. It is a reminder to organisations to be clear about (and state clearly) where documents are prepared for obtaining advice or in preparation for litigation, and to have a clear understanding of the circumstances in which the privilege will cease to apply, particularly in the context of subsequent legal proceedings.
The importance of clarity in the status of documents was underlined in another case: the Supreme Court of Western Australia rejected a claim for privilege concerning communications between accountants and the company secretary (who was also the company solicitor for the purpose of overseeing investigations in preparation for the proceedings) (Belle Rosa Holdings Pty Ltd v Hancock Prospecting Pty Ltd (unreported, 2105 of 1992). The court held that the communications were made for mixed purposes by the company secretary, who was not acting in his capacity as in-house solicitor at the relevant time.