Australia – High Court Holds That Legal Professional Privilege May Not Found A Cause Of Action.

What you need to know

 

• In a unanimous judgment, the High Court dismissed proceedings by companies within the global Glencore group seeking an injunction to restrain the Australian Taxation Office from making any use of documents subject to legal professional privilege.
• The privileged documents obtained by the ATO were amongst the "Paradise Papers", a cache of over 13 million confidential electronic documents relating to offshore investments, leaked to the International Consortium of Investigative Journalists.
• The High Court held that legal professional privilege is not an actionable legal right capable of sounding in injunctive relief. The privilege is only an immunity from the exercise of powers that would otherwise compel the disclosure of privileged communications.
• The effect of the High Court's decision is that if your privileged documents become public, for example because of being illegally hacked, you may be unable to recover them or prevent third parties using them. You may still, however, be able to bring an action to prevent their misuse or disclosure by anyone who obtained or was proposing to disclose the documents in breach of confidence. 

 

The Paradise Papers and the issue before the High Court

 

In late 2017, the Paradise Papers, a cache of over 13 million confidential electronic documents relating to offshore investments, was leaked to the International Consortium of Investigative Journalists.

 

The leaked material included documents relating to Glencore, relevantly advice from Appleby, the Bermudan law firm whose documents were stolen. That advice related to a restructure of four Australian companies within the Glencore group in a transaction called “Project Everest”.

 

In subsequent meetings with Glencore, the ATO indicated that it was in possession of the documents and that it was seeking to identify possible Australian links to tax avoidance.

 

Glencore commenced proceedings in the original jurisdiction of High Court, seeking an injunction to restrain the ATO's use of the documents, and orders requiring that the ATO return the documents in its possession.

 

The Association of Corporate Counsel was granted leave to appear as amicus curiae at the hearing to make submissions in support of Glencore. The ACC sought to rely upon what it contended were important matters of public policy in support of extending the scope of legal professional privilege. In particular, the ACC submitted that, in a world where law firms, corporations and governments are increasingly the target for sophisticated cyber-attacks, Australia is potentially at risk of becoming an attractive place for hackers to access and leak stolen privileged documents. This could in turn lead to the blackmailing of companies, and threats that the documents would be released to executive agencies unless the hackers' demands were met.

 

LPP is a common law immunity

 

In a unanimous judgment, the High Court dismissed Glencore's proceeding, refusing the injunctive relief sought.

 

At the heart of Glencore's case was the proposition that, while legal professional privilege has long been recognised as a fundamental common law right, the law is yet to, but should, recognise a complete set of remedies to protect that right. 

 

Glencore also submitted that the scope of the privilege should reflect the policy of the law upon which it is based – namely, the administration of justice through fostering of trust and candour in the relationship between lawyer and client, and the recognition of an actionable right to restrain the use and recovery of privileged documents, advances this policy.

 

The High Court rejected these submissions, holding that Glencore's argument rested fundamentally upon the false premise that because legal professional privilege is a legal right which is capable of being enforced it may also found a cause of action. Consistently with the its decision in Daniels Corporation v ACCC (2002) 213 CLR 543, the High Court reaffirmed that the privilege is only available as an immunity from the exercise of powers to compel the disclosure of privileged communications (as opposed to the foundation for a cause of action).

 

The High Court also considered in some detail the historical operation of the privilege, drawing from those origins the conclusion that privilege arose in response to the exercise of powers by the State to compel the disclosure of confidential communications between lawyer and client.

 

The High Court held that the true character of the substantive "right" spoken of in various cases including by the High Court in Daniels was a right to resist the compulsory disclosure of information, or to decline to disclose or allow to be disclosed the confidential communications or documents in question.

 

In response to Glencore's submissions concerning the need for scope of the privilege to reflect the policy of the law upon which it is based, the High Court held that the purpose of the law, in providing an immunity, was to enhance the administration of justice. By way of contrast, the law was not concerned to further a client's personal interest in preventing the use which might be made by others of that client's communications if they were obtained through proper channels.

 

The High Court observed that, on the present state of the law, once privileged communications have been disclosed, the affected party must instead resort to equity and the doctrine of breach of confidence if it wishes to restrain the use of that material.

 

Glencore's argument for the grant of injunctive relief on any basis other than breach of confidence was inconsistent with how the common law develops – namely, by applying settled principles to new circumstances, and by reasoning from settled principles to new conclusions. The High Court was not persuaded that the policy considerations relied upon by Glencore justified what it considered would be an abrupt change in the law.

 

Implications

 

The equitable doctrine of breach of confidence may be called upon when privileged communications have been disclosed and an injunction is sought to restrain the misuse of confidential information. It appears that this avenue was not available to Glencore in this instance given that the ATO had obtained the documents from the public domain. In that sense it might be said that there is a gap in the law as it does not otherwise afford protection against the use of privileged documents, which by the very nature of their privileged status are presumed to be confidential to the client.

 

Other avenues to protect privileged material (eg any tort of unjustified invasion of privacy) may be available to parties in different circumstances, and it remains to be seen whether those areas of law may be developed by the Courts to meet the recognised need to adequately protect privileged material from sophisticated cyber-attacks.

 

For the time being, however, this decision should serve as a reminder that while the law recognises legal professional privilege as an immunity from production or disclosure in certain circumstances, clients should remain vigilant and conscious of the risk that the contents of their privilege communications might be revealed due to matters beyond their control. This reinforces the need to be circumspect whenever committing matters to writing regardless of whether they are likely to be privileged, at least at the outset.