Keeping your skeletons buried – maintaining legal professional privilege in the investigation process

In the investigation process, questions regarding legal professional privilege often arise, especially as it relates to reports forming part of any investigations. Recently, Gadens examined the way in which legal professional privilege can pose operational hazards for multi-disciplinary firms. This article considers legal professional privilege generally, and how it may apply in the context of an investigation by reference to three cases where privilege applied through an investigation.

Legal professional privilege generally

Legal professional privilege (LPP) is a privilege over documents that allows a party to refuse to provide a document if the document constitutes legal advice. This allows a party to keep the contents of a document confidential and can refuse to produce it during court proceedings and pre-trial processes.

LPP exists to facilitate the administration of justice by allowing clients to communicate openly with their lawyers without concern that frank communication with a lawyer may be detrimental to their case. In Baker v Campbell, Deane J said:

“That general principle represents some protection of the citizen – particularly the weak, the unintelligent and the ill-informed citizen – against the leviathan of the modern state. Without it, there can be no assurance that those in need of independent legal advice to cope with the demands and intricacies of modern law will be able to obtain it without the risk of prejudice and damage by subsequent compulsory disclosure on the demand of any administrative officer with some general statutory authority to obtain information or seize documents.”[1]

The general rule in determining whether privilege applies is the ‘dominant purpose’ test. Put simply, the document that is purported to be privileged must have been prepared for the ‘dominant purpose’ of obtaining legal advice.[2] A document may have multiple purposes, but if legal advice is not the dominant purpose, privilege may not apply to the document as a whole. A key consideration and thing to keep in mind is that the dominant purpose is determined at the point in time in which a document is created, so you cannot retrospectively claim LPP by reference to how a document was used.

Legal professional privilege in investigations

Wirth v State of Queensland (Mackay Hospital and Health Service) [2015] QIRC 35

In this case, Wirth sought the production of an investigation report, witness statements, and other materials that arose from an investigation that resulted in his termination. The Respondent asserted that there was no investigation report and that the request was subject to LPP as a ‘Legal Advice Report’ had been prepared by a firm of solicitors. It was argued that this report was protected by LPP as lawyers had been engaged to conduct an independent investigation and provide legal advice.

Wirth countered that privilege did not apply as the independent investigation was not work that required legal qualifications, referring to Bartolo v Doutta Galla Aged Services Limited:

“In this case, the investigator was a lawyer. The work required in conducting the investigation could however hardly be described as work for which being qualified as ‘an Australian lawyer’ was a requirement. There is no privilege if a communication is with a lawyer acting in a non-legal capacity and providing something other than legal advice.”[3]

Ultimately, the Court held that the document’s dominant purpose was to identify communication and relationship breakdowns at the Mackay Hospital and Health Service to take appropriate steps to address the problem “for the safety of … patients and the proper and efficient management of the Service.”[4] The purpose of the documents in question was separate from any disciplinary action that was taken, and the Court held that the documents did not attract LPP.

TerraCom Ltd v Australian Securities and Investments Commission [2022] FCA 208

In this matter, TerraCom terminated the employment of its Commercial General Manager in the context of serious allegations that he made about the company, the CEO, and the CFO regarding the sample quality certification results of coal for exportation. TerraCom instructed its solicitors to provide legal advice relating to the allegations, and a consulting firm was engaged by the solicitors to prepare a forensic investigation report.

TerraCom made public disclosures that referred to the internal investigation and the conclusions that were reached. Following this, ASIC commenced an investigation and requested that TerraCom provide the report and other materials that were produced. TerraCom claimed privilege over the materials.

The Court considered whether:

1. the forensic investigation report was prepared for the dominant purpose of providing legal advice, and was therefore subject to privilege;
2. TerraCom waived privilege over the report by referring to the report in public statements; and
3. partial disclosure over the contents of the report gave rise to a waiver of privilege over the entirety of the report.

The Court found that the report was for the dominant purpose of being used by TerraCom’s legal advisers to provide legal advice, and considered the language used in the engagement letters issued by the parties in making this determination.

The Court held that TerraCom had used the investigation report for a forensic or commercial advantage and to “deflect the attention of any regulator in an investigation”[5] by referring to the materials in public statements. Given that statements were made to shareholders, the Court also stated that allowing TerraCom to maintain privilege would “operate a tangible unfairness” in preventing ASIC from testing whether statements to shareholders were false and misleading.[6]

The structure of the report itself necessitated that waiver of one part of the document resulted in waiver of the report as a whole, given the portion to which privilege applied was integrated throughout the document. Waiving privilege over the document was required to provide the necessary context for the whole document.

Petrunic v Q Catering Limited [2019] FWC 1034

In this matter, the Fair Work Commission upheld an employer’s claim for privilege over investigation documents that were sought by a former employee as part of unfair dismissal proceedings.

Senior Deputy President Hamberger found that the investigation documents consisted of confidential communications between Q Catering and its legal representatives for the purpose of legal advice, and privilege was initially maintained. Amongst the documents requested by Petrunic were ‘witness statements’ taken by Q Catering, but privilege was claimed.

During the proceedings, an employee witness disclosed that a statement had been provided to Q Catering, and broadly described the contents of their statement. Hamberger noted that the employee witness knowingly and voluntarily disclosed that they had provided a statement and disclosed the contents, concluding that privilege was waived by the disclosure. Hamberger allowed privilege to be waived over the statement in question.

Key takeaway

For legal professional privilege to apply to a report or document that forms part of an investigation, the dominant purpose of the document must have been legal advice. If an additional report is required from non-legal professionals, such as forensic accountants, the best practice is that they are engaged by lawyers, rather than the client engaging other parties directly, as the engagement can support the argument that it is for the purpose of legal advice.

To avoid waiving privilege over documents in an investigation, parties should avoid:

• referring to privileged materials publicly or in Court, as doing so may inadvertently waive privilege;
• broadly describing the contents or providing a summary of privileged materials; and
• attempting to rely on the contents of any document that they wish to retain privilege.

It is also important that parties avoid partial waiver of privilege, being where they attempt to rely on part of a document while retaining privilege over the balance. In some circumstances, privilege over the entirety of a document may be considered to be waived, particularly if waiving privilege is required to provide relevant context.

If you found this insight article useful and you would like to subscribe to Gadens’ updates, click here.

Authored by:

Daniel Maroske, Director
Anna Fanelli, Associate

[1] (1893) 153 CLR 52 at 120.

[2] Esso v Federal Commissioner of Taxation (1999) 201 CLR 49.

[3] Bartolo v Doutta Galla Aged Services Limited [2014] FCCA 1517 at [77], [78].

[4] Wirth v State of Queensland (Mackay Hospital and Health Service) [2015] QIRC 35 at [20].

[5] TerraCom Ltd v Australian Securities and Investments Commission [2022] FCA 208 at [61].

[6] ibid at [62].