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13 August 2014 Legal professional privilege and investigation reports

By Richard Ottley, Partner and Ellen Davis, Solicitor


In Brief

A recent decision of the Federal Circuit Court in an adverse action claim, has served to remind us of the pitfalls of lawyers carrying out investigative work for clients and then giving them legal advice based on their investigation. In this case legal professional privilege was held to have been waived.


Generally, communications between solicitors and their clients are protected by legal professional privilege, allowing communications between the parties to be frank and honest without fear of disclosure. The privilege of confidentiality belongs to the client and therefore can be waived or lost by the client's actions in relation to the communication.

Legal professional privilege can be waived where it is perceived that the client has acted in a manner that is inconsistent with the maintenance of the privilege. Cases of inconsistency commonly arise where clients disclose either orally or in writing to a third party or the public at large, the content substance or gist of advice, or conclusions contained within the advice.

Legal professional privilege and the termination of employees

The Federal Circuit Court of Australia was recently asked to determine whether legal professional privilege had been waived in a case concerning advice given to an employer by their solicitor in the form of a report relating to an independent workplace investigation. The report ultimately recommended as an option, the termination of the employee under investigation.

The employer in this case, Doutta Galla Aged Services Ltd, engaged the services of a law firm to investigate and provide advice to its Board of Directors into the conduct of one of its employees. An investigation was carried out and a report was provided to the Chairman of the Board which also contained legal advice and the firm's recommendations. The partner of the law firm also addressed the Board on the matters set out in his report.

The Board considered the advice and recommendations contained within the report and made four recommendations to the CEO of the Company, one of which was to terminate the employee. In a sworn affidavit the CEO referred to the existence of the report and stated that the Board had given consideration to the report before issuing four recommendations. The CEO also referenced his decision to terminate, to the Board's recommendations.

The former employee submitted that the reference to the report by the CEO in his affidavit showed that the Board had clearly been influenced and had made the recommendation to the CEO to terminate the employment, based on the contents and recommendation of the report. The former employee further submitted to the Court that he was therefore entitled to see the documents relevant to the state of mind of the Board, including the report supplied by the law firm which undertook the independent investigation.

The Court agreed with the former employee. The Court quoted with approval, earlier authority in Liquorland (Australia) Pty v Anghie [2003] VSC 73 for the proposition that "It is clearly not sufficient that a mere reference to legal advice will amount to disclosure. Nor could a mere reference to a decision having been made after consultation with lawyers, amount to a disclosure of the contents of that advice. Where, however, the client has put in issue their state of mind and it appears that legal advice was given at the relevant time, the privilege was lost where it can be shown that there is a likelihood that the legal advice contributed to that state of mind".

It was clear in this case that the recommendations contained within the firm's report and basis for them, had some bearing on the views and conclusions arrived at by the Board members when deciding to recommend (as one of the options) termination of the former employee. The Court held in these circumstances that it would be unfair to the former employee not to allow discovery of the report and ordered its production to the former employee.

POINTS TO TAKE AWAY

This case serves as a reminder that it can be dangerous to mix the provision of legal advice and the carrying out of an investigation. One attracts legal professional privilege, the other does not. By mixing them, the client runs precisely the risk that was realised in the above case, namely that the privilege is held to have been waived.  

Lawyers involved in an investigation and preparation of a report may in some situations determine that it is wise to assume that the report may ultimately become the object of scrutiny, and acknowledge that it is safer to allow another law firm to provide the legal advice. Alternatively, they could stick to providing legal advice and have a third party carry out the investigation and report.

For further information, please contact:

Richard Ottley, Partner  |  Phone: +61 2 9233 5544  |  Email: rbo@swaab.com.au

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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