Legal pro­fes­sion­al priv­i­lege and inves­ti­ga­tion reports

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.

Key Points

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.