In-House Counsel, the Requirement of Independence and Legal Professional Privilege in Australia

Background

Legal professional privilege protects from disclosure communications between a client and his or her lawyer, made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings. 

In Martin, Charlesworth J dismissed an interlocutory application for the production of documents against the law firm Norton Rose Fulbright Australia ("NRFA") filed by a former partner, Mr Martin. One of the arguments raised by Mr Martin was that the NRFA partner, Mr Cross, who was acting for NRFA in the litigation, lacked the necessary independence for his advice to the other partners of NRFA to be subject to legal professional privilege. 

Mr Martin argued that Mr Cross was not capable of exercising the requisite level of professional detachment from the firm and from the factual subject matter of the claims so as to be independent. The matters said to have affected the independence of Mr Cross included:

• He was personally involved in events within NRFA which culminated in Mr Martin's dismissal and so was a potential witness in the FWC proceeding. 
• He was a partner of NRFA and a party to the proceeding.
• Mr Cross was the person against whom Mr Martin made serious allegations of misconduct in the proceeding.
• Mr Cross was acting "as an agent, simpliciter, representing the Respondents as 'solicitor-litigants-in-person' and as NRFA's lawyer in connection with the proceedings".

Decision

Justice Charlesworth referred to the approach taken by Branson J in Rich including that her Honour discerned agreement in the judgments of the members of the High Court of Australia in Waterford v Commonwealth (1987) 163 CLR 54 "as to the need in every case for the legal adviser to be 'independent'". The rationale for the requirement was stated in the following passage of the judgment of Brennan J:

The purpose of legal professional privilege is to facilitate the seeking and giving of legal advice and thereby to ensure that the law be applied and litigation be properly conducted … If the purpose of the privilege is to be fulfilled, the legal adviser must be competent and independent. Competent, in order that the legal advice be sound and the conduct of litigation be efficient; independent, in order that the personal loyalties, duties or interests of the adviser should not influence the legal advice which he gives or the fairness of his conduct of litigation on behalf of his client. If a legal adviser is incompetent to advise or to conduct litigation or if he is unable to be professionally detached in giving advice or in conducting litigation, there is an unacceptable risk that the purpose for which privilege is granted will be subverted.

Further Branson J perceived majority support for the principles stated by Brennan J. 

Justice Charlesworth opined that Branson J was incorrect to say that there was majority support for the view expressed by Brennan J in Waterford. Rather, there was majority support for the proposition that matters affecting a lawyer's professional detachment (which inherently include his or her loyalties to the client arising out of, for example, an employment relationship) will necessarily bear on the question of whether the lawyer is, with respect to the communication in issue, acting in his or her capacity as a lawyer as opposed to some other capacity. An objective factual inquiry as to the capacity in which the adviser is acting necessarily informs the dominant purpose of the communication in respect of which privilege is claimed. 

Justice Charlesworth accepted that in circumstances of a case such as the present, a heightened potential for abuse or misuse of the privilege arose because of the discrete legal relationships vis-à-vis Mr Cross and his fellow partners at NRFA. Her Honour stated:

[Cross] may have communications with the other partners in his capacity as a partner per se concerning the management and commercial affairs of the firm, which may include its commercial interests in the outcome of litigation. Communications made in that capacity do not attract privilege. 

However, Mr Cross had also been instructed to "act on behalf of the firm" in relation to legal proceedings in his professional capacity as a lawyer. Communications in performing this role could attract privilege.

In the current case, Charlesworth J inspected the documents in contention and found them all to be privileged. The privileged nature of several of the documents turned upon an analysis of the independence of Mr Cross and the rejection of the approach taken by Branson J in Rich. Her Honour stated that "if the reasoning in Rich were to be applied, I would conclude that the nature of the relationship between Mr Cross and NRFA lacked the requisite independence such as to sustain NRFA's privilege claims". Her Honour was fortified in her conclusions by the safeguards that the in-house counsel be admitted to practice and therefore subject to regulatory oversight and the ability of the Court to inspect documents for itself in determining contested privilege claims.