‘Limited Waiver’ –  In the matter of Northern Energy Corporation Limited [2020] NSWSC 1073.

A question often arises in proceedings when documents are produced as to what constitutes Legal Privilege.

Legal privilege is the privilege attached to communications made for the dominant purpose of providing legal advice and/or for the purpose of legal proceedings (or anticipated litigation).  The privilege is for the benefit of the person receiving that advice, as it promotes the candid disclosure of information.

Where privileged documents are treated inconsistently (that is, the documents are disclosed and/or published), the privilege over those documents may be waived.

In the matter of Northern Energy Corporation Limited [2020] NSWSC 1073.  Rees J, discussed what constitutes a ‘limited waiver’ of documents. The decision involved assessing whether the documents produced by the auditor of a group of companies owned by New Hope Corporation Limited (New Hope) were subject to client legal privilege and whether access to those documents was to be restricted accordingly.

In summary, New Hope’s group auditor (Deloitte Touche Tohmatsu) produced a number of documents pursuant to an order for production by the liquidators of Northern Energy Corporation Limited (in liquidation) and Colton Coal Pty Limited (in liquidation), both of which were wholly owned subsidiaries (among others) of New Hope.  New Hope sought to restrict the liquidators’ access to the produced documents on the basis that the documents produced contained legal advice obtained by New Hope from Baker & McKenzie.

The liquidators’ position was that the documents had been produced to New Hope’s group auditor and that privilege over these documents had been waived.

In order to make a determination as to whether access ought be granted to the communications, it was necessary for Rees J to determine two issuesr:

  1. Firstly, whether the communications attracted client legal privilege; and
  2. Secondly whether there was any waiver of privilege over those communications.

In respect of (1), Rees J assessed each of the subject documents and came to the view that the communications attracted client legal privilege, as the dominant purpose of communications was for New Hope to obtain legal advice from Baker & McKenzie.

In respect of (2), Rees J assessed whether each of the disclosures made by New Hope to the group auditor enclosing or referring to the communications was consistent to maintain the privilege.  It was held that, New Hope had waived the privilege of the communications in a limited way, being waiver to the group auditor and solely for the purpose of conducting the group audit.  Rees J noted that the communications were provided only in so far as New Hope was required to do so to satisfy its statutory obligations (as a publicly listed company New Hope was required to have its accounts audited according to Division 3, Part 2M of the Corporations Act 2001 (Cth)) and under the express note that the communications were strictly confidential.

By reason of these matters, Rees J held that the waiver of privilege in this instance was provided only to the group auditor, and that it did not extend to the either of the subsidiary companies and/or the world at large.

As a result, the Court restricted access to the subject documents.

While each case is ultimately to be determined on its facts, Rees J made a number of interesting findings that are worth keeping in mind when providing privileged communications for a limited purpose (in the context of group audits):

  • At [70], “disclosure of confidential legal advice to a company’s auditor where conditions of confidentiality and privilege are maintained will not result in waiver of the confidential legal advice beyond the auditor”.
  • At [79], “where one company in a corporate group discloses privileged material to a group auditor then, so long as privilege and confidentiality are maintained when disclosing the communication to the auditor, the company does not thereby waive privilege vis a vis other companies in the corporate group”.

 

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