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Justin McDonnell  
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Mark Darian-Smith  

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Justice Young recently handed down a decision in the Federal Court concerning claims for legal professional privilege by AWB.¹ AWB has indicated that it will not appeal the decision.

AWB sought declarations in relation to claims for legal professional privilege in over 900 documents. The documents were principally legal advices or associated documents arising out of appearances and submissions made by AWB to a number of different inquiries into trade related issues concerning sanctions imposed on Iraq.

The Commonwealth opposed the declarations sought by AWB.

Were the Legal Investigations Privileged?

The Commonwealth argued that many of the investigations carried out by AWB’s lawyers were purely factual. They argued that factual investigations by lawyers can be separated from the ultimate legal advice given by those lawyers as a result of the factual inquiries. Justice Young disagreed. He took the view that it would be “inappropriate and artificial to attempt to sever the factual investigations carried out by the lawyers from the legal advice they provided”.

Waiver of Privilege

The Commonwealth relied on a number of transcript references from the Cole Inquiry and other public evidence to argue that AWB had disclosed the gist or substance of the legal advices it had obtained. As a consequence, it was argued that AWB had waived any privilege claims in relation to those advices, as the reasonable listener would understand that the evidence or comments referred to the effect of AWB’s legal advices.

Justice Young held that AWB had made conscious and voluntary decisions to refer to its legal advice in dealing with the Australian Government, the Permanent Investigations Committee of the United States Senate, a United Nations investigation and the Cole Inquiry. This is due to the continual references by senior executives of AWB in giving evidence or in discussions, that indicated that the conclusion of such legal advice was that there was no evidence of any wrongdoing by AWB. It was held that AWB had taken such action because it considered that it was in its commercial interest to do so. The Judge commented:

“I infer that AWB made the assessment that it would advance its commercial interests if it were to be known publicly that it had undertaken extensive legal reviews and that, as a result, it had obtained legal advice that there was no evidence that it engaged in any improper or unlawful conduct in breach of the United Nations sanctions.”

Justice Young considered these actions were inconsistent with the maintenance of confidentiality in the legal advices. It may have been different if AWB was under legal compulsion to provide such information. Further, no objection was made by AWB when evidence was given in the Cole Inquiry on these topics.

The Judge was of the view that privilege had been waived in a large number of documents and not just the legal advice, but the associated documents such as investigatory reports, communications with AWB and other documents considered or influencing the legal advice given.

Illegal or Improper Purposes and Privilege

Justice Young dealt with a specific category of documents concerning a transaction that inflated prices of two contracts leading to improper payments from the United Nations. AWB had argued that the relevant United Nations resolutions were not part of the law of Australia. Nevertheless, the Judge held that the documents related to this transaction were not privileged as they were in furtherance of an improper and dishonest purpose. The evidence established that the transactions were deliberately and dishonestly structured by AWB so as to misrepresent the true nature and purpose of the particular fees and “to work a trickery on the United Nations”. The Judge decided that it would be contrary to public policy for privilege to be applied to communications of this kind.

Lessons to be Learned

The principal lesson arising out of the case is the difficulty with waiver of privilege. The Judge relied on a number of cases (including US, English and Canadian authorities) which dealt with comments relating to legal advice that led to a waiver of privilege. An example was a reference in one of the C7 cases whereby a discovered Optus Board paper stated:-

“Our legal advice is that the risk of damages being awarded against Optus is low.” ²

In contrast, the Judge referred to the Ninox case which held that a reference as follows:

“We’ve engaged Stuart Littlemore QC and he has reviewed everything in great detail and we’re moving forward based on his recommendations”,

did not waive privilege as the obtaining of the advice and the action taken by the client were distinguishable from stating the gist or conclusion of the advice. The distinction is between the advice and the action taken. If there is a link such that it is apparent that the advice is that the action should be taken, then the disclosure could amount to waiver.

Hence, care needs to be taken in referring to the obtaining of legal advice and its conclusions. Waiver will often require the full opinions to be provided which may contain qualified views, highlighted weaknesses and possibly admissions. Conversely, keep alert for reference to legal conclusions asserted by opposing parties or negotiators, as waiver may work for you.³

Footnotes

1. AWB Limited -v- Cole (No 5) [2006] FCA 1234

2. Seven Network - v- News Limited (No. 12) [2006] FCA 348.

3. Nine Films and Television Pty Ltd -v- NinoxTelevision Ltd [2006] IPR 442