A recent Federal Court decision considered ASIC’s obligations when it receives privileged material from employees or former employees of a company under investigation.

The case was an application under the Administrative Decisions (Judicial Review) Act 1977 (Cth) for a review of ASIC’s decision to make information obtained during an investigation available to the Australian Federal Police (“AFP”). In issue was whether ASIC could disclose to the AFP information that might be subject to a claim for privilege by the company. The Court held that ASIC could pass on the privileged information to the AFP.

Facts

ASIC was investigating the activities of AWB Ltd (“AWB”) and others in connection with wheat sales to Iraq under the United Nations Oil for Food Programme. As part of its investigation, and pursuant to s 19 of the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”), ASIC examined a number of current and former AWB employees. Other employees and former employees also voluntarily provided witness statements. It was accepted that the examinees (not being officers or directors) did not have the authority to claim or waive AWB’s privilege. AWB was concerned, however, that an examinee might inadvertently or deliberately disclose privileged information to ASIC. AWB’s lawyers sought to attend the examinations for the limited purpose of seeking to protect AWB’s privilege, but this was not permitted.

AFP requested that ASIC provide it with copies of the witness statements and examination transcripts. AWB learned of AFP’s request not from ASIC, but from some of the examinees. AWB made submissions to ASIC regarding any possible claims of privilege it might have over the statements and transcripts, including suggestions for safeguarding that privilege. In accordance with its power under s 127(4) of the ASIC Act, ASIC disclosed the material to AFP. While certain conditions were attached to the disclosure, none of AWB’s suggestions were adopted.

AWB sought a review of ASIC’s decision. Central to AWB’s claims against ASIC was its argument that, if a person might disclose to ASIC material over which another person claimed privilege, ASIC must give that other person an opportunity to protect that privilege.

Decision

Gordon J held that s 127(4) of the ASIC Act permitted ASIC to provide the AFP with information over which AWB might have a claim of privilege, even where ASIC had obtained that information from someone other than AWB.

Her Honour noted that the ASIC Act does not abrogate privilege (as established in Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543), so ASIC cannot compel a s 19 examinee to disclose information over which the examinee claims privilege. However, the examinee may waive that privilege in the course of the examination by disclosure inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. ASIC has no obligation to prevent this waiver.

Her Honour held that:

• ASIC must give an examinee a reasonable opportunity to claim privilege on their own behalf;
• ASIC has no obligation to notify any privilege holder that its examinations may result in an individual providing privileged information to ASIC;
• ASIC has no obligation to allow the privilege holder to intervene or interject in an examination in order to claim privilege on its behalf;
• ASIC cannot compel an examinee to disclose to it material subject to a claim of privilege by another person. However, there is nothing to stop ASIC receiving such material from an examinee. Nor is there any obligation on an examinee to claim privilege on behalf of that person, or on ASIC to give the examinee a reasonable opportunity to make such a claim.

Implications

The decision leaves companies whose employees or former employees provide information to ASIC in a difficult position, particularly as the company may not be aware that the employee or former employee is doing so. While the employee may not be able to waive privilege on behalf of the company, and ASIC should not seek to compel disclosure of privileged material, such material may still be disclosed and used by ASIC and other parties to whom ASIC gives the information. As Gordon J noted, ASIC is unlikely to allow a company to be represented at the examinations, as this may frustrate its investigation. It may be possible for the holder of the privilege to take action in equity to prevent the use of the information in breach of confidence. However, to succeed in such an action the plaintiff would need to establish that the information was imparted in circumstances importing an obligation of confidence. The privilege holder may also make a claim for privilege prior to the tendering of evidence by ASIC or another recipient of the information.

An important feature of this case was the fact that the examinees did not have authority to claim or to waive privilege over the material in question. A “solution” suggested by Gordon J was for a company to authorise an examinee or other person providing information to ASIC to assert the company’s privilege, though her Honour noted that this could only occur where the third party has prior notice of the examination or other exercise of power by ASIC. One disadvantage with this approach is that authorising a person to assert privilege would also give them the power to waive the company’s privilege, and the company, not being represented at the examination, would have no control over this.

What should you do?

• Instruct employees to notify your in-house legal team if they are asked to provide information to ASIC.
• Seek to be represented at any ASIC examination of an employee/former employee for the purposes of protecting the company’s privilege. Note, however, that this is unlikely to be allowed by ASIC.
• Arrange for the employee to have legal representation at the examination. A lawyer can object to questions which would require the examinee to disclose privileged information.
• Consider carefully whether you should instruct employees who are to be examined by ASIC to require and authorise them to assert the company’s privilege. The risk of this is that it will also enable the employee to waive the company’s privilege.
• If you become aware that ASIC intends to pass on information from its investigation to another government body, seek to make submissions concerning the protection of any privileged information.