Skip to content.

Home

Allens Arthur Robinson

Focus: Privilege – August 2008

Third party communications and privilege

In brief: A recent Victorian Supreme Court decision provides an important reminder that third party communications that are privileged from production in federal courts may not be similarly privileged in state courts, particularly in Victoria. Partner Belinda Thompson (view CV), Senior Associate Andrew Maher and Lawyer Mark Farquhar explain.

How does it affect you?

  • In 2004, the Federal Court of Australia in Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 207 ALR 217 expanded the circumstances in which third party communications made for the dominant purpose of obtaining legal advice could attract legal professional privilege.
  • In Orica Australia Pty Ltd v Limit (No. 2) Limited, the Victorian Supreme Court indicated that a narrower interpretation of advice privilege in the context of third party communications is currently preferred in Victorian courts to the broader approach adopted in Pratt.
  • In practice, when marshalling information for the purpose of obtaining legal advice, it should not be assumed that third party communications made for the dominant purpose of obtaining legal advice will be privileged from production in all Australian courts. A cautious approach to those communications is warranted in the circumstances.

The facts

In Orica Australia Pty Ltd v Limit (No. 2) Limited [2008] VSC 247, Orica Australia Pty Ltd applied for a declaration that it was entitled to an indemnity from Limit (No. 2) Ltd under a charterers' liability insurance policy for Orica's liabilities following a shipping incident. Limit subpoenaed certain documents from Orica's global claims manager and agent, Marsh Pty Ltd. Orica objected to Limit inspecting the subpoenaed documents on the basis of legal professional privilege.

The disputed documents were created after Marsh had engaged Ewig International Marine Corporation, a marine surveying firm, to report on the facts of the shipping incident and to provide an independent opinion on the cause of that incident to Orica. Relevantly, the documents included correspondence between Orica's lawyers, Clayton Utz, and Ewig (the Ewig correspondence).

Return to top

The decision

When determining whether legal professional privilege applied to the Ewig correspondence, the Victorian Supreme Court observed that legal advice privilege (as opposed to litigation privilege) was confined narrowly to communications between the lawyer and client (or the client's agent acting as a conduit for such communications): Wheeler v Le Marchant (1881) 17 Ch D 675 and Mitsubishi Electricity Australia Pty Ltd (2002) 4 VR 332. As Ewig was engaged both to report on the facts and to express an independent opinion on the cause of the incident, its function went beyond acting as a mere conduit for the provision of instructions to Clayton Utz for the purpose of obtaining legal advice for Orica. Consequently, the relevant correspondence was between a third party (Ewig) and Orica's lawyers and was not protected by advice privilege.

The court contrasted its approach to that adopted by the Full Federal Court in Pratt. In that case, the court decided that, provided a third party communication is made for the dominant purpose of enabling a client to obtain legal advice from its lawyer, it is immaterial whether the third party is acting as the client's agent for the purpose of the communication with the lawyer. Instead, the Full Federal Court concluded that a 'substance over form' approach should be adopted, with the focus being on the purpose of the communication between the client or its lawyer and the third party. While the Supreme Court described this reasoning as 'seductive', it stated that it was 'obliged and inclined to follow the long established authority' of Wheeler and Mitsubishi.

Return to top

Implications

This decision indicates that the narrower interpretation of advice privilege in the context of third party communications is currently preferred in Victorian courts to the broader approach adopted in Pratt. It remains to be seen which approach other state courts will adopt following Pratt1.

Given this divergence in the law, when marshalling information for the purpose of obtaining legal advice, it should not be assumed that third party communications made for the dominant purpose of obtaining legal advice (and which are not made for the purpose of use in actual or anticipated litigation) will be privileged from production in all Australian courts. Therefore, corporations and individuals alike should proceed with caution when contemplating and making third party communications for the dominant purpose of obtaining legal advice. 

Footnote
  1. In New South Wales, the obiter comments of the Supreme Court of New South Wales in Re Southland Coal Pty Ltd (recs and mgrs apptd) (in liq) (2006) 59 ACSR 87 indicate that the reasoning in Pratt may be accepted in that state. The Supreme Court of Queensland decision in Century Drilling Limited v Gerling Australia Insurance Company Pty Limited [2004] 2 Qd R 481 provides some support for the acceptance of the reasoning in Pratt in Queensland.

Return to top

For further information, please contact:

Return to top

Bookmark with

What are these?

[Recent publications]

Recent Litigation & Dispute Resolution publications