In the recent Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No 2) case the Federal Court considered whether emails and draft document prepared by Telstra's in-house legal advisors where subject to Legal Professional Privilege.

Impact of The Telstra Case

October 2007 – Client Newsletter

Summary : In Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No 2) (Telstra Case) case the Federal Court considered whether emails and draft documents prepared by Telstra’s in-house legal advisors were subject to legal professional privilege. Managing principal solicitor, Eva Bruce, considers the implications of this case for government legal practice.

Justice Graham refused Telstra’s claim for legal professional privilege on the basis that its in-house lawyer lacked the requisite measure of independence, because he considered that the legal advice was compromised by virtue of the nature of the lawyer’s employment relationship with Telstra.

This decision is important to government in-house lawyers, indicating that it is likely to become more difficult to claim legal privilege.

To minimise the risk of a claim to legal professional privilege being successfully challenged, careful consideration needs to be given by government agencies and their in-house lawyers regarding the way legal services are provided by in-house lawyers.

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Introduction
What is legal professional privilege?
How is legal professional privilege lost?
Does in-house legal advice attract legal professional privilege?
Telstra case determination of in-house counsel employee problems
What the Telstra case means for government in-house lawyers

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Introduction

In the case of Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No. 2) (Telstra case)1 Telstra claimed legal professional privilege with respect to documents (including emails and draft memoranda) in reference to Telstra’s consideration to bring a legal challenge against the Minister for Communications, Information Technology and the Arts (Minister) on her decision to select an applicant other than Telstra (OPEL Networks Pty Ltd) to receive broadband funding.

Telstra claimed legal professional privilege on the basis that the documents were either prepared by Telstra’s legal adviser for the dominant purpose of providing legal advice or were communications between Telstra and its internal legal adviser for that purpose, including in connection with possible legal proceedings. Solicitors for the Minister argued that Telstra’s claim for legal professional privilege was not properly made and that the onus was on Telstra to justify its claim for privilege.

Telstra did not lead evidence to establish the role which the various legal practitioners played within Telstra, nor was evidence disclosed with respect to the measure of independence of Telstra’s in house legal adviser and their ability to provide independent legal advice. As a result, Justice Graham held that Telstra could not claim legal professional privilege with respect to the advice or communications to or from the in house legal adviser. It is important to note that it has always been for the party claiming privilege to show that the documents for which the claim is made are privileged.

Legal officers are employed across government to perform various roles including the role of in house lawyers. A legal officer also undertakes other roles such as policy advice and contract management. Within government departments and administrative offices legal officers are generally employed under the Public Administration Act 2004 (Vic). This provides that persons employed within those organisations are in effect the employees of the relevant head (eg. the Secretary of the Department or Administration Officers such as the Ombudsman with respect to his officers), who in turn have all the rights, powers and authorities of an employer with respect to those employees.2

The Telstra case is likely to make it more difficult for government agencies to claim legal professional privilege with respect to confidential communications and advice from their in house lawyers, even where the dominant purpose is for the purpose of providing legal advice or in connection with possible legal proceedings. In the event of a legal challenge, public sector agencies will need to prove to the court that the advice provided by their in house lawyers is independent and impartial. If the decision in the Telstra case extends to government lawyers, as one expects it will, the onus will be on government agencies to satisfy the court in each case that the advice of in house legal officers is not compromised by any feelings of duty or loyalty owed by those officers to their employer.

Careful consideration needs to be given to the action that needs to be taken to ensure that government agencies are in a position to demonstrate the independence of their in-house lawyers in providing them with legal advice to preserve any future claim to legal professional privilege they may wish to make.

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What is legal professional privilege?

Legal professional privilege is a rule of law which protects communications between legal practitioners and their clients from disclosure including under compulsion by a court or statute. It is a privilege that is held by the client and not their lawyer, and is therefore also described as client legal privilege.3

The rationale underpinning legal professional privilege is that it encourages full and frank disclosure of information by a client to a lawyer; it promotes compliance with the law by enabling lawyers to give full and considered advice on a client's legal obligations; discourages litigation and encourages alternative dispute resolution; protects a client's privacy; and protects access to justice.

Legal professional privilege has its origins in the common law dating back to the 16th century as a protection for individuals when accessing the knowledge and legal resources available to lawyers. It was said to stem from the "oath and honour" of the lawyer. Legal professional privilege in Australia continues at common law and under statute.

Sections 118 and 119 of the Evidence Act 1995 (Cth) provide that confidential communications created for the dominant purpose of providing legal advice or litigation are protected from disclosure to federal courts. In Victoria legal professional privilege in the context of court proceedings is governed by the common law.

The common law maintains a distinction between the two limbs of legal professional privilege, advice privilege and litigation privilege. Advice privilege protects communications between a client and a lawyer for the purposes of the lawyer providing legal advice to the client while litigation privilege refers to the protection of communications between a client, lawyer (and any third party) for the dominant purpose of anticipated or existing legal proceedings. There is of course much overlap between the two limbs.

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How is legal professional privilege lost?

Legal professional privilege can be lost by either an implicit or explicit waiver. The privilege can however only be waived by the client and not by their lawyer. Therefore, it is a client's intentional or inadvertent actions in relation to their use of legal advice which may preclude the client from asserting the privilege in future. It is not the actions of their lawyer.

A client who discloses confidential legal advice (eg. to justify its actions) will waive the privilege if the disclosure is inconsistent with maintaining the privilege. The High Court in Mann v Carnell4 established a test of 'inconsistency' to determine whether a client has waived legal professional privilege over a communication. That test requires consideration of whether the client’s actions are inconsistent with the maintenance of confidentiality. The most common circumstance in which a client will be found to have waived a privilege is disclosing the full advice, or the conclusions, gist or substance of the advice, to a third party or the public at large. In the government context the possibility of waiving privilege raises particular problems for public figures seeking to justify their particular courses of action by relying on legal advice.

To protect against such waiver it is important that advice is not too widely circulated and when it is communicated that this is done on a sufficiently confidential basis.5

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Does in house legal advice attract legal professional privilege?

It is accepted law that the communications of in house counsel, (including government lawyers) and their clients can attract legal professional privilege although there is currently no appellate authority on the extent to which it applies.

When determining whether legal professional privilege should attach to such communications, judicial decisions (including those in the Victorian Supreme Court) have emphasised the importance of the independence of the legal advice.6

Matters relevant to establishing the independence of such advice have been held to include:

  • whether the in house counsel is admitted to practice;
  • whether the in house counsel holds a current practising certificate and is therefore subject to professional supervision and obligations owed to the court or a professional body (these matters were said to be influential but not determinative7 and are also relevant to government lawyers);
  • establishing a duty to the Court or a professional body, beyond a duty to the client;
  • the employment structure; the chain of command and reporting; and the existence of and terms of any directions from superior officeholders.8

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Telstra case determination of in-house counsel employee problems

The Telstra case does cause some concern with respect to the ability of clients of in house lawyers to rely on legal professional privilege with respect to in house communications. The case does reiterate that the onus of demonstrating the independence of the legal advice given lies squarely with the recipient of that advice. This has always been the position.

While Justice Graham did not set out any measures or criteria for determining when an in house lawyer is sufficiently independent of his or her employer, he did go on to say:

“On the other hand, if the personal loyalties, duties and interests of the in house lawyer do not influence the professional legal advice which he gives, the requirement for independence will be satisfied.”

He went on to say

“ In the case presently before the Court, there is no evidence, as I have earlier remarked, going to the independence of the internal legal advisers involved in the communications said to have been brought into existence for the dominant purpose of providing or receiving legal advice.”

Based on the above statements it appears that where objective evidence is brought before the court of an employer taking the steps necessary to ensure that their in house lawyer is put in a position to give independent and impartial legal advice, then that claim based on legal professional privilege, will be successful provided all other requirements are met. It is important to note, however, that the effect of the Telstra case is that evidence will need to be led with respect to these matters if privilege is claimed and disputed.

Previously where a claim for privilege was asserted, the person challenging the claim would point to factual matters which brought into question the independence of the legal advisor. In the Telstra case, however, his Honour noted that no evidence had been led by Telstra to establish the role which the various legal practitioners performed within Telstra, nor to disclose the measure of independence of the legal practitioners in question and their ability to provide impartial legal advice, given the roles that they had to perform.

Notably, Justice Graham found that legal professional privilege was not limited to express advice about the law saying, “[too] literal a requirement of identifying legal advice as express advice about the law would place undue emphasis on formalism and undermine the privilege”. In his view the relevant inquiry for the purpose of determining whether legal professional privilege applied to in house legal advice was whether the writer of the advice was sufficiently independent of their employer in the writing of the advice.

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What the Telstra case means for government in house lawyers

It must be noted that the Telstra case was decided by a single judge and that no evidence was called in support of the claim. As stated the onus has always been on the party claiming the privilege. That said, the case will be quoted against parties who seek to rely on the privilege for legal advice received from internal legal advisors.

Accordingly, government departments and agencies seeking to assert legal professional privilege with respect to their in house legal advice will need to be in a position to demonstrate the independence and impartiality of that legal advice. Further consideration needs to be given as to how that independence is to be demonstrated. As a general practice we recommend the following:

  • position titles and position descriptions for in house legal officers must accurately reflect that the holders of those positions will be engaged in the work of a lawyer (this will be problematic where a government lawyer performs a number of different roles eg. legal officer and policy officer or legal officer and contract manager in which event every attempt should be made to clearly distinguish between the various roles performed).
  • protocols could be drafted and implemented, which set out how legal officers will interact with others staff in the government agency and which recognise that, at least with respect to particular legal officers, their first duty is to the Court over and above their duty to their particular employer.
  • at least the managers of legal services or the senior lawyer should be admitted to practice and should have a practising certificate. This is not determinative but should assist.
  • a request for advice from the in-house legal officer and the response should be managed in a way that makes it clear that there is separation and independence of the lawyer from the client.
  • The Victorian Government Solicitor’s Office can advise government departments and agencies on how to mitigate the risk of waiving privilege in particular circumstances.

Note: The first VGSO seminar topic in February 2008 will be ethics. The seminar will include a discussion on independence of legal advisors.

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For further information

For further information or legal advice on any issues raised in this newsletter contact:

neloN euS on 8684 0402
Assistant Victorian Government Solicitor

srehtimS nahtanoJ on 8684 0411
Assistant Victorian Government Solicitor

eeL nehpetS on 8684 0410
Assistant Victorian Government Solicitor

The VGSO is the primary source of legal services to the Victorian state government and its statutory authorities, providing strategic advice and practical legal solutions.

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1. [2007] FCA 1445
2. Clause 20(1) provides that a public service body Head [Department Head or Administrative Office Head], on behalf of the Crown, has all the rights, powers, authorities and duties of an employer in respect of the public service body and employees in it
3. Refer to VGSO publication ‘Understanding Legal Professional Development’ June 2007 www ua.vog.civ502cc2c94be1a7c4ca7ef25b8b50bc04@502cc2c94be1a7c4ca7ef25b8b50bc04osgv
4. (1999) 2 & 1 CLR 1
5. Refer to recommended practices for maintaining legal privilege as (1999) 2 & 1 CLR 1
6. Australian Hospital Care Pty Limited v Duggan & Ors [1999] VSC 131
7. Vance v Mc Cormack [2004] ACTSC 85 and [2005] ACTCA 35
8. Ibid