Independence - the applicable principles
162 Mr Martin's submissions proceeded on an assumption that a lack of professional detachment in a legal practitioner was sufficient to deprive the practitioner's client of an entitlement to privilege in respect of the practitioners' advice. Mr Martin invited the Court to read submissions made by counsel on his behalf before Wigney J on an interlocutory argument in the prohibition proceeding. The written submissions have been read, as has a transcript of oral submissions made before Wigney J on 13 February 2017, for the limited purpose of understanding the legal principles upon which Mr Martin relied. It is notable that in the proceedings before Wigney J, Mr Martin did not persist with a challenge to NRFA's privilege over communications to which senior counsel is a party. He did not so narrow his challenge in argument before me. He seeks access to all of the communications, whether senior counsel is party to them or not.
163 Mr Martin relies on Rich v Harrington [2007] FCA 1987; (2007) 245 ALR 106. In that case, Branson J upheld a challenge to privilege claimed by a firm in respect of legal advice given by an in-house lawyer who was also a partner of the firm. There is, I accept, some support for Mr Martin's position in the approach taken by Branson J in Rich.
164 Rich was applied in Aquila Coal Pty Ltd v Bowen Central Coal Pty Ltd [2013] QSC 82 at [10] (Boddice J). However, its correctness has been questioned by at least two members of this Court: Dye v Commonwealth Securities Ltd (No 5) [2010] FCA 950 (Katzmann J) at [11] - [19]; Archer Capital 4A Pty Ltd (as trustee for the Archer Capital Trust 4A (ACN 123 463 749)) v Sage Group PLC (No 2) (2013) 306 ALR 384 (Wigney J) [72] - [73]). The outcome of these cases did not turn on whether Branson J was correct in the approach that her Honour took, and none of the cases concern advice given by a legal practitioner who also had the status of a partner of his or her client.
165 As will become clear, my examination of the documents subject to NRFA's claim for privilege reveals few documents in respect of which the claim for privilege depends wholly upon an analysis of the independence of Mr Cross (in his professional capacity as lawyer) viz a viz NRFA (in its capacity as client), if "independence" is to be conceptualised as having the role identified by Branson J in Rich. In respect of those documents, if the reasoning in Rich were to be applied, I would conclude that the nature of the relationship between Mr Cross and NRFA lacked the requisite independence such as to sustain NRFA's privilege claims in them.
166 In the paragraphs that follow I explain why I have not applied the reasoning in Rich to those documents.
167 In Rich, the applicant (Ms Rich) commenced proceedings against the partners of a legal and accounting firm, Price Waterhouse Coopers (PwC). The central allegations in the action were acts of sex discrimination, bullying and harassment by a partner, having the subsequent approval of the board of partners and for which all partners were alleged to be liable.
168 Ms Rich challenged PwC's claim of privilege in respect of certain communications in the nature of legal advice given by lawyers in PwC's in-house Office of General Counsel (OGC) to PwC. Ms Rich submitted that the nature of the relationship between OGC and the partners of PwC was not such as to support the privilege claim. Among other things, the person holding the office of general counsel and having ultimate responsibility for the work of solicitors within the office, was himself a partner of PwC, as was another senior solicitor within the office. The subject matter of the proceeding involved allegations of a personal and serious nature against certain members of the firm with whom the solicitors were familiar, and had the potential to tarnish the reputation of the firm.
169 In concluding that PwC's privilege claim could not be maintained, Branson J discerned agreement in the judgments of the members of the High Court in Waterford v Commonwealth (1987) 163 CLR 54 "as to the need in every case for the legal adviser to be 'independent'" (at [36] - [38]). The rationale for that requirement, her Honour said, was that stated in the following passage of the judgment of Brennan J (at 70):
The purpose of legal professional privilege is to facilitate the seeking and giving of legal advice and thereby to ensure that the law be applied and litigation be properly conducted … If the purpose of the privilege is to be fulfilled, the legal adviser must be competent and independent. Competent, in order that the legal advice be sound and the conduct of litigation be efficient; independent, in order that the personal loyalties, duties or interests of the adviser should not influence the legal advice which he gives or the fairness of his conduct of litigation on behalf of his client. If a legal adviser is incompetent to advise or to conduct litigation or if he is unable to be professionally detached in giving advice or in conducting litigation, there is an unacceptable risk that the purpose for which privilege is granted will be subverted.
(Citations omitted)
170 Branson J perceived majority support for the principles stated in the passage. Her Honour said (at [38]):
Although Brennan J expressed a narrower view than Mason and Wilson JJ on the question of when legal professional privilege attaches to confidential professional communications between government agencies and salaried legal officers, their Honours were in agreement as to the need in every case for the legal adviser to be 'independent' (see also Deane J at p 80). See also Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (No 2) [1972] 2 QB 102 per Lord Denning MR at 129.
171 Her Honour also found support in the following statement of Graham J in Seven Network Limited v News Limited [2005] FCA 1551; (2005) 225 ALR 672 at [15]:
In my opinion, an in-house lawyer will lack the requisite measure of independence if his advice is at risk of being compromised by virtue of the nature of his employment relationship with his employer. 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.
172 Graham J later repeated that view in Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No 2) [2007] FCA 1445 at [35].
173 The content of the requirement that a legal adviser be independent, Branson J said, was informed by "notions of the absence of fear of favour" (at [40]). Her Honour continued:
An independent legal adviser is one who can bring a disinterested mind to bear on the subject matter of the legal advice. In the words of Brennan J in Waterford, what is required is a legal adviser who is able to be 'professionally detached' in giving the advice.
174 For PwC it was submitted that the concept of independence was concerned to ensure that legal professional privilege did not extend to advice given by lawyers in anything other than their professional capacity as lawyers. Issues affecting independence, PwC submitted, were issues that were potentially relevant to an assessment of whether a communication was made for the dominant purpose of obtaining or giving legal advice, especially in circumstances where an in-house lawyer assumes dual roles involving the provision of both legal and commercial advice. Independence, PwC submitted "has to be determined having regard to whether or not the person in question was performing a legal function (rather than a commercial or management function) in making a communication or preparing a document". PwC relied on the judgment of Tamberlin J in Seven Network Limited v News Limited [2005] FCA 142.
175 Branson J was not persuaded that Tamberlin J "intended to conflate the criteria for a claim of client legal privilege". Her Honour said that the requirement of independence was an essential characteristic of the relationship between lawyer and client as distinct from the criteria that the communication be made for the dominant purpose of giving or obtaining legal advice or to aid in the conduct of litigation in reasonable prospect. The dominant purpose test, her Honour said, was concerned with the object and subject matter of the communication and not with the nature of the relationship between the parties to the communication (at [58]), she continued:
In reaching a decision as to whether the relationship between OGC and the respondents was such as to secure to OGC's advice concerning Ms Rich's allegations and claims an independent character, I am not required to speculate about how General Counsel, or other solicitors in OGC, in fact approached the giving of that advice (Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 per Gleeson CJ, McHugh, Gummow and Hayne JJ at [7]). It may be that General Counsel and each solicitor in OGC was fully conscious of, and capable of avoiding, the insidious influences of factors such as loyalty to individual partners and to the firm including its leadership, concern for the reputation of the firm and the reputations of individual partners in the firm and other like matters. The critical question is whether the relationship between OGC and the respondents with respect to Ms Rich's allegations was one of professional detachment.
176 Her Honour concluded that Ms Rich's allegations were "inherently likely to engage the personal loyalties and duties" of all partners of PwC (including, implicitly, the partner holding the office of OGC) with the result that "OGC was not in a position to give professionally detached advice to the respondents concerning allegations of the character of those made by Ms Rich".
177 With respect, I do not consider the reasoning of Branson J to be in accordance with Waterford, or with the reasoning of Lord Denning MR in Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (No 2) [1972] 2 QB 102, from which her Honour drew additional support.
178 Crompton is a necessary starting point. In that case, Lord Denning MR (with whom Karminski and Orr LLJ agreed) said (at 129):
The law relating to discovery was developed by the Chancery Courts in the first half of the 19th century. At that time nearly all legal advisers were in independent practice on their own account. Nowadays it is very different. Many barristers and solicitors are employed as legal advisers, whole time, by a single employer. Sometimes the employer is a great commercial concern. At other times it is a government department or a local authority. It may even be the government itself, like the Treasury Solicitor and his staff. In every case these legal advisers do legal work for their employer and for no one else. They are paid, not by fees for each piece of work, but by a fixed annual salary. They are, no doubt, servants or agents of the employer .... They are regarded by the law as in every respect in the same position as those who practise on their own account. The only difference is that they act for one client only, and not for several clients. They must uphold the same standards of honour and of etiquette. They are subject to the same duties to their client and to the court. They must respect the same confidences. They and their clients have the same privileges.
179 His Lordship went on to confirm that where an in-house lawyer performs work for his employer in some other capacity, communications made in that other capacity would not attract privilege. He went on to say (at 129):
Being a servant or agent too, he may be under more pressure from his client. So he must be careful to resist it. He must be as independent in the doing of right as any other legal adviser … There is a safeguard against abuse … If there is any doubt as to the propriety or validity of a claim for privilege, the master or the judge should without hesitation inspect the documents himself so as to see if the claim is well-founded, or not.
180 A majority of the High Court in Kearney adopted and applied Crompton as correct (see at 510 (Gibbs CJ), 521 - 522 (Wilson J), 530 - 531 (Dawson J)), although the outcome of the case turned on other issues. Gibbs CJ said that the advice of an in-house lawyer would only be privileged if the lawyer who gives it has been admitted to practice and, his Honour was inclined to think, remains subject to the duty to observe professional standards and the liability of professional discipline: at 510. His Honour noted that qualifications of that kind had not been the subject of argument.
181 In Waterford the issue was whether legal professional privilege could attach to legal advice provided by lawyers employed by the Crown in right of the Commonwealth to the Attorney-General and the Department of Treasury concerning litigation pending before an administrative tribunal. Mason and Wilson JJ referred to the passages in Crompton extracted above. Their Honours observed that that aspect of the Court of Appeal's decision had not been challenged on appeal to the House of Lords and had been applied in Australia, Canada and Ireland. Their Honours continued (at 62):
In our opinion, given the safeguards to which reference is made in the various citations, there is no reason to place legal officers in government employment outside the bounds of legal professional privilege.
182 Among the safeguards identified in the authorities was the discretion of a judge to inspect the documents for him or herself to ascertain whether the claim is properly made and so guard against the potential for abuse.
183 Mason and Wilson JJ went on to say (at 62) that the relationship between in-house lawyer and his or her employer "must be a professional relationship which secures to the advice an independent character notwithstanding the employment". The emphasis is mine.
184 Brennan J drew a distinction between salaried lawyers within government and salaried lawyers employed within non-government agencies. His Honour said that the former relationship would attract the privilege but the latter would not. The rationale for the distinction was that lawyers employed in the offices of government were given statutory security of tenure, so leaving them "completely professionally independent", whereas non-government lawyers were subject to influences that naturally attended the relationship of employer and employee. In the passage upon which Branson J relied in Rich, extracted at [169] above, Brennan J conceptualised "independence" as a necessary feature of the lawyer-client relationship.
185 Subject to one reservation, Deane J confirmed that legal professional privilege could extend to the advice given within an organisation by a salaried legal adviser. The reservation was that it was unnecessary to determine what, if any qualification would apply so as to avoid the potential for abuse (at 81).
186 More categorically, Dawson J said (at 95 - 96):
Whilst there is something to be said for the distinction ... between independent and employed lawyers, it is not a statement of the position at common law and there is authority in this Court and elsewhere for the proposition that legal professional privilege may attach to communications passing between a salaried legal adviser and his employer, provided that the legal adviser is consulted in a professional capacity in relation to a professional matter and the communications are made in confidence and arise from the relationship of lawyer and client. For this reason the legal adviser must be qualified to practise law and, it seems, subject to the duty to observe professional standards and the liability to professional discipline.
187 In my respectful view, Branson J was incorrect to say that there was majority support for the view expressed by Brennan J in Waterford. There is, however, majority support for the proposition that matters affecting a lawyer's professional detachment (which inherently include his or her loyalties to the client arising out of, for example, an employment relationship) will necessarily bear on the question of whether the lawyer is, with respect to the communication in issue, acting in his or her capacity as a lawyer as opposed to some other capacity. The capacity in which the adviser is acting necessarily informs the dominant purpose of the communication in which privilege is claimed. As has been said, that is an objective factual enquiry. It is not to be answered definitively by reference only to whether there exists a potential for abuse of the privilege, however strong that potential might be.
188 The proposition that a lack of professional detachment on the part of an adviser will deny the entitlement to privilege must be rejected for a more fundamental reason: the privilege is that of the client, not that of the lawyer. Carried to its logical conclusion, the criterion of independence, as conceptualised by Brennan J in Waterford and Branson J in Rich, could not be fulfilled in circumstances where the personal interest of the lawyer obviously conflicted with the interests of the client. A lack of independence of that kind may cause the lawyer's advice to be partial, incomplete or wrong and subject the lawyer to disciplinary sanction. But it is difficult to comprehend why, for the purpose of the common law of privilege, the lack of independence should deprive the relationship as one of lawyer/client and even more difficult to comprehend why the client's privilege in the communication constituting the advice should be lost.
189 There is, in the circumstances of a case such as the present, a heightened potential for abuse or misuse of the privilege. The potential arises out of the discrete legal relationships viz a viz Mr Cross and the other members of NRFA. Clearly, there is a partnership relationship between Mr Cross and the other members of the firm. He may have communications with the other partners in his capacity as a partner per se concerning the management and commercial affairs of the firm, which may include its commercial interests in the outcome of litigation. Communications made in that capacity do not attract privilege. Mr Cross has also been instructed to "act on behalf of the firm" in relation to two proceedings to the extent that he is instructed to act in his professional capacity as a lawyer, that gives rise to an agency relationship quite apart from the agency relationship inherent in the partnership itself. It is that relationship that gives rise to distinct obligations owed to the other partners of NRFA and to the FWC and to this Court. Mr Martin's pleaded case expressly acknowledges that Mr Cross was subject to the legal and ethical obligations pertaining to all admitted legal practitioners when representing NRFA in each proceeding. He was subject to those obligations not because he was a mere agent of NRFA but because he represented NRFA in legal proceedings in his capacity as an admitted legal practitioner.
190 Generally speaking, the potential for abuse of the privilege arises because of the risk that the instruction to act is itself a sham arrangement and the risk that communications between a legal practitioner and client are made subject to privilege claims when, in truth, the communications have been made by the lawyer acting in some other capacity.
191 Risks of this kind appear to me to have been front of mind of the members of the High Court in Kearney and Waterford. The safeguards referred to in the judgments (and for which I consider there to be a majority view) are the requirement that the lawyer be admitted to practice and so subject to regulatory oversight, and the ability of the Court to inspect the documents for itself.