December 5, 2013

When Privileged Documents are Inadvertently Disclosed

Expense Reduction Analysts Group Pty Ltd & Ors v Armstrong Strategic Management and Marketing Pty Ltd & Ors [2013] HCA 46 (Expense Reduction Case)

During the litigation process, once parties have filed and served their pleadings, they must then disclose to each other the documents the parties will reply upon at trial. The process of disclosure is intended to prevent surprise at trial, and also to inform the parties of the issues in dispute.

In the Expense Reduction Case, the High Court was called upon to decide what should happen in circumstances where one party made accidental disclosure of privileged documents to the other.

Norton Rose, acting for Expense Reduction Analysts Group Pty Ltd (Expense), inadvertently disclosed a number of privileged documents to Marque Lawyers, acting for Armstrong Strategic Management and Marketing Pty Ltd (Armstrong). Norton Rose advised Marque of the inadvertent disclosure, however Marque declined to return the documents because it was of the view that any privilege attaching to the documents had been waived by the disclosure.

What is Privilege?

Parties must disclose the documents that they intend to rely upon before trial; however they are also entitled to claim privilege over some documents and are not required to disclose them. A document may be privileged for a number of reasons, including if it is:

  • subject to legal professional privilege, for example, communications to obtain confidential legal advice; or
  • without prejudice communication, such as without prejudice settlement discussions.

 

Waiver of Privilege

Waiver is the circumstance (or series of events) which results in a party adducing material that would otherwise be protected from disclosure under legal professional privilege. Waiver of privilege may be:

  • express – where the party claiming privilege intends to waive privilege; or
  • implied – where a party is taken to have waived privilege by their conduct, despite the fact that they did not actually intend or want to waive privilege.

 

Outcome of the Expense Reduction Case

In this case, discovery by the parties involved approximately 60,000 documents – a task acknowledged as “huge” by the Court. It also observed that, in large commercial cases, mistakes are now more likely to occur.

The Court said that what it was faced with was a mistake which had occurred in the course of discovery, and that it was necessary that the mistake be corrected and the parties continue with their preparation for trial. The Court also criticised the parties for going off on a tangent and incurring unnecessary costs to resolve an issue the Court said should have never been raised.

In its decision the High Court unanimously held that the Supreme Court of New South Wales should have ordered the privileged documents inadvertently disclosed by Norton Rose be returned by Marque. It also ordered that Armstrong pay the costs of Expense associated with having the privileged documents returned.

Takeaway

  • Inadvertent disclosure may not amount to waiver of privilege where a party acts promptly to request return of the documents.
  • There is a professional and ethical obligation on a lawyer who receives privileged documents to return them. In Queensland, Rule 31 of the Australian Solicitors’ Conduct Rules has been adopted and deals with the duty of a lawyer to return material which is known or reasonably suspected to be confidential, where a solicitor is aware that its disclosure was inadvertent.