Spilling the beans: Waiver of privilege for your investigation reports

There are a wide range of workplace and safety scenarios where employers may undertake an investigation and obtain a written report. Sometimes these investigations and reports are set up to be the subject of the legal professional privilege. However, while the report may start out as being subject to a claim for legal professional privilege, this can be waived by subsequent conduct and result in ‘spilling the beans’.

A communication or document will attract legal professional privilege if it was brought into existence for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings.

There needs to be deliberate and careful planning to attract legal professional privilege in the context of an investigation. It cannot be for mixed purposes, and the substance of any report prepared as part of the investigation cannot be disclosed at a later date.

In the workplace and safety sphere, the following types of scenarios can arise when an incident occurs or a grievance arises:

1. an investigation is conducted, followed by a written report. These actions occur because the business’ policies require an investigation
2. an investigation is conducted with a report prepared. The individual receiving the report provides it to other internal or external lawyers to seek legal advice
3. a legal practitioner commissions an investigation and a report in order to advise the business based on the report. Certain statements are made to a regulator or third parties in respect of circumstances that are the subject matter of the investigation and report
4. a legal practitioner commissions an investigation and a report in order to advise the business based on the report. At some point, the business responds either directly to a complainant advising of the outcomes of the investigation or to a regulator or third party regarding the outcomes of the investigation or making some comment concerning what the investigation determined.

In each of these scenarios, the question of whether the report and the associated material can be the subject of a claim for legal professional privilege arises.

The recent decision in TerraCom Limited v Australian Securities and Investment Commission [2022] FCA 208 is a good reminder of this principle for businesses, both in the employment and safety spheres. 

TerraCom Limited v Australian Securities and Investment Commission [2022] FCA 208

TerraCom Limited (TerraCom) is an ASX-listed resource explorer. In August 2019, TerraCom terminated Mr Williams’ employment in circumstances where he had made serious allegations against TerraCom. Mr Williams alleged that TerraCom pressured the Australian Laboratory Services to falsify test results about the quality of their coal (Allegations of Misconduct)

TerraCom instructed its legal advisors to act for and provide legal advice on the issues arising in relation to the Allegations of Misconduct. TerraCom’s legal advisors subsequently engaged Price Waterhouse Coopers (PWC) to provide forensic support through a report regarding the Allegations of Misconduct (Report).

The Report was seized in accordance with a warrant executed by ASIC in March 2021 and also captured in a Notice to Produce issued by ASIC in May 2021. TerraCom sought to rely on legal professional privilege to forbid ASIC from reviewing the Report (in respect of the warrant) and to not be obligated to provide the Report (in respect of the Notice to Produce). 

In deciding whether the Report was subject to legal professional privilege, the Federal Court considered:

1. if the Report was prepared for the dominant purpose of providing legal advice
2. if TerraCom’s actions waived privilege over the whole or any part of the Report
3. if privilege over only part of the Report was waived, did that result in privilege over the whole Report being waived.

Did the Report meet the ‘dominant purpose’ test?

The Court found legal professional privilege applied to the Report as it was created by PWC for the dominant or sole purpose of it to be used by TerraCom’s legal advisors to provide legal advice to TerraCom. 

In making this determination, the Court examined the engagement letters between TerraCom and its legal advisors and the engagement letter between TerraCom’s legal advisors and PWC. The Court also accepted evidence from a director of TerraCom that the Report was prepared for legal advice. 

Was privilege waived by TerraCom’s actions?

The overarching test to determine if a party has waived privilege is whether subsequent conduct in relation to the privileged material is ‘inconsistent’ with the retention of the privilege. This inconsistent conduct (and waiver of privilege) will often come about where privileged material, including a summary of the contents or outcome of privileged material is disclosed to third parties on a non-confidential basis.

ASIC argued that the following disclosures by TerraCom to third parties waived the legal professional privilege:

• disclosure to Teneo, a communication advisory firm engaged by TerraCom on a confidential and private basis
• disclosure in an open letter to shareholders, which stated that an independent forensic investigation had found no evidence of wrongdoing by TerraCom’s CEO and CFO
• disclosure in an ASX announcement, which stated a separate independent review of TerraCom found the allegations against it to be unfounded.

The Court found that the disclosure to Teneo did not waive legal professional privilege, as the disclosure was kept within a confidential advisory relationship, which is consistent privilege.

The Court dealt with the disclosures in the open letter and ASX announcement together. The Court found that TerraCom’s decision to rely on the outcome of the Report was deliberate and considered, and that using the findings of the Report to maintain the company’s commercial good standing and share price was not consistent with privilege, and therefore waived the legal professional privilege attached to part of the Report.

Did the partial waiver result in a full waiver?

Given that the open letter and ASX announcement referred to only the outcome of the Report, rather than the entirety of its contents, the Court considered whether privilege over the whole Report was waived, or only partially waived in respect of the portions relied upon in the open letter and ASX announcement. 

The Court was not able to separate this part of the report without leaving it disjointed and incomplete, and thus the Court determined that it was appropriate to establish the waiver of legal professional privilege attached to the whole report. 

Comments and observations

Applying the principles from the TerraCom decision to the scenarios detailed above, we make the following comments:

• in this first scenario, the key question is whether the investigation and the subsequent written report was for the dominant purposes of giving or obtaining legal advice or the provision of legal services. If the investigation and report are required per the terms of a written policy, then more likely than not, the dominant purpose will not be for legal advice but, rather, to follow and comply with the terms of the written policy. If that’s the case, then no legal professional privilege will arise in respect of the report
• in the second scenario, the key question remains whether the dominant purpose for the investigation or report was obtaining legal advice. Just because the report is subsequently provided to lawyers for legal advice, it does not mean that report is subject to legal professional privilege. Whoever commissioned the report will need to be able to say that seeking legal advice was the dominant purpose for procuring the report
• in the third scenario, the structure is in place to establish a claim for legal professional privilege. This is because the legal practitioner is commissioning the report, which supports that it is for the purpose of legal advice. However, this scenario raises the question of whether a subsequent statement that touches on the matters in the investigation and the report disclosed some or all of the report’s content or merely expressed an opinion separate from the report. If the former, this can constitute a waiver of privilege over part or all of the report
• in the fourth scenario, the structure of how the investigation report is first obtained gives rise to a claim for legal professional privilege (like the third scenario). However, the disclosure of the outcomes to a complainant or other third party raises the same question –whether it constitutes a disclosure of part or all of the report. Unlike the third scenario, it’s unlikely that advising of the outcomes derived expressly from an investigation and report can be characterised as an opinion and not directly disclosing the report’s content. In this context, the question will be whether those aspects of the report outlining the outcome can be severed from the balance of the report, which, in many cases, will be difficult. 

It is important for employers and businesses to be alert to these scenarios and to think through from the start and whether they wish to make a claim for legal professional privilege. If so, deliberate and careful steps need to be taken to establish the grounds for legal professional privilege and then to maintain it. This includes being alert to the effect of statements made to regulators and/or third parties concerning the matters the subject of a report. 

If you have any questions about this article or need assistance with claiming legal professional privilege, please contact us or send us your enquiry here.

Authors: Stephen Trew, Michael Hope & Olivia Lawrence

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Stephen Trew

Michael Hope, Olivia Lawrence

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