Privilege under pressure

THE confidential nature of the relationship between clients and their solicitors is being chipped away, with the Australian Competition and Consumer Commission leading the latest foray against legal professional privilege.

Successive pieces of legislation, with some assistance from the courts, have sought to erode a client’s right to confidential advice, long regarded with suspicion by the regulators and enforcement agencies.

The latest successful attack on clients’ rights was by the ACCC in the Federal Court, where it used section 155 of the Trade Practices Act in ACCC v Daniels Corporation. This has many legal experts concerned.

“The ACCC v Daniels Corporation marks the latest step in the progressive, if unsystematic, elimination of legal professional privilege,” Freehills Perth commercial litigation partner Paul D Evans said.

He said that s155 was one element of a small but growing body of legislation that had been interpreted by judges as a means of enabling regulatory authorities to obtain access to information for the purposes of conducting an investigation, which may lead to criminal prosecution or civil action.

Other legislation includes:

p ASIC has powers in relation to the conduct of takeover bids, contravention of the corporations law and related legislation (Div 1 Pt 3 and s192 of Australian Securities and Investment Commission Law).

p The Australian Taxation Office has similar powers in relation to the supply of information for tax matters (s264 Income Assessment Act).

p The Criminal Property Confiscation Act 2000.

Many other bodies one would expect to have similar powers to the ACCC – ASIC and the ATO do not. The National Crime Authority, Independent Commission Against Corruption and the Criminal Justice Commission are not afforded these powers. Nor do administrators conducting examinations under s597 of the Corporations Law.

“While none of these statutes expressly abrogate legal professional privilege, it is the courts which have drawn these conclusions as a matter of construction,” Mr Evans said.

Defenders of legal professional privilege look to the 1983 landmark High Court ruling of Baker v Campbell, where privilege was found to have relevance to the public interest in a modern state.

Mr Evans said the erosion of solicitor/client confidentiality could well affect the actions of many corporations, particularly in the areas of tax, competition and corporate misfeasance, where the regulator can at least look at – and may be able to use – privileged documents.

These powers cut to the heart of corporate activity in areas where the exercise of judgement is most acute, the propriety or otherwise of conduct most dependent upon particular facts.

Judicial views often differ, sometimes sharply: Has market power been ‘used’ wrongly? Have directors acted improperly? Does a transaction with tax consequences have a ‘purpose’?

All of these are matters upon which legal advice is taken by the hour, and where the quality and therefore utility of that advice is based upon the frank communication of facts.

Priests, doctors, and journalists all bemoan the loss of their once-privileged communications.

Will the legal profession be able to protect its clients from the ever-growing powers of the regulators?

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