In its discussion paper, the A-G’s Department and Treasury noted “there is concern that some [legal professional privilege] claims are being used improperly in Commonwealth investigations”.

“Stakeholders, including regulatory and enforcement agencies, have observed instances of behaviours related to LPP which have the effect of obstructing and frustrating Commonwealth investigations. For example, this may include claiming LPP over communications where the party does not have a reasonable basis for asserting that the communication is privileged, failing to engage with agency requests for additional information in a timely way, or making broad claims over communications requested or seized by an agency,” the paper said.

“These behaviours can have various impacts on Commonwealth investigations. It is important to note that while these behaviours may impact Commonwealth investigations, this does not mean that they are intended to obstruct or frustrate an investigation.”

In its submission responding to the discussion paper, the Law Council – noting its preference for the term “client legal privilege” (CLP), which emphasises that privilege belongs to the client, not the legal practitioner – said that the departments’ concerns were “not particularised” beyond instances of behaviour that have obstructed or frustrated Commonwealth investigations.

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“The closest the discussion paper comes to articulating the details of these concerns is through a summary of the decision of Commissioner of Taxation v PwC [2022] FCA 278 (PwC case),” the group said.

“While behaviour such as this raises significant professional conduct questions, the reported judgment does not enable one to draw any more specific conclusions, especially a conclusion that the matter evidences a pattern of systemic conduct within the legal profession as a whole of making improper CLP claims in order to frustrate Commonwealth investigations.”

Responses to AGD and Treasury assertions

While there will always be tension between CLP and a regulator’s power to compel the production of documents for an investigation, the existence of this tension is not of itself problematic, LCA proclaimed.

CLP is a fundamental right, developed following a balancing exercise between the interests of full disclosure against the objectives served by the immunity. Such privilege is a doctrine that, by its nature, will cause inconvenience, the group espoused.

Regarding complexity or notices, LCA said the discussion paper correctly acknowledged the myriad challenges inherent with compulsory notices, such as when notices capture documents or communications that concern more than one client, or in cases of short time frames.

To this end, incorrect claims of CLP should not be, without further context, equated with misuse or abuse of privilege.

“Practically, the difficulty associated with making CLP claims is compounded by the circumstances of compulsory notices, which are typically answerable within short and demanding time frames,” the group said.

In response to apparent concerns that privilege is being used to obstruct or frustrate investigations, as referenced by the A-G’s Department and Treasury, LCA wrote it must be remembered that there are various avenues of recourse available to investigators to challenge privilege claims and that the powers granted to such agencies are not intended to be unlimited.

While some agencies may feel that current settings do not adequately deter improper CLP claims, regulators already have powers that can be used where spurious legal claims are made, the group said, including sections 64 and 66 of the Australian Securities and Investments Commission Act, which list offences for the provision of false information or obstruction of an investigation.

LCA also pointed out that the instances of reported bad actors are not high, nor is it directly aware of CLP claims being used improperly in Commonwealth investigations.

Risks

The A-G’s Department and the Treasury mused, in the discussion paper, that possible options to address supposed improper CLP claims could include expanded penalties or new, targeted penalties in federal legislation.

Such measures would be of great concern, LCA responded, given “there is insufficient evidence of intentional abuse” of CLP claim processes, or legislative gaps preventing such conduct being captured. Such steps would be premature, the group wrote.

Moreover, LCA argued that “excessive curtailment” or CLP would undermine trust in the legal system and discourage the seeking of legal advice.

This risk to lawyer–client relationships must be fully appreciated, LCA said, in considering any changes to the operation of CLP processes in Commonwealth investigations.

“Limiting or abrogating CLP poses a risk to the lawyer–client relationship. If a client’s confidences were not required be maintained by their lawyer, the trust and candour of the relationship would be undermined. That would, in turn, impact on the profession’s capacity to encourage compliance with the law by advising on relevant legal obligations. It might also lead to inadvertent breaches of the law by clients,” the group said.

Additionally, it is possible that constraining CLP in Commonwealth investigations would erode individual human rights, and unintended consequences in foreign jurisdictions, LCA pointed out.

Options for reform

If a lawyer conducts themselves improperly or illegally, then that individual should be subject to punishment and the client’s rights kept intact, LCA wrote. Thus, instead of further constraining CLP, the review should move to improve processes, guidance, and education.

For example, the group suggested, a consistent approach from Commonwealth agencies to compulsory information-gathering powers would help ensure that CLP is respected and protected.

There is also a need for more targeted information gathering, LCA went on, “or engagement in more constructive, upfront dialogue on what may be required”, to reduce downstream pressures on all parties.

In terms of scale, investigators could address large numbers of privilege claims by issuing more focused or targeted questions and requests for information and documents, LCA suggested.

Elsewhere, agencies could work with the recipients of notices to triage production such that, when appropriate, larger notices can be responded to in multiple tranches, the group said.

“The PwC case highlights the need to ensure adequate and ongoing education and training around claims for legal privilege and that legal practitioners are alive to the scope of, and limitations to, any claims for privilege,” LCA said.

“Law firms (including those providing some ancillary services) regularly provide education such as seminars/case and legislation updates to their staff and clients, and LCA has undertaken to produce guidance for the legal profession to assist in this regard.”

Submissions for the joint review closed late last month.