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Australia – Return To Sender: Mistaken Disclosure Of Privileged Documents.

13 November, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Dispute Resolution

 

Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46 (6 November 2013)


WHAT YOU NEED TO KNOW

 

  • Courts recognise that mistakes will happen in discovery in large commercial cases, but the faster you seek to remedy the situation, the better.
  • The overriding objective of the quick, just and cheap resolution of disputes will not be served by the pursuit of satellite litigation over peripheral issues.
  • It is wrong to think of inadvertent discovery of privileged documents in terms of a waiver of privilege – the requisite element of inconsistency does not arise.
  • Trying to take advantage of a mistake is a dangerous approach – and not one with which courts are enamoured; be mindful of the ethical obligations owed by legal practitioners.
 

As the volume of electronic data has grown, so has the burden of discovery in large commercial litigation. Document review usually involves teams of lawyers, and in recent times the use of external service providers, in an effort to create efficiencies in a time consuming and expensive process. Close supervision can be a challenge; mistakes are often inevitable. This week the High Court endorsed a pragmatic approach to the management of discovery and ordered the return of privileged documents produced in error. The High Court also sent a clear message that satellite litigation on such peripheral issues should be discouraged, and gave an important reminder about the ethical responsibilities incumbent upon the legal profession.

 

Background

 

In giving discovery of about 60,000 documents, the defendants’ lawyers inadvertently produced a handful of documents without claiming privilege. They subsequently requested the return of those documents and an undertaking that they would not be relied on. The plaintiffs’ lawyers refused; they did so despite having first identified an inconsistent approach to privilege claims over similar documents, and despite the defendants’ lawyers having quickly asserted, upon realising the error, that their clients maintained a claim for privilege. The plaintiffs’ lawyers argued that privilege had been waived.

 

The New South Wales Court of Appeal approached the issue from the perspective of whether the plaintiffs had received the documents in circumstances that imposed an obligation of confidence. It found that they had not, and in any event that privilege had been waived.

 

The High Court’s Decision

 

The High Court found that the direction which the Supreme Court should “promptly” have made was to permit the defendants’ lawyers to amend the list of documents, and make consequential orders for the return of the disks containing the discovered documents, to enable the privileged documents to be deleted. The High Court explained that:

 

Such a direction and orders would have obviated the need to resort to the more complex questions concerning the grant of relief in the equitable jurisdiction. It would have served to defuse the dispute and dissuaded the Armstrong parties from alleging waiver. It accords with the overriding purpose and the dictates of justice.

 

This conclusion rested primarily on three considerations:

 

  • The nature of court ordered discovery.
  • Efficient dispute resolution; which is antithetical to satellite litigation on minor discovery issues.
  • The test for waiver of privilege in Mann v Carnell (1999) 2001 CLR 1.
 

Nature Of Court Ordered Discovery

 

The High Court recognised that although discovery is an “inherently intrusive process” it is not intended to affect a person’s entitlement to confidentiality.


It follows that where a privileged document is inadvertently disclosed, the court should ordinarily permit the correction of that mistake and order the return of the document if the party receiving the documents refuses to do so.


Efficient Dispute Resolution


The High Court reiterated that speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. This is supported by the overriding purpose of the Civil Procedure Act 2005 (NSW) (CPA) “to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings”. To give effect to this, courts may need to take a more robust and proactive approach. The pursuit of satellite litigation over tangential issues does not fulfil the overriding purpose of the CPA. The dispute over waiver in this case should not have reached the stage that it did.


Waiver Of Privilege


The High Court endorsed the principles in Mann v Carnell that, in determining whether a waiver has occurred, considerations of fairness should inform the court’s view on the inconsistency between a party’s conduct and maintaining confidentiality.


However, the High Court added that courts will normally only permit an error to be corrected if a party acts promptly and that relief may be refused if the party who received documents has been placed in a position which makes it unfair to order their return. In this case there was no significant delay and, in any event, waiver of privilege did not occur as no inconsistency was found to arise.


Ethical Responsibilities


This case provides a salient reminder of the danger in seeking to take advantage of another party’s mistake.


The CPA imposes a positive duty upon a party and its legal representatives to facilitate the CPA’s purposes. The High Court held that requiring a court to rule upon waiver and the grant of injunctive relief in these circumstances could not be regarded as consistent with that duty.


Rule 31 of the Australian Solicitors’ Conduct Rules deals with the duty of a solicitor to return material, which is known or reasonably suspected to be confidential, where a solicitor is aware that its disclosure was inadvertent. That involves notifying the other solicitor of the disclosure and returning the material. The Rules have been adopted in South Australia and Queensland. They are yet to be adopted in other states and territories.


In any event, the High Court stated that such a rule should not be necessary. Legal practitioners have professional and ethical obligations to support the objectives of the proper administration of justice.

 

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For further information, please contact:

 

Andrew Harpur, Partner, Ashurst
[email protected]


James MacDonald, Ashurst
[email protected]

 

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