Privilege and in-house counsel (part 2): Tips to avoid waiver of privilege

January 2012

In this two-part article, Karen Ingram, Partner, and Danielle Briers, Senior Associate, Clayton Utz provide tips to directors and aspiring directors on legal priviledge.

As a board director, you will often be briefed on legal issues confronting your organisation, whether it be a report on a legislative change that affects the business, an update on current or impending litigation, or legal advice on employee-related issues. It is important to be aware of how legal privilege works, to maximise the likelihood that privilege applies to your organisation's legal advice, and minimise the chance it could be lost.
In the last WOB Newsletter, we gave some practical tips to help ensure legal privilege applies to communications between an organisation's board of directors and its lawyers. In this follow-up article, we discuss the principles governing waiver of privilege, and steps directors can take to minimise the risk of privilege being waived.

Confidentiality paramount to maintenance of privilege

Confidentiality is an essential pre-condition to the existence (and maintenance) of privilege. Subject to limited exceptions (for example, disclosure to a party with whom the organisation shares a 'common interest' in legal advice or litigation), if an organisation fails to keep a privileged communication confidential, this will amount to waiver of the privilege.
Once privilege is lost, it is lost for all purposes and against all parties – not just the party to whom the legal communication was disclosed. In light of this, and given the sensitive and candid nature of many communications between a business and its lawyers, the consequences of waiving privilege can be dire.

Beware of implied waiver of privilege

In addition to express waiver (i.e. actual disclosure of a privileged communication), an implied waiver can arise if the privilege-holder has acted in some other way that is inconsistent with the maintenance of the privilege.
For example, an organisation risks waiving privilege by referring to the privileged communication in a non confidential forum, such as negotiations with another company, disclosure to regulators, or a media statement. Even disclosing merely the gist or conclusion of legal advice may be a waiver of privilege in the whole advice.
Despite the ease with which privilege can be waived, there are some easy steps directors (and employees) can and should take to help their organisations minimise the risk of waiving privilege.

Tips to help organisations avoid waiver of privilege

1. Do not disclose the substance, gist or conclusion of legal advice

Be careful not to disclose the substance (or even the gist or conclusion) of legal advice in external communications or any forum that is not confidential to the organisation. Remember, disclosure can occur even without an express statement. For example, saying "we have received legal advice and are confident of our prospects" may be enough to waive privilege, as it effectively discloses the substance of the underlying advice.

2. Minimise the reference to legal advice in board minutes and papers

Exercise caution when recording discussion of legal matters in board minutes. Ideally, minutes should briefly state that an issue the subject of legal professional privilege was discussed, rather than dealing with that issue in detail. If legal advice must be recorded, keep it in a separate document which can be annexed to the board papers, or at least in a separate section with a heading such as "subject to legal professional privilege". This also applies to agendas and notes taken during the meeting.

3. Minimise circulation of legal communications around the business

Circulating legal advice internally increases the risk of waiver of privilege. The more people who have seen the advice, the less likely a court will view it as still having the necessary confidentiality to be privileged. Moreover, the more people who see the advice, the more likely it is that someone may inadvertently disclose it outside the organisation.
Avoid lengthy email chains, the "reply all" button and forwarding legal advice to people who are only tangentially involved in the issue. Better yet, where possible, introduce a policy of not forwarding privileged emails beyond the initial sender/recipient(s).
By following these steps and remaining alert to the risk of waiver of privilege, you can help your organisation minimise the likelihood of waiving privilege over the legal advice and communications it receives.

Thanks to Michelle Barraclough for her help in writing this article.

For more infomation: Clayton Utz