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Claiming Privilege: So You Don’t Have To Tell All!

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By Alicia Hill, Principal, MST Lawyers

The right to claim ‘Privilege’ provides protection from having to make disclosures, answer questions or provide documents. It can be lost if conduct occurs that is contradictory to the maintenance of the confidentiality of the information over which privilege is claimed.

In today’s business environment, franchise systems and franchisees can potentially face the prospect of regulatory action against them by the Australian Competition and Consumer Commissioner, the Fair Work Ombudsman, the Australian Taxation Office, and where companies are involved, the Australian Securities and Investment Commission. The ability to keep matters confidential and avoid being compelled to provide information, answer questions or make statements can be a critical tool in defending prosecutions that may be commenced.

Types of Privilege

The most widely known form of privilege is that of legal professional privilege.  This refers to the protection given to advice given by a lawyer to a client is in the course of provision of legal services or to communication surrounding actual or anticipated litigation; keeping any communications confidential.

A less well-known type of privilege is penalty privilege. This privilege permits a party subject to a  penalty from having to provide information that would disclose or assist in establishing the liability of a party to a penalty. Penalty privilege serves the purpose of ensuring that those who allege criminality or other illegal conduct have the burden of proving it. It can also relieve a party from the need to deliver a defence that complies with the pleading rules if the rules would override the privilege, or prevents a party from filing Statements of Evidence before trial.

There is also a privilege against self-incrimination which is very similar to but distinct from penalty privilege.

These types of privilege are most relevant to individuals, such as directors who are joined as accessories or under accessorial liability provisions to actions where penalties or other adverse judgment may be imposed on them.

It is also relevant for companies where there is a sole director and shareholder because orders regarding those companies to provide information may contravene a person’s right to assert privilege and keep information confidential.

For example, Penalty privilege does not apply to companies. However, a Court should not make an order requiring a company to make discovery if by the company complying with that order a person would be denied the right to claim privilege in that information.

Loss of Privilege

All forms of privilege can be lost by express conduct (i.e. saying you no longer consider the information protected) or through implied conduct of a party (i.e. doing something inconsistent with keeping the information confidential).

For example, in the case of the Fair Work Ombudsman v Hu [2017] FCA 1081, the Fair Work Ombudsman said that the filing of a Defence by Hu was a waiver of Penalty Privilege because Hu could have claimed privilege to avoid having to file a defence. However, because he had filed responsive statements in a Defence, this prevented him from later claiming Privilege to avoid having to give further information.

Where Hu made admissions and positive assertions of fact in Defence, the Court found that privilege had been waived in respect of those matters but not more generally in respect of any other facts or matters.

The Court said limited waiver of privilege occurred and that Hu could still claim Privilege to avoid having to provide evidence dealing with the matters.

The other aspect which was asserted as a waiver of privilege was the agreement of the parties by consent to directions that included the filing of Affidavits of Evidence prior to trial.  It was argued that a lawyer on behalf of his client waived privilege by consenting to those type of directions where privileged information would be disclosed as part of the court process.

The Court found that there was no implied waiver of privilege as there was no binding agreement formed between the parties in respect of the directions made. Instead, the directions had been imposed on the parties by the court exercising its power to make the orders suggested. As there had at that stage been no disclosure of privileged information the Court the Court found privilege had not been waived.

In that instance, Hu could not be compelled to provide Affidavits or submissions dealing with factual issues before the close of the Fair Work Ombudsman’s case.

Use of Privilege

As in all things care needs to be taken when interacting with regulatory agencies, particularly where investigatory or enquiry phases are being conducted and then more obviously when prosecution for offences is being undertaken.

There is a need to balance being open and frank and disposing of queries or concerns a regulator may have through open and effective communication with providing evidence for the regulator to use against the party providing it to start a prosecution.

Guidance should always be sought from appropriately experienced legal practitioners if you have concerns or doubt about responding to a regulatory agency with information that that the regulator requests and whether any claims for privilege might be available.

Asserting or claiming privilege in itself is not an admission that anything untoward or unlawful has occurred as it is a right available to all to exercise where applicable.  Claiming different types of privilege, however, have different implications attached to that action.

Interaction with any regulatory agency should always be considered carefully.  Assessment of how much, what and by whom any information should be provided to a regulator is critical for the ability to claim / assert privilege in respect of information held by a party.

Please contact Alicia Hill by email or call +61 3 8540 0200 if you would like to discuss interacting with regulators or claiming privilege during the course of such interaction.