Caroline Hayward and Yasmin Milligan kickstart a new inhouse counsel series with their top tips on privilege: the shield that can keep information from prying eyes. What can inhouse lawyers do to ensure privilege is preserved? How to avoid (red alert!) an unintentional waiver?

From our inhouse to yours.

Introducing KWM’s new inhouse-centred series. Written by members of the firm’s Office of General Counsel in Australia, the series will give practical advice to inhouse counsel. 

Privilege is a cornerstone of the legal profession and protecting it is vital to inhouse counsel.  Every lawyer knows what privilege means and the consequences of inadvertent waiver.  But do their internal clients, who often aren’t lawyers?  This post explores what privilege is and provides practical tips for inhouse counsel to ensure it is preserved.

Risk mitigation is the safe path to follow – here’s how.

WHAT IS PRIVILEGE?

Legal professional privilege protects communications between a client and their legal representative. Privileged communications are exempt from disclosure obligations such as from a production order of a court like a search warrant or subpoena.  This prevents the document or communication from being used as evidence in court.  There are various types of privilege.

Privilege is a right that belongs to the client (and not inhouse counsel) and exists so that a client can be open and honest with their lawyer to ensure they are best represented.

A document or communication is privileged if it satisfies the three key requirements: it sits within the legal relationship, it is confidential, and it falls under either the advice or litigation limb of privilege. This is shown in more detail below.

But wait – are inhouse counsel really independent?

Historically inhouse lawyers were seen as lacking the independence of an external law firm for the purposes of claiming privilege.  This is now not the case and inhouse lawyers can claim privilege provided they are sufficiently independent (and hold a practising certificate).  There may be situations where independence cannot be demonstrated, such as when a lawyer is also a partner in a business and has a direct interest in the advice over which privilege is being claimed.

Important reminder

Privilege is a shield, not a sword. Privilege is immunity from the exercise of powers which would otherwise compel disclosure of privilege information – it is not a legal right which is capable of being enforced [1]. A document or communication that is already disclosed cannot use the protection. So, a cautious approach must be taken to ensure that privilege is not waived.

HOW TO PROTECT PRIVILEGE

There are several strategies you can employ to ensure privilege is preserved.

WHAT TO DO

• Only share legal advice on a ‘need-to-know’ basis and ensure the recipients are aware that the advice is confidential in nature.
• Limit the number of people who will receive or view legal advice to as small a group as practical.
• Keep legal advice separate from commercial advice. The Association of Corporate Counsel Australia’s 2023 trends survey indicates that 8% of inhouse counsel are also responsible for procurement, 7% are also responsible for Human Resources and 38% are also responsible for Risk and Compliance [2].  If you wear multiple hats along with your inhouse counsel hat, you should take care to separate emails and keep legal advice separate from commercial or general advice.
  • Also keep telephone call notes, documents and emails separate.  This will ensure you aren’t casting doubt as to whether privilege exists over a document or communication.
  • Remember the dominant purpose test – if a document has been created regardless of an intention to seek legal advice it will not be privileged.
• Educate your internal clients (especially those who are not lawyers) on what privilege is and when it applies.
  • Include information like the impact of sharing advice too broadly, the potential for inadvertent waiver and the importance of getting OGC involved as soon as a legal issue arises.
• Ensure communications and documents are appropriately marked as ‘Privileged and Confidential’ or you could say ‘This document has been prepared for the dominant purpose of providing legal advice and is privileged and confidential’. This alone does not make a document privileged – but it will notify the user that the document is considered confidential and should be treated as such and that privilege is being claimed.
• Maintain a centralised, secure repository of legal advice provided or received (in soft or hard copy) – ensuring access to this workspace is limited to those who need to know. Folders containing legal advice should be clearly marked as containing privileged information.  You should also password protect any external media drives to prevent unauthorised access.
• Request that your internal clients state the reason for creating a document or contacting you – such as – ‘We have created the attached document as we wish to obtain legal advice in relation to…’.
• Similarly, when requesting the services of third parties, ensure that they are notified that their services are being engaged for the provision of XYZ (services) for the purpose of providing the information to your lawyers for the purpose of obtaining legal advice.
• Ensure that your clients seek legal advice from you before they share or disclose the content of legal advice – they may inadvertently waive it.
• Create a policy or position statement about the role of inhouse counsel in your organisation – state that the legal advisors are lawyers to the business, are independent, do not provide commercial advice (if applicable to your team) and detail how privilege applies.
• Have clear and current confidentiality agreements or contractual restraints in place when using third parties – notify them that they will be handling privilege information and that you do not consent to having that information shared beyond those who ‘need to know’ (including potentially overseas or cloud storage if that is your company policy).
• If you’re working on an issue that may turn into a dispute, make sure that your language reflects this to ensure you’re covered by litigation privilege – refer to the anticipated dispute and indicate that the parties disagree, and that litigation may be undertaken to resolve the issue.
• Undertake careful due diligence when relying on third party data storage products (such as consumer-grade free cloud hostage providers). Storing your privileged information in a non-secure environment may leave you vulnerable to a data breach.
  • Remember, once your document is out there, privilege is lost and cannot be regained.

HOW TO PREVENT WAIVER

Care must be taken –so that privilege is not waived either unintentionally (accidental or inadvertent disclosure) or by an implied waiver .  That is a lot of ways to lose the protection of privilege!

As inhouse counsel remember that it is your internal client who owns privilege and can intentionally or unintentionally waive it.  Your internal client may want to intentionally waive privilege, for example, if it is easier for the legal advice to be disclosed in a court or there are no concerns about it being made publicly available.  The important part to remember is that as inhouse counsel you can’t intentionally waive privilege yourself – you need your client’s instructions as the owners of the privilege.  Your role is to protect privilege and not inadvertently waive it yourself.

Privileged information must be treated in a manner that is consistent with its confidential and privileged status.  If you, or your internal clients, act in a way that is inconsistent with the principles of confidentiality and privilege, or demonstrate an intention to relinquish privilege, it may be lost.

WHAT TO AVOID

• Forgo the forward! Don’t forward legal advice to a wide audience (either as a group or individually, externally or internally). If you’re forwarding information around to a wide audience, you’re potentially raising a question of whether the information is actually confidential (because you wouldn’t typically widely circulate confidential information).
• Beware the ‘reply all’! If an email chain is required to be produced and one email of legal advice is contained within the chain, privileged is assessed based on the whole chain which may not meet the ‘dominant purpose’ test. While you could attempt to redact the privileged advice in the chain, this can be challenged.
• Don’t even share the vibe! Don’t refer to the gist, content or conclusion of legal advice obtained when communicating with counterparties, the other side or unrelated third parties. For example, don’t say – ‘we’ve received legal advice and they said that we haven’t done anything wrong’ or ‘our legal advisors have said our prospects of success in litigation is likely’ as these statements may disclose the substance or conclusion of advice and may waive privilege.  This may be tempting to do to justify your position during commercial negotiations, but it must be avoided.
• Don’t panic! If you inadvertently disclose privileged information such as sending a document to the incorrect email recipient take immediate and reasonable steps to protect its confidentiality. For example, by contacting the recipient and asking them to confirm they have deleted the communication.  Contact your KWM Partner who will be able to give you advice.
• Don’t overuse the ‘privilege’ label. Only use it when the communication or document is genuinely privileged otherwise you risk diminishing the effect of privilege applying.
• Don’t repurpose or modify legal advice. If you receive legal advice from KWM, do not remove the logo or confidentiality notices that make it clear that it is legal advice obtained from a law firm.
• Don’t summarise or comment on legal advice in a public document or documents that may be produced such as ASX statements, board papers or press releases. You can refer to having received legal advice without disclosing the substance or conclusion of the advice.  Also minimise reference to legal advice in internal documents such as minutes, file notes, agendas and instead state ‘an issue subject to legal professional privilege was discussed’.
• Don’t wing it – always engage your KWM Partner to provide advice on how to protect privilege or review documents which refer to legal advice provided.

Overall remember to take a risk-adverse approach to protecting privilege. Once lost, it is gone forever: there is no regaining it.

Privilege can be a nuanced and complicated area of law.  If your business needs legal advice on legal profession privilege and how it applies within your organisation, please reach out to your KWM contacts. If you have any questions, please contact Matt Swinn, Partner, who also serves as the firm’s Managing Partner, Practice Excellence.