Under section 290 of the Corporations Act 2001 (the Corporations Act), a director has an unrestricted right to access the financial records of a company. A director also has a common law right to any other documents of a company as a necessary incident of a director exercising their powers and duties.

As a general rule, this right of access extends to documents that are privileged, such as confidential legal advice given to a company.

However, in certain circumstances a company may prevent a director from accessing privileged documents. Typically, that right to maintain privilege against a director arises when a company is in dispute with that director and the advice concerns that dispute.

An example of this is the recent case of Hammond v Quayeyeware Pty Ltd [2021] FCA 293. In that case the company had obtained legal advice in relation to a dispute with a director of the company, Ms Hammond. Ultimately, the dispute that was the subject of the advice was finalised. However, after the dispute was finalised Ms Hammond asserted that she had a right to access the legal advice as a director of the company. The court held that she did not have the right to access the legal advice. The privilege was the company’s and the subject matter of the advice was the dispute between the company and Ms Hammond. Because Ms Hammond’s interests and the company’s interest were adverse, the company was entitled to maintain its assertion of privilege against disclosure to Ms Hammond.

The take-home message is that if your company is in a dispute with a director, the company can confidently seek legal advice without fear of such advice coming into the hands of that director.

 

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