An important function of the Courts is to determine which documents can and cannot be used as evidence in a proceeding. An important class of documents that cannot be used are those protected by legal professional privilege. The recent Federal Court decision of Carna Group Pty Ltd v The Griffin Coal Mining Company (No.2)  FCA 2209 has clarified the requirements of establishing a claim for legal professional privilege, especially in circumstances where the parties involved in the creation of an allegedly privileged document are not able to give evidence.
This case concerns an action against The Griffin Coal Mining Company (Griffin Coal) by the liquidators of Carna Group Pty Ltd (In Liquidation) (Carna) for breach of contract, and misleading and deceptive conduct. Griffin Coal made an application to access documents and correspondence between Carna and a Mr Nardizzi. The liquidators of Carna alleged that the documents were brought into existence for the dominant purpose of obtaining legal advice as Mr Nardizzi had been providing Carna with legal advice. Carna refused to give Griffin Coal access to the documents on the ground of legal professional privilege.
The main issue in this case was that the liquidators had very little evidence to support their claim of privilege. There was no letter of engagement between Carna and Mr Nardizzi, and all the people who might give evidence to clarify Mr Nardizzi’s role were either adversaries to, or distanced from, the liquidators. The only documents supporting the claim were items of correspondence that referred to Mr Nardizzi as Carna’s lawyer.
Griffin Coal challenged the claim for privilege on the grounds that there was insufficient evidence to establish the grounds of the claim.
In His Honour’s decision, McKerracher J discussed a number of authorities that considered the nature of the evidence required to establish a claim for legal professional privilege (such as Hancock v Rinehart, Hastie Group Ltd (in liq) v Moore, and McKenzie v Cash Converters International Ltd). From these authorities, His Honour highlighted the fundamental principle that the grounds to claim privilege must be proven by admissible evidence. He stated:
“[a] mere assertion [that] the documents are privileged can never suffice because it is an inadmissible assertion of law… a claimant must set out the facts from which the Court can see that the assertion is rightly made.”
Griffin Coal argued that Carna did not meet this requirement as there was no admissible evidence to support the assertion that the documents were prepared by Mr Nardizzi, acting as Carna’s lawyer, for the dominant purpose of providing legal advice. Griffin Coal also argued that Carna’s failure to call witnesses such as Mr Nardizzi or the former directors of Carna to give evidence about the relationship left it open to the Court’s discretion to draw an inference that such evidence would not have assisted Carna’s claim (see Jones v Dunkel (1959) 101 CLR 298).
McKerracher J firmly rejected Griffin Coal’s arguments, stating that “… there are a number of ways [establishing the necessary facts] can be done and regard should be had to all the circumstances in determining the correctness of the assertion [of legal privilege]”. His Honour confirmed that admissible hearsay could be considered in support of such a claim, and that the circumstances of the case (including the liquidation of the company) were relevant factors in the assessment of a privilege claim.
In the circumstances of the company’s liquidation, the directors were not able to give evidence to support the claim of privilege, and as there was no other evidence or reason to believe otherwise, the Court accepted that the correspondence was enough to justify Mr Nardizzi’s role as legal advisor and Carna’s claim for professional privilege.
Key takeaways from this case are that the factual circumstances of the liquidation of a company will be relevant when assessing evidence required to establish a claim for legal professional privilege. Where there is no other evidence to rely on, admissible hearsay evidence may be sufficient to establish a claim for privilege. As in all such cases, great care must be taken to avoid a loss of privilege over protected documents.
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