Inadvertent disclosure of privileged documents: recent High Court decision
Parties to litigation have a continuing obligation to disclose documents that are relevant to an allegation or matter in issue.1
The requirement in recent times to run trials and undertake disclosure electronically has meant an increase in the scale and complexity of the disclosure process in litigation.2 These factors make it even more important than ever to carefully manage the risks of the disclosure process, including the inadvertent disclosure of privileged documents.
The November 2013 decision of the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd3 is a timely reminder of the care that needs to be taken with electronic disclosure. This case concerned the inadvertent disclosure of privileged documents. The High Court set aside the orders of the New South Wales Supreme Court and ordered the return of the privileged documents. In making these orders, the High Court also made important observations about the duties of parties and solicitors in the practice and management of disclosure and the use of judicial and court resources for resolving interlocutory disputes about disclosure.
Background to the proceedings
The parties to commercial proceedings were ordered by the NSW Supreme Court to give general disclosure.4 Disclosure by the appellants involved reviewing approximately 60,000 documents. During this process, the appellants’ solicitors inadvertently disclosed on disk 13 documents over which legal professional privilege was, or was intended to be, claimed. Of those 13 documents, nine were listed as privileged and also as non-privileged in the appellants’ list of documents.
On being advised by the respondents’ solicitors, the appellants’ solicitors requested that the documents be returned on the basis that they had been inadvertently disclosed. The appellants sought to maintain their claim of privilege over the documents and requested an undertaking from the respondents that the documents would not be relied on in the proceedings or otherwise. The respondents’ solicitors refused to return the documents, stating that there was no obligation to return them and, in any event, privilege had been waived by the appellants’ inadvertent disclosure.
Lower court proceedings
The appellants sought injunctive relief and other orders in the NSW Supreme Court in respect of the 13 documents.5 Justice Bergin ordered the return of the nine documents on the basis that:
- nine of the 13 documents were listed as privileged and non-privileged in the list of documents and this was sufficient to show that there was an intention to claim privilege
- as the four remaining documents were not listed as privileged in the list of documents, this was sufficient to show that there was no intention to claim privilege.
The NSW Court of Appeal (Campbell and Macfarlan JJA and Sackville AJA) allowed the appeal on the basis that the NSW Supreme Court did not have power to order the return of the documents at common law or under the Evidence Act 1995 (NSW).6 The Court of Appeal held that the proper basis for orders sought was under the law of confidential information in equity. The Court of Appeal considered that the circumstances in which the privileged documents were disclosed did not impose an obligation of confidence and, in any event, privilege had been waived for the following reasons:
- sending the documents was an intentional act carried out with knowledge that privileged documents may be withheld from production
- that act was done in the context of a court-ordered discovery process where the parties’ lists of documents were verified and certified as accurate
- there was a lapse of time between the disclosure of the documents and the claim of mistake
- the mistake was not obvious.
In all the circumstances, the Court of Appeal considered it was inconsistent for the appellants to claim privilege over the documents.
High Court decision
The High Court (per French CJ, Kiefel, Bell, Gageler and Keane JJ) set aside the orders of the NSW Supreme Court and Court of Appeal and ordered that the privileged documents be returned to the appellants.
The High Court considered that the NSW Supreme Court had all the powers necessary to deal with an issue relating to discovery, which included that a party be permitted to correct a mistake. Those powers existed by virtue of the Supreme Court's inherent role in case management and the powers under Part 6 of the Civil Procedure Act 2005 (NSW) to ensure the 'just, quick and cheap resolution of the real issues in the dispute or proceedings'.
The NSW Supreme Court should have permitted the appellants to amend their list of documents and made consequential orders for the return of documents. The High Court considered that '[s]uch a direction would have obviated the need to resort to the more complex questions concerning the grant of relief in the equitable jurisdiction. It would have served to defuse the dispute and dissuaded the [respondents] from alleging waiver'.
The High Court held that there was no conduct on the part of the appellants’ solicitors that was inconsistent with their claim of privilege. The High Court recognised that in large commercial cases, the 'process of discovery has assumed large proportions in some cases and become increasingly burdensome'. The High Court recognised that mistakes can occur. Despite this, the High Court held that:
- disclosure must be a process which can be reasonably relied on and parties to a dispute must make every reasonable effort to ensure that their list of documents is accurate
- however, where a privileged document is inadvertently disclosed, the court should ordinarily permit its return
- courts will normally only permit an error to be corrected if a party acts promptly
- if the party to whom the documents have been disclosed has been placed in a position, as a result of the disclosure, where it would be unfair to order the return of the privileged documents, relief may be refused
- unless a document assumes particular importance, the court will generally consider that the party or the party’s lawyers will be able to place any knowledge gained from the document to one side.
In making these findings, the High Court made important observations about the use of judicial and court resources when resolving interlocutory disputes about disclosure. It considered that the determination of the issues in this case did not advance the resolution of the real issues in dispute between the parties and had 'distracted them from taking steps to a final hearing, encouraged the outlay of considerable expense and squandered the resources of the Court'. The High Court was of the view that the proceedings should have been avoided at the outset.
The High Court further emphasised the legal and ethical duties of legal practitioners in supporting the proper administration of justice through the just, quick and cheap resolution of the real issues in dispute. The High Court referred to Rule 31 of the Australian Solicitors’ Conduct Rules, which outlines the duty of a solicitor to return material that is known or reasonably suspected to be confidential when the solicitor is aware that its disclosure was inadvertent. The Rule requires notifying the other solicitor of the inadvertent disclosure and returning the material, thereby avoiding intervention by a court.
What does this mean in Queensland?
- The decision of the High Court provides a valuable precedent in Queensland.
- Parties to a dispute must make every reasonable effort to ensure that their list of documents is accurate.
- Where a privileged document is inadvertently disclosed, the court will ordinarily permit the correction of that mistake and order the return of the document.
- Rule 5 of the Uniform Civil Procedure Rules (Qld) provides that the overriding obligation of the parties and the court is to facilitate the just and expeditious resolution of the real issues in civil proceedings at minimum expense.
- Interlocutory proceedings about disclosure, including the inadvertent disclosure of privileged documents, should generally be avoided where those issues will not advance the resolution of the real issues in dispute between the parties.
- Legal practitioners are under a legal and ethical obligation to return privileged documents that have been inadvertently disclosed.
- The Australian Solicitors’ Conduct Rules7 have been adopted in Queensland8 and require legal practitioners in Queensland to return confidential documents that have been inadvertently disclosed to them.
- This approach is consistent with the model litigant principles.
What does this mean for your agency?
The High Court recognised that the disclosure process is an inherently intrusive process and has become increasingly burdensome in modern litigation. The decision of the High Court demonstrates that it is important to carefully manage the disclosure process to minimise the risk of mistakes, particularly where disclosure is undertaken electronically. At the same time, the decision gives some comfort in the event that privileged documents are inadvertently disclosed.
1 Uniform Civil Procedure Rules 1999 (Qld), s. 211.
2 See Supreme Court of Queensland Practice Direction 10 of 2011, Use of technology for the efficient management of documents in litigation.
3  HCA 46.
4 Disclosure in New South Wales is referred to as ‘discovery’: Uniform Civil Procedure Rules 2005 (NSW), r 21.2.
5 Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd  NSWSC 393.
6 Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd; Expense Reduction Analysts Group Pty Limited v Armstrong Strategic Management and Marketing Pty Limited  NSWCA 430.
7 Available at: http://ethics.qls.com.au/sites/all/files/QLS_Australian_Solicitors_Conduct_Rules_2012.pdf .
8 Legal Profession (Australian Solicitors Conduct Rules) Notice 2012 (Qld).
The information in this publication is provided for general purposes only. It is not to be relied on as a substitute for legal advice. Crown Law and the Department of Justice and Attorney-General accept no liability for losses caused by reliance on the material in this publication. Formal legal advice should be obtained for particular matters.
Published: 5 February 2014
Author: Paul Lack