Allens

Insolvency & Restructuring

Focus: A 'privileged' life – receivers' legal professional privilege upheld in WA

2 September 2011

In brief: The Supreme Court of Western Australia has held that a receiver can assert legal professional privilege over solicitors' bills of costs incurred by them through their receivership. Partner Philip Blaxill (view CV), Senior Associate Corey Steel and Lawyer Stephen Olynyk look at a case that also indicates this privilege extends to the narrations contained within solicitors' bills of costs and receivers' charging schedules.

How does it affect you?

  • This decision in Carey v Korda & Winterbottom (No 2) [2011] WASC 220 confirms that receivers can seek legal advice on their own behalf as opposed to as an agent on behalf of the company in receivership.
  • While solicitors' bills and receivers' charging schedules themselves may be discoverable, legal professional privilege extends to the information contained within, in circumstances where that information sets out the nature or narrative of the legal advice.
  • Disclosure of these bills of costs and charging schedules to the company in receivership will not waive legal professional privilege.
  • The disclosure requirements under the Legal Practice Act 2003 (WA) and the Legal Profession Act 2008 (WA) do not override receivers' legal professional privilege.

Background

The defendants were receivers and managers of eight companies that formed part of the Westpoint Group (together, the companies). The plaintiff, Mr Carey, was a director and shareholder of several of the companies. Perpetual Nominees, as a lender holding a fixed and floating charge over the companies, appointed the defendants as receivers and managers.

Under section 421(2) of the Corporations Act 2001 (Cth), the plaintiff requested from the receivers copies of the:

  • schedules of costs incurred by the receivers (prepared for the benefit of the lender); and
  • bills for the legal costs charged by the receivers' solicitors.

The receivers refused to allow the plaintiff to inspect those documents, claiming these records were subject to legal professional privilege. Instead, the receivers gave the plaintiff redacted versions of the documents, having removed the narrations. The plaintiff argued that the bills of costs and schedules requested were not subject to any legal professional privilege that existed between the receivers and the solicitors.

The questions that arose for Justice Edelman were:

  • who could claim legal professional privilege in respect of the bills of costs and schedules; the receivers or the companies;
  • had the receivers discharged their onus of showing that the information contained in the bills of costs and schedules was subject to legal professional privilege;
  • was legal professional privilege waived by the disclosure of the bills of costs and schedules to the companies; and
  • whether privilege had been overridden by disclosure requirements in the Legal Practice Act or the Legal Profession Act.

Return to top

Party entitled to claim legal professional privilege

Justice Edelman held that the appointment of receivers did not turn them into general agents of the companies. The description of a receiver as an agent for the company chargor is merely a 'verbal device used for attaining desired legal consequences', ie protection to the receivers for personal liability for their acts. As such, receivers were the clients of their solicitors, and were a proper party to assert legal professional privilege.

Justice Edelman gave the following reasons why advice the solicitors gave to the receivers was given to them as receivers, not as general agents for the companies:

  • the existence of receiver's duties, and the receivers' potential for liability for breaching them, demonstrates that the solicitors were engaged to advise the receivers and not the companies;
  • the solicitors provided advice to the receivers in circumstances where the receivers had been threatened with litigation concerning their management of the companies; and
  • both the receivers and the solicitors considered that the solicitors were acting on behalf of the receivers in respect of the receivership.

Return to top

Privilege over solicitors' bills of costs and receivers' schedules of costs

Justice Edelman held that the information contained in solicitors' bills of costs and the receivers' schedules of costs were subject to legal professional privilege, and that the receivers had satisfied their onus of establishing legal professional privilege.

Legal professional privilege is a right to resist disclosure of communications to another person who would otherwise have a right. The information contained within solicitors' bills of costs and receivers' schedules of costs will be privileged where those documents recite the nature or narrative of the legal advice given to the receivers.

Return to top

Waiver of privilege though partial disclosure

Justice Edelman held that the receivers had not waived any privilege to which they were entitled by disclosing to the companies the redacted documents. The key question was whether the conduct of the person entitled to the privilege is inconsistent with the maintenance of the communication's confidentiality . Justice Edelman held that the receivers' disclosure of the documents to the companies was not inconsistent with the maintenance of the confidentiality of the privileged communications because the disclosure was made for the limited purpose of providing an explanation to the companies of the purpose for which payment from them was required.

Return to top

Effect of statutory disclosure requirements on the receivers' legal privilege

Justice Edelman held that the companies' right to require the solicitors to disclose their bills of costs (under the Legal Practice Act and the Legal Profession Act) did not impliedly override the receivers' legal professional privilege. His Honour applied the principle that a statute cannot override an important common law principle, such as privilege, unless it clearly indicates that it can do so.

Return to top

Conclusion

This case shows that a receiver is the person entitled to claim legal professional privilege in respect of legal advice it has sought in relation to receivership.

In addition, while solicitors' bills of costs and receivers' charging schedules are not themselves subject to legal professional privilege, the privilege extends to information contained within those bills that recites the nature or narrative of the legal advice. Disclosure of those documents or disclosure to the company in receivership itself does not amount to a waiver of legal professional privilege.

For further information, please contact:

Return to top

Share or Save for later

What are these?
 

To save this publication on your smartphone or
tablet for off-line reading (eg on a plane flight),
we recommend Pocket.