- In the recent case of Glencore v Commissioner of Taxation  HCA 26, the High Court firmly rejected the contention that legal professional privilege is something more than a privilege, such as an actionable legal right capable of sounding in injunctive relief.
- It is the long-standing policy of the law that the public interest in the administration of justice is sufficiently secured by the grant of an immunity from disclosure and nothing more.
Swiss multinationals, a mining giant, Bermuda tax structuring advice, ‘Paradise Papers’, data leak, tax officials … this case had it all. Or did it? In the much anticipated decision in Glencore International AG & Ors v Commissioner of Taxation of the Commonwealth of Australia & Ors  HCA 26 , the High Court of Australia unanimously dismissed Glencore’s bold albeit novel attempt to extend the operation of legal professional privilege (‘LPP‘) into an actionable legal right sufficient to grant injunctive relief against tax regulators.
Confronting the Court in its original jurisdiction was a demurrer posing the controversial issue of whether LPP operates merely defensively to resist compulsory production, or, whether it is something more. Namely, does LPP provide a positive right, entitling the privilege holder to claim a remedy, specifically, an injunction restraining the use of the privileged material? Could LPP be the proverbial padlock to secure Pandora’s Box once and for all?
The papers at the heart of the controversy were the ‘Glencore Documents’. Ironically, for a case solely about LPP, their contents are well known; and universally so. They comprised legal advice (in particular, tax advice) to Glencore, a mining behemoth, concerning a corporate restructure. The advice was from Appleby, a Bermuda based law firm.
Following a colossal data breach in 2016, the Glencore Documents, along with more than 13 million others, known as ‘the Paradise Papers’, were disseminated globally. The event captured international media coverage. The event also captured the attention of regulators, including Australian taxation authorities who then obtained the Glencore Documents. Glencore asked the Australian Taxation Office to return the Glencore Documents and for an undertaking that they would not be referred to or relied upon. The defendants (the Commissioner, the Second Commissioner and the Deputy Commissioner of Taxation – and any other officer of the Australian Taxation Office) did not accede to Glencore’s requests. This catalysed the litigation.
There was no dispute that the Glencore Documents attracted LPP. Plainly, the documents were created for the sole or dominant purpose of legal advice. But a declaration to that effect would not assist Glencore. The defendants already possessed the Glencore Documents and statutory powers permitted their use unless Glencore could identify a juridical basis to restrain that use. That the documents were already in the public domain also put out of reach any application to restrain an apprehended breach of confidential information which would ordinarily be the juridical basis for relief in equity.
The question was therefore about preventing continuing access to and use of the Glencore Documents. Could the LPP attached to the Glencore Documents be used to prevent the defendants using the documents in circumstances where they were already in their possession, albeit, not with Glencore’s consent? The legal edifice supporting the argument was creative, albeit unsuccessful. Glencore framed its case by way of injunctive relief. It sought to (ambitiously) restrain the defendants from using the Glencore Documents whatsoever.
The Court dismissed Glencore’s case. The Court accepted that LPP is a privilege, but it firmly rejected the contention that the privilege was something more, for example, an actionable legal right capable of sounding in injunctive relief. LPP is not a legal right after the fact. LPP is not a sword. Rather, LPP is a shield. The Court observed that in circumstances where privileged communications had been disclosed the law associated with the equitable doctrine of breach of confidence was apposite. On the present state of the law, turning to LPP and seeking to elaborate its doctrine was unjustified and without proper basis.
The gravamen of Glencore’s case was that LPP is a fundamental common law right. LPP furthers the administration of justice through fostering trust and candour in the relationship between lawyer and client. Noting the essentiality and importance of LPP, Glencore argued that LPP is more than just an immunity. It amounts to an actionable right to restrain the use of and recover privileged documents. Glencore argued that characterising LPP as an actionable right is both justified and necessary and advances the inherent policy underlying LPP (at ). Recognising LPP as an actionable right was said to be a more intellectually satisfactory approach rather than looking to and straining the law of confidential information.
Computer said yes but Court said no
Unhesitatingly, the Court thought otherwise. It held that Glencore’s case rested on an incorrect legal premise. Contrary to Glencore’s submissions, the common law does not support the proposition that LPP amounts to an enforceable legal right or ought to. Glencore’s case sought to ‘transform the nature of the privilege from an immunity into an ill-defined cause of action which may be brought against anyone with respect to documents which may be in the public domain’ (at ). Glencore impermissibly sought the creation of a new actionable right which was unavailable having regard to settled principles. It held as incorrect Glencore’s submission that common law courts elsewhere have granted injunctions on a basis other than a breach of confidential information. The Court also reasoned that there is an unlikelihood that policy is a basis for providing anything more than an immunity flowing from LPP. It is the long-standing policy of the law that the public interest in the administration of justice is sufficiently secured by the grant of an immunity from disclosure and nothing more (at ).
In rejecting Glencore’s case, the Court emphasised that the common law does not develop in the manner contended for by Glencore. Rather, it develops ‘by applying settled principles to new circumstances, by reasoning from settled principles to new conclusions, or determining that a category is not closed. Even then, the law as developed must cohere with the body of law to which it relates’ (at ). The Court went on to say that it is true that ‘policy considerations may influence the development of the law but only where that development is available having regard to the state of settled principles. Policy considerations cannot justify an abrupt change which abrogates principle in favour of a result seen to be desirable in a particular case’ (at ). In this sense, the judgment is illustrative of the development of common law and the somewhat restricted role of policy in that domain.
The judgment sheds light on the meaning and scope of LPP as well as its historical origins (see -). Fundamentally, LPP is an immunity from the exercise of powers that would otherwise compel the disclosure of privileged communications. It is a right to resist compulsory disclosure of information. So understood, its true character is a freedom from the exercise of legal power or control, and therefore, is an immunity. This function is reflective of its historical origins where LPP was introduced in response to the exercise of the powers by the State to compel disclosure of confidential communications between lawyer and client.
Although rejecting Glencore’s thesis for the extension of LPP into an actionable right, the Court endorsed the expression of LPP as a right which is fundamental to persons and to the legal system. For example, LPP is not merely an aspect of curial procedure or a mere rule of evidence. It is a substantive right founded upon a matter of public interest. Moreover the rationale for LPP is the promotion of public interest. LPP enhances the administration of justice. By keeping secret their communications, the client is encouraged to retain a lawyer and to make full and frank disclosure of all relevant circumstances to the lawyer.
In arriving at its decision, the Court identified some other hypothetical difficulties in Glencore’s application. For example, what would be the nature of the cause of action which is to found the relief? How would the fact of the information being in the public domain impact the claimed privilege?
The defendants also contended an alternative case under s 166 of the Income Tax Assessment Act 1936 (Cth). That section provides that the Commissioner must make an assessment of a taxpayer’s taxable income from the taxpayer’s returns ‘and from any other information in the Commissioner’s possession’ (at ). Having found against Glencore in respect of the principal issue, the Court did not decide the alternative contention.
The case goes to the heart of the fundamental right of LPP and the need to protect it. It is both a reminder to be vigilant in protecting a client’s right to LPP, as well as a warning against the limitations of the privilege. Having regard to our increasingly data-saturated paradigm coupled with the real risk of large scale data breaches, the potential ramifications of the decision are serious. For example, in what circumstances can a regulator use privileged material that has been disseminated into the public arena by a third party without the authority of the client who owns the privilege? If the information is used, to what extent will such information be admissible should a regulator seek to rely on hacked documents in Court? A balance will need to be struck between regulators’ access to and use of such information and the preservation of confidential communications between clients and their lawyers, and which is realistic and workable, having regard to prevailing technologies.
In conclusion, the Court reflected that in the absence of further facts it was not possible to determine whether Glencore was totally devoid of remedy. Earlier in its judgment, the Court averred to Glencore not relying on other potential avenues, for example, developing the tort of unjustified invasion of privacy. Perhaps this could be a pointer to more fertile ground for subsequent applications. In any event, the indubitable conclusion remains that even if there be a gap in the law, LPP is not the doctrine to develop in answer to the remedy sought. It is a shield and a shield it shall remain.