Whose privilege is it anyway: the receivers’ or the company’s?

Receivers’ agency in the context of legal professional privilege

In yet another stoush in the Westpoint Group receiverships, Carey challenged the receivers' and managers’ right to claim legal professional privilege over documents produced during the receivership relating to the Westpoint companies.¹

Carey argued that:

• a bill of costs from the receivers’ former lawyers; and
  
  
• schedules of costs incurred by the receivers, invoiced to the management company, and re-invoiced by the latter to its subsidiaries,

were the companies’ documents and, as a result, were available for inspection by him (without redaction of usually privileged content) pursuant to the Corporations Act 2001 (Cth).

The Supreme Court considered whether the receivers, as agents for the companies, could personally claim the benefit of the privilege or whether the privilege belonged to the companies to which they were appointed.

Not my client: who engaged the lawyers?

The Court first examined who engaged the lawyers and with whom the client-lawyer relationship arose for the purpose of asserting privilege; the receivers or the companies to which they were appointed.

This required consideration of the usual agency provisions in the underlying security documents by which the receivers were deemed agents of the companies to which they were appointed.  Carey argued that it followed that any lawyers engaged by the receivers (in their capacity as agents for the companies) were, under the law of agency, sub-agents of the companies.

The Court rejected Carey’s argument noting the special nature of the receivers’ agency, concluding that the law of agency did not render all acts of the receivers during their appointment as acts of the companies, rather the agency provisions delineated the receivers’ acts from acts of the secured creditor (with a view to reducing its liability during the appointment).

In so concluding, the Court said that:

• The powers to care, preserve and realise assets of the companies during the receivership vested in the receivers, not the companies, such that only the receivers could engage lawyers for the purpose of obtaining legal advice on their liability when undertaking these tasks.²
  
  
• The advice was sought by the receivers in circumstances where they had been threatened with litigation for allegedly failing to meet their duties.  It consequently followed that the receivers sought advice on their liability in this regard, not the companies.’
  
  
• Lastly, although costs agreements were directed to the companies in receivership, that was only for the purpose of payment of invoices rendered by the lawyers and each costs agreement clearly contemplated advice being given to the receivers in relation to the conduct of the receivership.

The Court concluded the receivers, and not the companies, had engaged the lawyers.

Other questions for determination

Three related issues were considered in the Supreme Court’s judgment, all of which were resolved in favour of the receivers:

• Whether the documents attracted privilege in that it was arguable whether they contained any information which disclosed the nature of advice sought or received by the receivers.³  Sealed affidavits were reviewed by the Court from which the Court found detailed narrations attracted legal professional privilege.
  
  
• Whether privilege had been waived by the receivers’ disclosure of the documents to the companies.⁴  The Court said that voluntary, intentional disclosure of privileged content did not amount to waiver of privilege provided that the disclosure was not inconsistent with the ability to maintain confidence over the communication.⁵  Here, the only basis for the receivers’ disclosure of the documents to the companies was for the purpose of sharing costs amongst the companies for legal and receivership expenses. That limited disclosure did not amount to disclosure at large inconsistent with the right to maintain confidence or privilege over the information.
  
  
• Whether the privilege was abrogated by the Legal Practice Act and the Legal Profession Act, both of which allow a party liable to pay costs (here the companies) to insist on the provision of detailed bills of costs for taxation.  The Court rejected this argument on the basis that a fundamental common law right such as privilege was not abrogated by statute unless it explicitly stated so, which was not the case here.

Lavan Legal comment

The decision highlights the unusual nature of the receivers’ agency and how that agency must be distinguished from traditional concepts of agency law.  It tends to suggest the receivers’ ‘agency’ is not agency at all and should be re-characterised.

Receivers and their advisors should heed the Court’s comments in relation to the operation of the agency provisions in the security documents and ensure the terms of their engagement and advice are directed to the appropriate party, the receivers.  By doing so, the receivers should avoid any suggestion of waiver of privilege over sensitive information, including, for example, legal advice, valuations and expert opinions.

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