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High Court of Australia dismisses action to restrain use of "Paradise Papers" on grounds of LPP

06 September 2019

The unanimous decision of all seven judges of Australia's highest court in Glencore International AG v Commissioner of Taxation [2019] HCA 26 underlines the importance of confidentiality in maintaining a claim for legal professional privilege (LPP) and leaves open the question of whether a claim of LPP will be available in litigation in the ordinary course if the otherwise privileged documents have entered the public domain following a cyber-attack.

The decision (available here) also confirms LPP's limited function as an immunity from compulsory production and the ordinary rules of evidence, capable of abrogation by statute, and not having the character of an actionable legal right.

Background

The dispute related to certain documents which had been created for the sole or dominant purpose of the provision of legal advice by Glencore's Bermudian lawyers, Appleby (Glencore Documents) but which had been among the so-called "Paradise Papers" stolen from Appleby's electronic file management system and leaked to the International Consortium of Investigative Journalists and further disseminated. The Commissioner of Taxation (Commissioner), who had obtained copies of the Paradise Papers, including the Glencore Documents, refused to accede to Glencore's request that the documents be returned to Glencore and refused to provide an undertaking not to refer or rely upon them.

In that context, Glencore applied to the High Court seeking an injunction restraining the Commissioner from making any use of the Glencore Documents or any information contained in them. Glencore also sought an order for the delivery up of the Glencore Documents.

The Commissioner resisted Glencore's application, arguing that no cause of action had been disclosed which would entitle Glencore to injunctive relief. In the alternative, the Commissioner argued that he was entitled and obliged to retain and use the Glencore Documents pursuant to a provision of Australian tax legislation which 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".

The principal issue in dispute

There was no issue in the proceedings about the Glencore Documents being the subject of LPP. Rather, the principal issue in dispute was whether the Court, exercising its equitable jurisdiction, could in the peculiar circumstances of the case grant the injunctive relief sought.

Given the circumstances, Glencore would not have been assisted by a declaration that the Glencore Documents were privileged and thus exempt from production by court process or statutory compulsion, since the Glencore Documents were already in the Commissioner's possession.

Further, whilst the Court acknowledged that equity will restrain a third party from breaching confidentiality if their conscience is relevantly affected, including in respect of confidential LPP documents, it recognised that there may be difficulties in Glencore satisfying this test. Far from being confidential, the Glencore Documents had entered the public domain, and there was no allegation concerning the Commissioner's conduct or knowledge which would support an argument that the Commissioner's conscience was relevantly affected.

It followed that the Commissioner was entitled to use the Glencore Documents in connection with the exercise of his statutory powers unless Glencore was able to identify some other juridical basis upon which the Court could restrain that use.

Glencore therefore brought its claim for injunctive relief not on grounds of confidentiality but rather LPP, arguing that the privilege was a fundamental right, having its basis in the rule of law and of such importance to the proper administration of justice as to confer in and of itself a legal right capable of being enforced.

The High Court's decision

The Court rejected Glencore's argument. In doing so it confirmed that LPP can be used as a shield, but not as a sword. Though LPP had been described in previous cases as a fundamental right (as Glencore had contended), according to the Court that description revealed nothing about the content of such right and in particular whether it is an actionable right. The Court also considered that Glencore's contention that LPP conferred an actionable right contradicted a long line of Australian, New Zealand and UK authority which continued to stand for the proposition that LPP, though capable of being described as a right, is more accurately to be described as an immunity – a right to resist the compulsory disclosure of information.

So where does that leave the law of LPP?

The law of LPP has not changed, though the High Court's decision has highlighted one of the key risks of a data breach – that regulators and taxation officials may be able to use leaked documents which have entered the public domain in order to discharge their functions, irrespective of whether those documents would otherwise have attracted LPP.

The decision leaves open the question of whether a claim for LPP would nevertheless be available to resist such documents being used in evidence in litigation in the ordinary course. In its judgment, the Court considered a decision of the Court of Appeal of Singapore (Wee Shuo Woon v HT SRL [2017] 2 SLR 94) where, despite the fact that certain emails which had been hacked and uploaded onto the internet had lost their confidential character, orders were nevertheless made on the basis that the emails had retained that character. The Court considered that the case did not in fact support Glencore's claim for injunctive relief, without commenting on whether the Singapore Court's reasoning was consistent with the law in Australia or other common law countries.