Question
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29 January 2016

To disclose or not to disclose, that is the question

Practice Management
Federal

Asked

Does the solicitor client privilege override legislation? For example, section 77 of the Bankruptcy Act 1966 provides that a bankrupt shall, unless excluded by the trustee or prevented by illness or other sufficient cause, forthwith after becoming bankrupt give to the trustee all books that are in the possession of the bankrupt and relate to his or her examinable affairs. Section 129(3) of the Act provides that ‘a person is not entitled, as against the trustee, to withhold possession of the books of account or any papers or documents of the bankrupt relating to the accounts or to any of the examinable affairs of the bankrupt or to claim any lien on any such papers or documents’.

Based on the Act as set out above, will a solicitor have to disclose files in their possession related to the bankrupt’s examinable affairs? Or does the solicitor client privilege override the legislation? Or is there a certain provision against the need to disclose to a third party any information that is confidential to the client?

Answered

The common law position is that legal professional privilege attaches to confidential communications passing between a client and a client’s legal advisor, for the dominant purpose of obtaining or giving legal advice (legal advice privilege), and confidential communications passing between a client, the client’s legal advisor and third parties, for the dominant purpose of use in or in relation to litigation which is either pending or in contemplation (litigation privilege). However, legal professional privilege may be lost for several reasons, including abrogation by statute by express wording or by implication.

When you are acting on behalf of a client in bankruptcy, you still owe a duty of confidentiality to that client. As a general rule, legal professional privilege is maintained during bankruptcy proceedings and you cannot divulge privileged or confidential information to the trustee-in-bankruptcy without your bankrupt client's consent.

Although you may not be compelled to disclose privileged communications concerning your client, you may have to disclose factual information about the bankrupt's affairs that are not considered communications between you and your client for the purpose of legal advice and, as such, protected by privilege. Even if privilege is made out, the Australian Financial Security Authority is of the view that, while there is little authority on whether a trustee’s powers under section 77 of the Bankruptcy Act would abrogate a claim for legal professional privilege by implication, it would be difficult to argue that the privilege was not abrogated. The authority relies on the decision of the full federal court in Griffin v Pantzer (2004) 137 FCR 209 which held that section 77 abrogates the privilege against self-incrimination.

The law and responsibilities in relation to making and maintaining a claim of legal professional privilege in this area is very complicated and unclear, and we suggest that you obtain advice from counsel on the matter.

Regards

Mentor