Can ASIC Obtain Your Privileged Communications? — Implications of the James Hardie Bill

Article by Geoff Healy, Luke Hastings, Andrew Eastwood and Cameron Hanson

The James Hardie (Investigations and Proceedings) Act 2004 (Cth) (James Hardie Act) came into force on 15 December 2004. The effect of the James Hardie Act is, in general terms, to abrogate legal professional privilege with respect to investigations and proceedings commenced by the Australian Securities and Investments Commission (ASIC) in relation to the James Hardie group of companies.

The implications of the James Hardie Act for other companies are important.

For some time there has been uncertainty about ASIC's ability to gain access to documents protected by legal professional privilege. For example, the High Court in Daniels case in 2002 held that the ACCC was not entitled to require the production of privileged documents. It also expressly doubted the correctness of its earlier 1991 decision in Yuill's case, in which it had held that legal professional privilege was not a 'reasonable excuse' for failing to comply with a notice to produce documents issued by the Corporate Affairs Commission of New South Wales, one of the predecessors of ASIC. The James Hardie Act emphasises this uncertainty. Accordingly, a recipient of an ASIC notice seeking privileged documents should give serious consideration as to whether to accept ASIC's view that it can require production of that material.

The James Hardie Act indicates the willingness of the legislature to take dramatic steps, such as abrogating a fundamental common law right, where it considers there may have been serious corporate malpractice. It may also indicate a willingness to abrogate legal professional privilege with respect to regulatory investigations entirely.

Introduction

ASIC has the power, for certain purposes, to issue notices requiring persons to produce specified documents (see, for example, section 30 of the ASIC Act 2001 (Cth)). An intentional or reckless failure to comply with such a notice is an offence, unless the person has a 'reasonable excuse' (section 63 of the ASIC Act).

Since the High Court's decision in Corporate Affairs Commission of NSW v Yuill (1991) 172 CLR 319 (Yuill), ASIC has taken the view that legal professional privilege is not a 'reasonable excuse' for the purposes of section 63 of the ASIC Act. In Yuill, the High Court held, by a 3-2 majority, that legal professional privilege did not constitute a reasonable excuse to refuse to produce documents in response to a notice to...