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This proceeding relates to claims made on behalf of shareholders of Boral Ltd (Boral), and the consequent impact of the discovery of alleged fraudulent accounting entries in one of the company’s United States businesses in early November 2019.

The applicants raised challenges to a number of claims of legal professional privilege made by Boral and in particular, claims asserted over three investigation reports prepared by Boral’s United States lawyers, Alston & Bird.

The Investigation Reports

Following the discovery of potential accounting issues in November 2019, a senior manager at Boral retained Alston & Bird to advise on the proper process to be followed and Boral’s legal position in relation to the accounting irregularities. Alston & Bird in turn retained accountants at Ernst & Young and an independent firm of investigators, Nardello & Co, to conduct a detailed investigation of the facts and Boral’s true financial position. Lawyers at Alston & Bird stated that this investigative work would be used to by the firm to provide the legal advice sought by their client.

Applicants’ Submissions

The applicants submitted that because Boral would have needed to investigate the matters addressed in the investigation reports pursuant to continuous disclosure obligations under the Corporations Act 2001 (Cth) and auditing standards, the investigation reports could not be said to have been prepared for the “dominant purpose” of obtaining legal advice or for use in the conduct of litigation.

Ruling on Privilege

In rejecting the applicants’ submissions, Rares J emphasised the public policy rationale behind the law’s recognition of legal professional privilege, citing the reasons of Stephen, Mason and Murphy JJ in Grant v Downs (1976) 135 CLR 674 who explained that legal professional privilege “promotes the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers, the law being a complex and complicated discipline”.

In finding that the dominant purpose of Alston & Bird’s work was to “give Boral legal advice that it could take into account in making decisions that included what it would disclose to the market”, his Honour rejected the argument that the use of the investigation reports for an operational purpose (such as deciding how Boral would meet its necessary disclosure obligations) in any way diminished the dominant purpose of obtaining legal advice. Here his Honour drew upon the decision of Bromberg J in Kirby v Centro Properties Ltd (No 2) [2012] FCA 70 which emphasised that the use of legal advice for operational or commercial purposes does not replace the dominant purpose for which the advice is sought. This is because legal advice “is rarely sought in a commercial context merely for the sake of receiving legal advice”.

Parkin v Boral Ltd (Privilege Argument) [2022] FCA 1467 

Federal Court of Australia, Rares J,
14 November 2022

Applicants’ Solicitors: Maurice Blackburn
Respondent’s Solicitors: Herbert Smith Freehills
Applicants’ Funder: N/A

Austlii Link: Available here

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