The Paradise Papers
by Jerome Veldsman
The Bermudan law firm Appleby was founded in 1898 (that makes Appleby seventy years younger than Walkers). In 2016, Appleby suffered an illegal computer hack, and 13 400 000 files, going back some seventy years, containing confidential information of some 120 000 individuals and companies, including some internationally known rich and famous, were stolen.
The stolen files were made available to a newspaper, and more than 380 journalists have spent a year combing through the data. And then the media feeding frenzy on the files (nicknamed the “Paradise Papers”) began. Not long afterwards, tax authorities wanted in on the action.
Glencore International AG v Commissioner of Taxation, a judgment of the Australian High Court (the apex Court) on 14 August 2019, dealt with that tax authority using the Paradise Papers against Glencore.
Glencore applied to Court for an order (an injunction – “interdict” in South Africa) that the tax authority must return the documents to Glencore, and must undertake not to refer to or rely on the documents against Glencore, on basis of legal professional privilege. Glencore lost, and appealed to the High Court.
Under South African common law, the legal professional privilege rule determines that the content of communications between a client and a legal practitioner are protected from disclosure (as evidence in court, and otherwise), if certain requirements are met. In brief, if the client claims the privilege, the requirements are that (1) the legal practitioner must have been acting in a professional capacity, (2) the client must have consulted the legal practitioner in confidence, (3) the relevant communication must relate to legal advice, and (4) the advice must not facilitate the commission of a crime or fraud. The legal position in Australia is approximately similar.
It was common cause that the Glencore documents were protected from disclosure under the legal professional privilege rule. The tax authority could not and did not get the documents from Appleby or from Glencore, but found the documents on the internet. What now?
The High Court held that legal professional privilege is only an immunity from compulsion to produce documents that evidence confidential communications about legal matters between lawyers and clients, founded on the basis of confidentiality. As the documents were now in the public domain, they had lost their confidential character. Glencore lost:
“In the absence of further facts it is not possible to say whether the plaintiffs are without any possibility of a remedy. But if there is a gap in the law, legal professional privilege is not the area which might be developed in order to provide the remedy sought.”
One wonders to what extent the media frenzy (“fat cats” v “the poor”, and the like) affected the ultimate finding. Whilst there is some logic in the decision, there is no consideration of future consequences. The legal professional privilege exists because of the basic need of an individual in a civilised society to be able to turn to his or her lawyer for advice and help, especially in a society with complex laws. That need does not disappear because of an illegal computer hack. It is possible but doubtful that a South African Court will in similar circumstances develop legal professional privilege to provide a remedy.