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Commonwealth of Australia & Anor v Russell Vance

In November 2005, whether a practising certificate is required, was explored by Commonwealth of Australia & Anor v Russell Vance. In this case the in-house counsel was engaged as a legal officer with the Australian Defence Force in the position of Departmental Legal Officer (DLO). The plaintiff sought damages from unlawful termination from the Defence Force and applied for an order requiring the defendants to provide a number of documents for inspection. The application was proposed on the ground that the
documents were the subject of a claim of legal professional privilege.

The primary issue in the application was whether communications from DLOs which contained or purported to contain or relate to the provision of legal advice could be the subject of a claim for legal professional privilege. This involved an examination of the position and function of DLOs and in particular, whether they were lawyers.

The application for privilege was considered at common law and not under the provisions of the Evidence Act 1995 (ACT). His Honour Crispin J, examined Waterford v Commonwealth, which he believed to be most relevant to the proceedings. Waterford stated that the in-house solicitor should hold a current practicing certificate or be otherwise entitled to practice in the relevant jurisdiction. In Waterford, the person who provided the legal advice were ‘lawyers,’ that is, not only were they qualified to practise law in terms of academic prerequisites, but each held a relevant practising certificate.

The evidence then stated that while all permanent military and civilian DLOs were legally qualified and admitted to practice, the military DLOs were not required to hold practising certificates. The plaintiff argued that the defendants’ claim for privilege must fail, because the communications the subject of the claim for privilege were not from persons qualified to practise law and they did not hold relevant practising certificates.

Having considered both Waterford and Attorney General (NT) v Kearney (1985) 158 CLR 500 (both of which maintained the importance of practising certificates) his Honour held that it is ‘difficult to see how these requirements could be regarded as having been satisfied by legal advisors who did not hold practising certificates or, perhaps, worked under the supervision of others with practising certificates, unless they enjoyed a statutory right to practice such as that provided by … the Judiciary Act,’ (which the DLOs did not).

Consequently, his Honour concluded that legal professional privilege will arise to “protect the confidentiality of communications
with a legal advisor only when he or she has an actual right to practice and not merely when he or she has… joined the ADF, even if permitted to carry out ADF legal duties without holding a practicing certificate.” Consequently his Honour was satisfied that any presumption in favour of privilege attaching to the documents in issue had been amply displaced.

The appeal

The Commonwealth sought leave to appeal on the basis that the trial judge had erred by holding that a claim for legal professional privilege could only be brought where a document was authored by a person holding a current practising certificate. The court found that from a consideration of those cases it was possible to conclude that his Honour the trial judge should have applied the provisions on client legal privilege of the Evidence Act 1995 (ACT).

The Court then held that where client privilege may be claimed over a document by an in house lawyer, the question is whether the document would meet the statutory test of being a confidential document, which includes being under an express or implied obligation not to disclose its contents, whether or not that obligation arises under law. This may be more easily answered where the lawyer holds a practising certificate. However, holding a practising certificate is not the definitive test, as long as the statutory requirements are met.

The proceedings were accordingly remitted to the trial judge to consider the question of privilege in accordance with the courts reasons. Therefore in jurisdictions where the Evidence Act applies, then privilege will apply to communications sought to be adduced
in evidence if those communications are to or from a lawyer regardless of whether that lawyer holds a current practising certificate so long as the person is acting in their capacity as a lawyer and for a privileged purpose.

Employment case law

Nikolich v Goldman Sachs JB Were Services Pty Ltd

Nikolich worked as an investment advisor for Goldman Sachs in their Canberra office. Goldman Sachs decided to implement a new ‘partnership’ method of client management, which was touted as having the definite potential to increase the business efficiency and earning capacity of the office.

The new method consisted of several investment advisors forming a partnership in which they pooled their clients and shared client work. Any partner who exited the partnership had to leave their clients behind.

Nikolich formed such a partnership with two other advisors. When one partner resigned and exited the partnership, Nikolich’s supervisor transferred the highest-revenue clients from Nikolich’s partnership to his own partnership. When Nikolich voiced his disquiet with this transfer, the supervisor informed him that he was “greed[y]”, “lazy” and “whinging”, and began to behave in an intimidating and threatening manner.

Nikolich eventually made a written complaint to Goldman Sachs’ Human Resources department. Following several meetings with the applicant, the only action that HR took was to discuss Nikolich’s complaint with the supervisor in question. Nikolich had informed HR that he was feeling unwell and was very stressed, and hated to encounter his supervisor at work. HR advised him to take some time off, or to utilise the company’s employee counselling service.

When Nikolich was informed that the outcome of his complaint was that the supervisor would be moved from the Canberra office, he tried to take the complaint further, claiming that he was now “suicidal” as a result of the harassment he had suffered and that he had now lost an estimated $300,000 in client revenue due to the unjust client reallocation.

He asked for monetary compensation. Goldman Sachs refused to compensate him for any loss in revenue and asked him to resume his normal duties. When Nikolich refused, the respondent terminated his employment. Nikolich brought an action against his former employer in the Federal Court, seeking damages and compensation.
He based his claim upon several causes of action, one of them being founded on a breach of the terms of his employment contract by the respondent. He argued that the provisions of the respondent’s policy manual, a 119 page document entitled “Working With Us” that was provided to him at the same time as the letter of offer, concerning company policies on workplace health and safety, freedom from harassment and concerns or grievances, was part
of his employment contract.

As he was employed as an investment advisor, the vast majority of his remuneration was earned in the form of incentive payments for client work, and therefore his remuneration was largely determined
by the quality of clients that he handled for the respondent.
The Federal Court found that the respondent had no objective procedure concerning client allocation when it obviously
needed one, and that the respondent’s human resources officers were inadequate in their handling of the applicant’s complaint. Turning to the policy manual, the court considered the question of whether the language used constituted ‘lawful and reasonable directions’ or were in fact promises that were binding on both employer and employee?

Wilcox J found that the policy manual was not merely a set of directions to employees. He concluded that the WWU document bound not only the employees of Goldman Sachs, but also Goldman Sachs itself, relying on an earlier decision of the Full Federal Court in which the majority held that a ‘Human Resources Policies and Procedures Manual’ bound an employer such that an ex-employee was entitled to receive the redundancy benefits set out in
the employer’s Manual. The Court found that the relevant provisions of the manual were indeed promises that formed express terms of the applicant’s employment contract.

The circumstances surrounding the delivery of the manual to the applicant such that it accompanied the letter of offer, and the promissory language used within the manual itself (e.g. “We will take every practicable step…”), meant that the provisions of the manual were contractual in nature and were, by their very nature, express terms in Nikolich’s contract. Wilcox J noted that if the policy manual did not bind the respondent in any way, then “those of its provisions that constitute promises by GSJBWS, or which purport to confer entitlements, are misleading…”

Wilcox J found that the respondent knew from the time of Nikolich’s complaint that he was in an extremely distressed state, and was obliged to work in the same office as an intimidating and hostile supervisor. He considered that the respondent’s policy manual created a legally enforceable obligation on the respondent to “take every practicable step to provide and maintain a safe and healthy work environment” and to conduct a proper and timely enquiry
into the applicant’s complaint. The respondent breached that obligation, and consequently, Nikolich was entitled to recover damages for the psychological distress caused by that breach. Over half a million dollars was awarded to the applicant, and comprised compensation for past loss of earnings (by far the greatest component of the award), loss of future earnings, and damages for Nikolich’s pain and suffering.

Goldman Sachs appealed to the Full Federal Court. The majority dismissed the appeal and upheld the decision of Wilcox J, but they came to different conclusions regarding the interpretation of the policy manual provisions. Black CJ and Marshall J held that only the provision relating to employee ‘Health and Safety’ was a contractually binding term of Nikolich’s contract; the ‘Harassment’ and ‘Grievance’ sections of the policy manual were expressed in such
a way that it could not be held that they were “promissory in nature”, as they were couched in aspirational rather than promissory language – the employer would “strive” to achieve certain things, rather than simply “do” them.

The breach of the ‘Health and Safety’ policy, which was constituted by the negligent manner in which the HR department had handled Nikolich’s complaint, was confirmed by the majority to have caused the damage to Nikolich. That document was “prescriptive”, requiring certain standards that were not met by the conduct of Goldman Sachs. Thus the Nikolich appeal confirmed the distinction between “aspirational” and ”prescriptive” policies: corporate aspirations are not contractual; “declarations of intent” are. If Goldman Sachs had not worded its ‘Health and Safety’ provision in the ‘language of obligation’, it would, following the reasoning of the Full Court, not be liable to pay Nikolich damages of over half a million dollars for breach of that obligation.