Complexities often arise when preparing board papers where legal advice is required. Historically, a conservative approach has been common practice — companies will isolate legal advice in a standalone document (or annexure), protected by legal professional privilege, while a separate paper will set out the commercial context.
While providing the best protection for the privileged advice, this approach comes at a real cost for directors. Segmented papers can be harder to follow and digest, as directors are required to jump between papers to get the full picture.
It's time to reconsider this approach.
There are ways to prepare combined, part-privileged reports. To balance the efficiencies of combined reporting with the risks of waiving privilege, it is crucial that the approach is clear and well-documented to mitigate risk.
What is required to attract privilege in board papers?
Dominant purpose test: privilege will apply to documents created for the dominant purpose of obtaining legal advice (or use in anticipation of litigation). Historically mixed board reports were unlikely to meet this test where legal advice is only one of a number of items in the report.
Confidentiality: privilege will be waived if a company acts inconsistently with keeping the advice confidential. If information is disseminated widely, it may lose its confidentiality, and therefore, its privileged status. This risk arises where board papers are circulated widely within a company.
So how can privilege apply to mixed board papers?
Broadly, where legal advice already exists, it can usually be safely summarised in a mixed board paper.
This is because the advice has already been created in another document (and so the “dominant purpose” can be assessed, and satisfied, using that base document not the board paper). A reproduction of the advice (or a summary of it) in a board paper should be fine, provided that the board paper remains confidential. If confidentiality is maintained, it is unlikely that the reproduction will waive privilege in the underlying advice contained in another document.
Courts and regulators are generally happy to accept part privilege claims over mixed documents provided that the dominant purpose test is satisfied in another, underlying document (meaning that the privileged sections of board papers can be redacted, while the non-privileged parts remain visible).
However, the traditional concern about mixing legal advice with non-legal advice in board papers remains where legal advice is given for the first time in a mixed board paper. If so, it can be difficult to establish the dominant purpose based on the board paper itself, unless a court accepts that different parts of the paper can have different purposes (some judges have done this, but it is not universally accepted).
Privilege disputes are highly fact dependent. The risk associated with a consolidated approach will vary from company to company, and depend on the way the board papers are presented, as well as internal procedures and protections put in place.
What should a combined board reporting protocol include?
Only summarise existing advice: only include a summary of existing advice, don’t create “new” advice for the first time in a mixed board paper.
Restrictions on circulation: the mixed board paper should be marked as confidential, and recipients should be advised not to on-forward. Any mixed paper should clearly identify (with labels) which part of the paper contain legal advice. Labelling is not necessary to create privilege, but it can practically assist to reduce the risk that a valid claim is overlooked.
Have a clear, written process: to assist in any later challenges to privilege claims, it is critical that the company have a clear protocol setting its process for preparing mixed reports.
There are risks involved. Whilst combined reporting simplifies the process, the reporting structure must be well-documented and set up effectively to protect privilege and avoid inadvertent waiver.
- A mixed board paper will not be privileged in its totality. Part-privilege can apply to the sections which are summarising existing legal advice. These sections could then be redacted in situations where the overall board paper has to be produced to a regulator or court.
