07 July 2020

Internal investigations of highly sensitive issues: CBA and the High Court follow different paths

This article was written by Tim Bednall.

In June 2020, two investigations of highly sensitive matters at the highest levels of the relevant organisation came to public notice. This article focuses on the legal issues that arise in the conduct of internal investigations.

CBA appointed an external lawyer to conduct an investigation into the differing recollections of CBA directors of proceedings at board and board committee meetings in late 2016, which were the subject of evidence given by Ms Catherine Livingstone, the Chairman of CBA, at the Financial Services Royal Commission in late 2018. Lawyers advising plaintiffs in class actions against CBA are seeking to obtain the report prepared by the investigator. CBA has stated that the report is subject to legal professional privilege, and is exempt from any compulsion to disclose.

The High Court conducted an investigation into allegations of sexual harassment by a former member of the Court. The investigation was not conducted by a lawyer, and there has been no suggestion that the report of the investigation provided to the court is privileged. The report will therefore be susceptible to production in proceedings in which it is relevant. This may conceivably include proceedings against the Commonwealth as the employer of High Court staff.

The two circumstances provide an interesting contrast in approach to investigations. The High Court’s apparent position is consistent with the approach taken to the investigation and the public statements made by the Chief Justice, in which transparency has been paramount.

CBA has taken the more traditional approach to addressing a sensitive matter, commissioning a private investigation by a lawyer, which was never intended to become public. The circumstances of the two investigations are of course very different: the obligations of the board and the interests of the corporation’s stakeholders are quite distinct from those of the Court. We would always recommend that investigations of this nature by a corporation should be conducted in a manner that ensures that the report of the investigation is privileged. The corporation may choose to waive the privilege and disclose the report, but the protection of privilege in the face of possible regulatory action and civil suits will often be important.

The CBA matter arose from differing recollections about proceedings at board and board committee meetings that were not recorded in the minutes of those meetings. The keeping of minutes has become a vexed issue following Ms Livingstone’s examination in the FSRC, the increasing emphasis on community expectations of directors, reflected in expectations of regulators (whether reasonable or not), a growing body of hard and soft law that directors must challenge management in order to discharge their obligation of reasonable care and diligence, and the introduction of the BEAR accountability regime.

Minutes are deemed to be evidence of proceedings at a meeting of directors. However, this does not mean that there is an assumption that if a matter is not recorded in the minutes, it did not occur. Minutes are not required to be a transcript of the meeting, merely to record the outcome of matters considered at the meeting. But minutes that record only the matters decided at the meeting, in the traditional manner, and not the matters of debate, challenge or dissent, may not assist directors to prove that they have discharged their statutory duties and accountability obligations. We are seeing a greater tendency to record those matters, and for directors to ensure, when settling minutes, that their points of challenge or concern have been recorded.  

If nothing else, keeping minutes in that way may avoid the need to conduct more extensive investigations should directors later be put to proof on matters going to accountability and the discharge of duties. But of course, minutes are not privileged.

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