Legal professional privilege: disputes between owners corporations and lot owners

Broadly speaking, legal professional privilege can be claimed over confidential communications and documents made for the dominant purpose of:

  1. giving or receiving legal advice; or
  2. use in existing or anticipated litigation.

In general, an owners corporation is entitled to claim legal professional privilege against a lot owner with whom the owners corporation is involved in litigation or in respect of whom the owners corporation has received legal advice. However, pursuant to section 108 of the Strata Schemes Management Act 1996, an owners corporation must make certain records available for inspection by lot owners upon request. There is a risk that during the course of making records available for inspection, confidential legal communications and documents may be inadvertently disclosed.

The issue for owners corporations and strata managers is to ensure that legal professional privilege is preserved despite the right contained in section 108 for lot owners and third parties to inspect documents. It is also important for owners corporations and strata managers to understand when the privilege does not exist, so that they are not denying owners access to records they are otherwise legally entitled to inspect.

In the case of The Owners- Strata Plan No 74602 v Eastmark Holdings Pty Ltd [2013], the NSW Court of Appeal affirmed that section 108 does not revoke an owners corporation’s right to claim legal professional privilege. As a result, where confidential communications and documents fall within the ambit of legal professional privilege, an owners corporation is entitled to withhold those from inspection by lot owners in certain circumstances. Those circumstances include where an owners corporation and a lot owner are adversaries, i.e. where the lot owner is an opponent in legal proceedings, or has the capacity to become an opponent in legal proceedings.

Where the above circumstances apply, owners corporations and strata managers should withhold from the relevant lot owner access to documents made for the dominant purpose of:

  1. giving or receiving legal advice; or
  2. use in existing or anticipated litigation.

In the event that those documents are inadvertently made available, legal professional privilege may be lost (ie: the right to claim privilege “waived”), and the lot owner may be entitled to use those documents against the owners corporation in litigation.

It is often difficult to determine the purpose for which documents have been made, and in the case of uncertainty, we recommend that you communicate with the lawyer who prepared the document/s or (if lawyers have changed over time) the lawyer advising the owners corporation at the time. It is often a useful exercise to ask that lawyer to attend the strata manager’s office and inspect the owners corporation’s books and records themselves, removing those documents that fall within the privilege.  The privileged documents should then be placed in a separate folder marked “legal professional privilege”. When owners corporations and strata managers receive requests to inspect records under section 108, this folder should be kept separate if the lot owner inspecting (or their representative inspecting) is an adversary.

If legal advice was obtained in relation to a third party, and the interests of the owners corporation and lot owner align, then the owners corporation is not entitled to claim legal professional privilege in respect of any associated communications and documents. Where a lot owner is not an adversary, that lot owner will likely share a common interest with the owners corporation. A situation falling in to this category is where an owners corporation is suing a contractor who performed services on the common property.

In summary:

  1. Lot owners and their authorised representatives are entitled to inspect the records of owners corporations pursuant to section 108 of the Strata Schemes Management Act 1996.
  2. Where the lot owner is an adversary of the owners corporation, the owners corporation is entitled to claim legal professional privilege over confidential communications and documents which relate to the dispute. The specific test is whether the communications and documents have been made for the dominant purpose of: (a) giving or receiving legal advice; or (b) use in existing or anticipated litigation.
  3.  There is no requirement for legal proceedings to be on foot- an owners corporation is entitled to make a claim in circumstances where the lot owner is a potential opponent in legal proceedings.
  4. Communications and documents in relation to legal advice or litigation in respect to lot owners who are adversaries of the owners corporation should be kept in a separate folder to avoid the waiver of legal professional privilege.

When in doubt about a particular set of documents, we suggest that legal advice is sought as to whether or not legal professional privilege can be claimed by the owners corporation.

 

The information contained in this article is not legal advice. This article is intended to provide general information in summary form only. You should not rely on the content of this article as legal advice. If you would like advice specific to you and your situation, please contact us.

Posted in LCOR