Judge notes defence counsel’s proposed solution is expensive, impractical
While rejecting the defendant’s claim for legal professional privilege and his counsel’s proposed solution for navigating the thousands of documents potentially covered, New South Wales’ Supreme Court noted an undertaking from the plaintiff’s counsel to set aside obviously privileged documents.
In Xu v Cao & Du Management Pty Ltd (No 4) [2026] NSWSC 219, the underlying proceeding involved a loan agreement with a defendant who was bankrupt or subject to a personal insolvency agreement.
The present matter addressed the plaintiff’s attempt to recover favourable verdicts arising from the court’s judgments dated 22 September 2025, 1 October 2025, and 15 December 2025. The defendant claimed legal professional privilege over thousands of documents.
The plaintiff acknowledged that the asserted privilege would inevitably cover some of the documents. However, he alleged that the defendant failed to establish his entitlement to the claim.
The defendant provided three affidavits addressing the broad range of documents concerned and uploaded Excel sheets describing these documents – encompassing emails, text messages, and WeChat communications – in a USB.
During the cross-examination of his affidavits, the defendant detailed a system for identifying privileged documents. He explained that he and his lawyer would enter a keyword, such as a lawyer’s name, into the search engine and examine any identified documents to determine whether to assert privilege over them.
The defendant’s counsel frankly conceded that these affidavits did not meet the requirements for a privilege claim in Dexus Capital Investment Services Pty Ltd atf Dexus Diversified Infrastructure Trust A v Australia Pacific Airports Corporation Ltd [2026] NSWSC 125.
The defendant’s counsel also recognised that going through thousands of documents to provide information satisfactorily establishing a privilege claim would exceed the capacity of the available legal resources.
Upon receiving the opportunity to think of a mechanism or form of order to identify the privileged documents, the defendant’s counsel suggested that the independent solicitor review the documents and make the decision.
The Supreme Court of New South Wales saw no choice except to reject the defendant’s claim for legal professional privilege.
However, to give the defendants some comfort, the court asked the plaintiff’s learned senior counsel to provide an undertaking to offer a degree of assistance by setting aside obviously privileged documents, rather than examining them further or disclosing them to anyone other than the plaintiff’s legal representative.
The court acknowledged that:
The court found that permitting the defendant’s counsel to make another attempt to identify the privileged documents would lead to a seemingly never-ending exercise.
Given the number of documents involved, the court found that the proposed task for the independent solicitor would be extremely expensive and impractical, whether undertaken on his own or in consultation with the defendant’s counsel.
