Mosaic Brands directors lose privilege over safe harbour advice shared with administrators

The Federal Court of Australia has ruled that former and current directors of Mosaic Brands Limited held exclusive legal professional privilege over advice obtained from Hamilton Locke concerning the safe harbour provisions of the Corporations Act 2001, but waived that privilege by voluntarily providing the advice to the company's administrators and incorporating it into board minutes. Justice Markovic found that the directors' express attempts to preserve privilege were ineffective because their conduct was inconsistent with maintaining confidentiality, although advice concerning events before 21 June 2021 remained protected due to the absence of evidence that a former director had consented to its disclosure.

The dispute arose in the liquidation of Mosaic Brands and 12 related companies, which operated Australian fashion retail brands including Rivers, Millers, Noni B, Katies and Rockmans. Vaughan Strawbridge, Kathryn Evans, Kate Warwick and David McGrath of FTI were appointed voluntary administrators in October 2024 and subsequently became liquidators in July 2025. Andrew McCabe, Wenjie (Jessie) Wang and Joseph Hayes of Wexted Advisors were appointed special purpose liquidators in December 2025 to investigate the companies' affairs, including potential claims against current and former directors and former legal advisers Hamilton Locke.

The special purpose liquidators sought directions permitting them to inspect and use documents relating to safe harbour advice provided by Hamilton Locke and Deloitte Financial Advisory between 2020 and 2024. Several directors, including David Wilshire, Scott Evans, Quentin Gracanin and Jacqueline Frank, opposed the application, asserting that the advice was privileged exclusively in favour of the directors rather than the Mosaic companies. The liquidators disputed that position, arguing that any privilege was held jointly with the companies or, alternatively, had been waived.

The Court first considered whether Hamilton Locke had been retained by the directors personally. Although there was no written retainer expressly establishing that relationship, Justice Markovic found that one could be inferred from the surrounding circumstances. The directors had initially sought advice in March 2020 amid concerns about the financial impact of the COVID-19 pandemic and their potential exposure to insolvent trading liability. Their understanding that Hamilton Locke was advising them personally was supported by contemporaneous correspondence, the nature of the safe harbour regime and the firm's continued representation of the directors following the appointment of administrators.

Justice Markovic rejected the liquidators' argument that the companies' payment of legal fees, involvement of senior employees and receipt of financial advice from Deloitte demonstrated that the privilege belonged to the companies. The Court distinguished between restructuring measures undertaken for a company's benefit and legal advice obtained by directors concerning their personal protection under section 588GA. Although the former must be directed toward achieving a better outcome for the company, the latter concerns protection against potential personal liability. The Court also found that communications involving Deloitte could attract the directors' exclusive privilege to the extent they assisted Hamilton Locke in providing that legal advice, with the status of particular documents to be determined separately.

However, the directors' success on the ownership of privilege did not resolve whether that protection remained available. Following the appointment of administrators, the directors received requests for company records and information concerning their reliance on safe harbour. On 12 December 2024, they provided the administrators with a detailed timeline, explanatory memorandum and supporting documents outlining their reliance on the regime. The accompanying correspondence expressly reserved their claims to legal professional privilege and requested that the materials not be shared without their consent, other than with the administrators' legal advisers.

Justice Markovic found that the directors were not legally compelled to disclose their privileged advice. The statutory notices issued under sections 438B and 438C concerned company books and records, while a subsequent request referring to section 588GB sought a summary of the directors' reliance on safe harbour rather than production of their confidential legal advice. The directors nevertheless elected to provide the underlying material, apparently seeking to demonstrate the strength of their potential defence against future insolvent trading claims.

The Court held that this deliberate disclosure amounted to a waiver notwithstanding the directors' express reservation of privilege. Justice Markovic reasoned that the directors must have appreciated that the administrators could use the material to assess potential claims and that subsequently appointed liquidators might deploy it in examinations or litigation. The waiver was therefore not confined to the administrators but extended to the general purpose liquidators, special purpose liquidators and third parties more broadly.

An important qualification concerned Sue Morphet, who ceased to be a director on 21 June 2021. Because the privilege was jointly held by the directors who received the relevant advice, and there was no evidence that Ms Morphet had consented to its disclosure, the Court found that privilege had not been waived in relation to material concerning events occurring on or before her resignation. The waiver arising from the December 2024 disclosure was therefore confined to advice and related materials concerning subsequent events.

Justice Markovic separately held that the directors waived privilege by recording the substance of their safe harbour advice in board minutes. Although board meetings and their minutes are ordinarily confidential, that confidentiality belongs to the company rather than the directors personally. By incorporating privileged advice into company records instead of maintaining separate confidential documents or merely recording that advice had been received, the directors acted inconsistently with preserving their exclusive privilege.

The Court declined, however, to find a separate waiver arising from the provision of board minutes to BDO, Mosaic's auditors. The evidence did not establish whether the materials supplied to BDO contained privileged safe harbour advice, and the circumstances suggested that confidentiality measures had been maintained.

The parties have been directed to provide proposed orders by 5 November 2026 addressing the effect of the ruling, costs and whether further hearings are required to determine privilege claims over specific categories of documents. A case management hearing is scheduled for 9 November if necessary.

Read the decision here.

David Williams SC, Michael Rose and Sophie Kaiko, all of 9 Wentworth Chambers (instructed by ERA Legal) acted for the special purpose liquidators.

Stewart Maiden KC of the Victorian Bar and Mr J Hynes of Ninth Floor Selborne Chambers (instructed by White & Case) acted for David Wilshire.

John Anderson of 9 Selborne Chambers (instructed by Henry William Lawyers) acted for Scott Evans.

David Southwood of New Chambers (instructed by Bridges Lawyers) acted for Jacqueline Frank.

Daniel Krochmalik of 3 St James' Hall (instructed by Gilbert+Tobin) acted for Quentin Gracanin.