Confidentiality, privilege and AI: notes for Victorian law firms

Lawyers were early, enthusiastic users of generative AI, and also the source of some of its most memorable failures: submissions citing cases that don't exist. Those stories get the headlines. The quieter risk, and the one that matters more day to day, is confidentiality.

The duty hasn't changed

Under rule 9 of the Australian Solicitors' Conduct Rules, a solicitor must not disclose information that is confidential to a client, subject to narrow exceptions. Nothing about that rule mentions technology, and nothing needs to. Pasting a client's affidavit, advice or correspondence into a tool run by a third party is, in plain terms, giving that information to someone else.

Whether that is a breach depends on the tool and its terms. A firm's document management system is also run by a third party, after all. The difference is that firms choose those systems deliberately, with contracts about where data is held and who can see it. A junior lawyer's personal chatbot account comes with none of that.

What the regulators have said

In December 2024 the Victorian Legal Services Board and Commissioner, the Law Society of New South Wales and the Legal Practice Board of Western Australia issued a joint statement on the use of AI in Australian legal practice. Paraphrasing its main points:

• Lawyers should not enter confidential, sensitive or privileged client information into public AI chatbots or any other tool that does not guarantee the information stays private.
• AI cannot replace a lawyer's own judgement, and lawyers remain responsible for the accuracy of anything they file or send.
• Lawyers should understand the tools they use well enough to recognise their limitations.
• Time spent and costs charged should reflect the actual work done, including where AI made it faster.

The courts have also issued guidance. The Supreme Court of Victoria's guidelines on the responsible use of AI in litigation stress that parties and practitioners must understand the tools they use, and must not put confidential or privileged material into tools that aren't secure. Other courts have gone further, and some now require disclosure of AI use in certain documents. It is worth checking the current practice notes for each jurisdiction you appear in.

The privilege question

Privilege protects confidential communications made for the dominant purpose of legal advice or litigation. Disclosure to a third party can, in some circumstances, waive it. There's little Australian authority yet on whether putting a document into an AI tool counts, and a lot would turn on the facts: the terms of service, whether anyone could access it, whether it was used for training.

The safest position is not to have to find out. If privileged material never leaves systems the firm controls, there is nothing to argue about.

Where AI is genuinely useful in a firm

None of this means firms should avoid AI. Used carefully, it saves real time on:

• first-draft chronologies and summaries of long documents;
• turning file notes into tidy correspondence;
• comparing versions of an agreement and listing what changed;
• finding the precedent or earlier advice buried in the firm's own files;
• plain-English explanations for clients, which a lawyer then checks.

What these have in common is that a lawyer reviews the output. AI is very good at a first draft and unreliable as a final authority, especially on case citations. Treat it like a capable graduate who has never been to court.

Practical steps for a small firm

1. Write a one-page AI policy. Which tools are approved, what can go into them, and a flat rule against client material in anything else.
2. Choose tools on their data terms, not their demos. Ask where data is processed and stored, how long it's kept, whether it trains models, and who at the provider can access it.
3. Keep the permissions you already have. An assistant that searches the firm's files should only show each person the matters they can already open.
4. Verify every citation. Every time, without exception.
5. Talk to clients. Some will ask; it's better to have an answer ready.

Some firms settle on an enterprise cloud product with strong contractual terms. Others, particularly in family, criminal and estates work, prefer an assistant that runs entirely on the firm's own server so client files never leave the building. Both can be defensible. Using whatever is free on a staff member's phone is not.