Update on Legal Advice Privilege

By Mike R. Stewart and Nita Mistry, K&L Gates London

In common law jurisdictions, legal professional privilege prevents communications between a professional legal adviser and their clients from being disclosed.  There are two main types of privilege:

• Legal advice privilege, which protects confidential communications between lawyers and their clients; and
• Litigation privilege, which protects confidential communications, provided that such communications have been created for the dominant purpose of obtaining legal advice for litigation.

This update focuses on recent developments concerning legal advice privilege .

The current position (in English Law) is that legal advice privilege protects:

• The confidentiality of communications;
• Between lawyers and client;
• Created for the purpose of giving or receiving legal advice;
• Regardless of whether litigation is pending or contemplated.

In 2003, the English Court of Appeal sought to limit the meaning of a corporate client in the context of legal advice privilege. The key case is that of Three Rivers District Council v Governor and Company of the Bank of England (No 5) [2003] QB 1556 (Three Rivers (No 5)). In this case, the Court of Appeal took a restrictive interpretation of the meaning of a “client” when determining if communications were privileged.  It follows that, as a matter of English law:

• Not all employees are considered to be the “client”.
• In the case of individuals, the client is the individual instructing the lawyer.
• In the case of a corporate entity, the client is those employees of an organisation responsible for communicating with the legal advisers.

The Three Rivers decision has caused difficulties for corporate entities.  Some employees may not be considered part of the “client” for the purposes of legal advice privilege.  This means that communications or documents prepared by those employees will not be privileged.

Even a communication or document that is prepared by one employee to enable another employee to seek legal advice from a lawyer will not be privileged (unless the communication or document that is prepared is for the purpose of contemplated litigation).  In considering whether communications and documents are protected by legal advice privilege, it must be determined who within the company is the “client” instructing the lawyer.

Hong Kong Court of Appeal in Citic Pacific Limited v Secretary for Justice and Commissioner of Police (29/06/2015, CACV 7/2012)

In a significant judgment, the Hong Kong Court of Appeal (HKCA) has departed from English law adopting a wider test for the application of legal advice privilege.

First Instance Decision

Citic Pacific Limited (the “Company”) was being investigated by the regulatory authorities in relation to a profit warning announcement.  The company made a claim to privilege in respect of a large number of documents and other material seized by the police.

The judge held that some of the documents seized did not attract legal advice privilege because they were communications between certain of the company’s employees which were not communications on behalf of the company.

The Hong Kong Court of Appeal

The HKCA was asked to determine:

• Whether the first instance judge was correct to decide that privilege was limited to direct communications between those in the group legal department and its external lawyers;
• Whether Three Rivers (No 5) was good law in Hong Kong; and
• The proper approach to the definition of a “client” for the purpose of legal advice privilege.

The HKCA rejected the restrictive view adopted by both the first instance judge in Citic Pacific and the English Court of Appeal in Three Rivers (No 5).  The court held that:

“In the context of a corporation, where the necessary information may have to be acquired by the management from employees in different departments or at various levels of the corporate structure, there is a need to protect the process of gathering such information for the purpose of getting legal advice…it is unlikely that a small group of employees within the legal department of a corporation would be likely to have all the technical knowledge or skills that may be required to obtain information for, and put together, suitable instructions to the corporation’s lawyers”.

The HKCA adopts a wider test for the application of legal advice privilege. The “client” is simply the corporation as a whole.  All employees within the corporation are considered the “client”.

The question is which employees should be regarded as being authorised to act for it in the process of obtaining legal advice.  The HKCA adopted a “dominant purpose” test for this.  It is only internal confidential documents or communications, prepared by an employee for the dominant purpose that they be used to obtain legal advice, that will be protected by legal advice privilege.

In summary, legal advice privilege under Hong Kong law now extends to confidential internal communication:

• between employees of a client organisation, provided that
• those communications were created for the sole or dominant purpose of obtaining legal advice.

The Future for English law?

Three Rivers (No 5) still remains binding under English law and has not been overruled.

The dominant purpose test does not apply to English law in the context of legal advice privilege.

The position may be challenged in the future in light of the more liberal approach taken in Hong Kong and other common law jurisdictions.