24 September, 2015
In a further sign of the Hong Kong Court’s commitment to upholding the concept of legal professional privilege (“LPP”), the Court of Appeal’s 29 June 2015 judgment in Citic Pacific Limited v Secretary for Justice & Commissioner of Police has provided welcome clarification in relation to the definition of the “client” for the purpose of legal advice privilege and has roundly rejected the more restrictive approach taken by the English Court of Appeal in the controversial Three Rivers (No 5) decision [2003] QB 1556. The Court has also provided helpful guidance for clients and practitioners in relation to dealing with claims for LPP in respect of materials seized upon the execution of a search warrant.
As pointed out by the Court in the introduction to its judgment, LPP has its origins in the common law but has been constitutionally entrenched in Hong Kong as a basic right under Article 35 of the Basic Law, and the Court of Final Appeal has repeatedly stated that LPP is a fundamental right which the Courts would jealously protect.
The Three Rivers (No 5) Decision
The English Court of Appeal’s decision in Three Rivers (No 5) caused concern to the legal profession throughout the Common Law world as a result of the limitations it placed on the protection given by LPP to companies. The contentious part of the Three Rivers (No 5) decision concerned legal advice privilege, which protects from disclosure confidential communications between a lawyer and his client made for the purpose of seeking or giving legal advice. The Bank of England was seeking to assert legal advice privilege over various categories of documents generated as a result of the Bingham Inquiry into the collapse of BCCI. Noting that a distinction between litigation privilege (which protects communications between a client and third parties where litigation is on foot or is contemplated) and legal advice privilege had emerged in Anderson v Bank of British Columbia (1876) 2 Ch D 644, the Court held that legal advice privilege did not apply to documents provided to a client or his solicitor for advice to be taken upon them, but only to communications passing between that client and his solicitor and documents evidencing such communications. In terms of identifying the “client” for these purposes, the Court held that the Bank Inquiry Unit (“BIU”), an internal team established by the Bank to deal with the Bingham Inquiry and to seek and receive legal advice, was the “client” of the Bank’s lawyers, rather than any single officer of the bank. Accordingly, communications between the Bank’s employees and the BIU were regarded as internal memoranda or materials preparatory to consultation with solicitors and not protected by legal advice privilege.
The First Instance decision and scope of the appeal
At first instance in the Citic case, Mr. Justice Wright was required to deal with a claim for LPP made in relation to materials seized from Citic Pacific Limited (“Citic”) pursuant to various search warrants. In attempting to categorise the documents for the purpose of deciding whether or not they were subject to legal advice privilege, the Judge followed Three Rivers (No 5) and stated that documents relating to, or communications including, gathering information from employees of Citic, other than its Group Legal Department, were not protected by LPP. In reaching this conclusion, the Judge concluded that the “client” of Citic’s legal advisers was the Group Legal Department, and that other employees of Citic should be regarded as “third parties”, with an exception being made in relation to members of Citic’s board on the basis that it was clear that the Group Legal Department acted under their direction.
Wright J’s decision represented the first occasion on which Three Rivers (No 5) had been applied in Hong Kong.
Whilst Citic had appealed various aspects of Wright J’s decision in relation to privilege claims, pursuant to agreement between the parties and with the expectation that the issues between them may be narrowed if the Court confined itself to an appeal on the Three Rivers point, the Court agreed to proceed in relation to that issue only. The Court of Appeal noted that the English Court of Appeal’s decision in Three Rivers (No 5) decided that information obtained from third parties is not protected by legal advice privilege, which is confined to communications between client and solicitor only, and that internal communications between employees for the purpose of getting information for legal advice stand on the same footing as information obtained from third parties. The Court said that they were not directly concerned with the position of third parties and for present purposes they were only confining themselves to dealing with the position of internal communications between employees.
The Court of Appeal’s decision – Adopting the “Dominant Purpose” test
The Court noted that whilst Wright J was of the view that he should follow Three Rivers (No 5), that post-handover, the decision was not binding in Hong Kong, and other Common Law jurisdictions such as Singapore and Australia had rejected Three Rivers (No 5) in favour of a test whereby an internal confidential document which was produced or brought into existence with the dominant purpose that it or its contents be used to obtain legal advice is covered by legal advice privilege. The Court felt that this dominant purpose test was capable of screening out unmeritorious claims for LPP.
The Court of Appeal did not agree that a narrow definition of “client” should be adopted as a proper limit for legal advice privilege. It said that documents generated in the course of a transaction or event are not protected by LPP, and the production of such documents or copies to a solicitor cannot alter their character. However, the processing of knowledge and reduction of knowledge into documentary form for the purpose of seeking legal advice, whether for litigation or non-litigious purposes, is different. If such a document comes into existence as part of a process in the communication with a lawyer with a dominant purpose of getting legal advice, its compulsory disclosure would impinge on the confidential communication between a client and his lawyer.
The Court said it was meaningless to have a right to confidential legal advice if the protection is confined to communications setting out that advice. Lawyers needed to have the relevant information from their clients before proper advice could be given, and it was thus a necessary incidence of the right to confidential legal advice that the whole process be protected by privilege so as to safeguard confidentiality. In the context of a company, where the information may have to be acquired from employees in different departments or at various levels, there was a need to protect the process of gathering such information for the purpose of getting legal advice. It would be meaningless, the Court said, to have a right to confidential legal advice if management was hampered by the concern that statements taken in the process of gathering information could be open to discovery. Further, in the present day, it was unlikely that a small group of employees within the legal department of a corporation would be likely to have all the knowledge and skills that would be required to obtain information for, and put together, suitable instructions.
The Court said that to adopt a restrictive definition of who constitutes the client in these circumstances would be just as likely to impinge upon the ability of the corporation to seek and obtain meaningful and useful legal advice, since it might well discourage those defined as the client for the purposes of LPP from seeking the input or assistance of other employees who were better qualified or able to provide it. The Court approved statements made by Tomlinson J at first instance in Three Rivers (No 5) to the effect that the confidentiality of the whole process of communication requires protection, not just those documents which can be recognised as comprising actual or final communications, and it would be artificial and not in any way consonant with the rationale underlying the principle of LPP to confine protection to documents actually intended to be handed to the legal adviser.
The Court decided that they should adopt a more liberal approach and reject the narrow definition of “client” in Three Rivers (No 5). There was a mismatch, it said, between the narrow definition of “client” and the proper limitation of legal advice privilege. It can be said, the Court held, that the client is simply the corporation, and the question is really which of its employees should be regarded as being authorised to act for it in the process of obtaining legal advice. The dominant purpose test was, in the mind of the Court, demonstrably more appropriate in setting proper limits to legal advice privilege.
In summing up, the Court stated that:
- They disagreed with the restrictive definition of “client” in the context of legal advice privilege as laid down by the Court of Appeal in Three Rivers (No 5); and
- The rationale for LPP is equally applicable to litigation privilege and legal advice privilege, and there has to be effective and meaningful protection for confidentiality in the process of obtaining legal advice in the litigious and the non-litigious context. A restrictive definition of “client” would frustrate the policy of LPP and it cannot be the right test to identify the proper limit for legal advice privilege. The dominant purpose test sets the proper limit for legal advice privilege, is consistent with the authorities and with the fundamental nature of LPP, as guaranteed under Article 35 of the Basic Law, and this should be the test to be adopted in Hong Kong.
In support of its decision, the Court gave specific examples of certain documents which Wright J had excluded from LPP protection as a result of applying the test in Three Rivers (No 5)These included emails sent by qualified solicitors employed by Citic but who did not work in the Group Legal Department seeking the assistance and advice of Citic’s solicitors. It was clear to the Court that such documents sought legal advice and should have been cloaked with the protection of LPP.
Procedure for disposal of LPP claims
The Court also provided guidance on the procedure for the more effective disposal of similar claims for LPP in the future. They recommended the adoption of a procedure similar to that adopted since 2000 in England, whereby the relevant law enforcement authority would instruct an independent lawyer to attend the search to identify LPP materials or deal with a claim for LPP by the occupier of the premises. The Court found materials set out in the English Serious Fraud Office handbook and English Bar Council Guidelines to be very useful, and urged Hong Kong’s Department of Justice and legal profession to consider these materials and, based on the English experience and indeed any relevant experience from other jurisdictions, explore the possibility of devising and developing Hong Kong’s own practice of engaging an independent lawyer to deal with LPP claims.
The Court stated that:
a) The burden rests on the person claiming LPP to make good his claims;
b) Any blanket claim of LPP is objectionable and will be rejected by the Court; and
c) Meaningful assistance from both parties must be given to the Court or any independent lawyer appointed by the parties to resolve the claims.
The Court then set out a proposed procedure for handling LPP claims in respect of materials seized upon the execution of a search warrant.
Implications of the decision
The Court of Appeal’s decision is welcome and important in a number of respects:
It has ended the uncertainty and practical difficulties encountered by practitioners and clients since Three Rivers (No 5): now, if a document or communication is produced by an employee of a company for the dominant purpose of seeking legal advice, that document or communication is protected by legal advice privilege.
- It provides very helpful guidance for resolving LPP claims that arise as a result of the execution of search warrants; and
- It is an example of the Hong Kong Courts being prepared to look closely at persuasive decisions from other Common Law jurisdictions and deciding to adopt a different course where the Basic Law and/or other considerations demand it.
It remains to be seen whether the Court will in due course extend the ambit of legal advice privilege further to cover communications between lawyers and genuine third parties, as opposed to company employees, for the purpose of providing legal advice. The Court has left this question open for the present.
There are also various questions to be resolved concerning the proposed scheme to deal with LPP claims made following the service of warrants: for example, a situation may arise where the client who is entitled to assert LPP is ignorant of the existence of the warrant because the “tipping off” provision in the Organised and Serious Crimes Ordinance prevents the client’s lawyers from alerting them to the existence of the warrant. Whilst the Court of Appeal has stated that blanket claims for LPP are to be discouraged, a solicitor cannot waive privilege without the permission of their client. Perhaps a solution would be to allow the independent lawyer to make a provisional adjudication of whether documents are subject to LPP.
Another issue is who is to bear the cost of any independent lawyer assigned to assess LPP claims. No doubt these issues will come before the Courts in due course.
For further information, please contact:
Richard Hudson, Partner, Deacons
richard.hudson@deacons.com.hk
