The Hong Kong Court of Appeal has declined to follow the controversial decision of the English Court of Appeal in Three Rivers (No. 5),1 which set the limits of legal advice privilege by reference to a narrow definition of “client” rather than to the purpose for which the communication in question was created.
In Hong Kong and elsewhere in the English common law world, there are two categories of legal professional privilege: legal advice privilege and litigation privilege. The former is applicable where there are no legal proceedings in existence or contemplation, and it protects communications between lawyer and client but not communications between client and third parties and other advisers, or other raw materials. Litigation privilege, which is relevant where proceedings exist or are contemplated, protects communications that have come into existence for the dominant purpose of gathering evidence for use in the proceedings, including communications with third parties made for that purpose.
In Three Rivers (No. 5), the English court concluded that internal communications passing between employees of the client for the purpose of obtaining information to enable legal advice to be taken were on the same footing as communications with third parties and other raw materials which had come into existence during the course of a transaction or event, and such internal communications were not therefore covered by legal advice privilege. Applying that to the case in hand, it held that communications between employees of the Bank of England, on the one hand, and an internal unit set up by the Bank to handle the Bank’s response to the Bingham enquiry into the collapse of Bank of Credit and Commerce International, on the other, were not privileged, and it held that only communications directly between the unit—which it concluded was the “client” for relevant purposes—and its external lawyers were covered.
The proper limits of legal advice privilege also had to be considered in Citic Pacific Limited v. Secretary for Justice,2 in which documents and computer hard drives—some containing allegedly privileged materials—had been seized under search warrants. The Hong Kong Court of Appeal took as its starting point the position in England, Australia and elsewhere that legal professional privilege generally is a fundamental human right, a right entrenched in Hong Kong by Article 35 of the Hong Kong Basic Law. It also accepted what it described as the “rule of law rationale” for legal advice privilege as summed up by Lord Scott in Three Rivers (No. 6)3 in the House of Lords. Having referred to earlier decisions justifying privilege in a non-litigious context, Lord Scott said:
“. . . [t]he dicta to which I have referred all have in common the idea that it is necessary in our society, a society in which the restraining and controlling framework is built upon a belief in the rule of law, that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers’ legal skills in the management of their (the clients’) affairs, should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else . . . [This] justifies . . . the retention of legal advice privilege in our law, notwithstanding that as a result cases may sometimes have to be decided in ignorance of relevant probative material.”
Putting to one side the limitation adopted by the court in Three Rivers (No.5) (i.e., the definition of “client”), the Hong Kong court then considered what the other potential limits on legal advice privilege could be. Of these, the one it regarded as most consistent with the rule of law rationale was the “dominant purpose” test (i.e., if the dominant purpose for the creation of the document was to use it or its contents to obtain legal advice, then it should be privileged from production).
In doing so, the Hong Kong court rejected the view that a narrow definition of “client” should be adopted as the proper limit. While it agreed that documents generated in the course of a transaction or event (i.e., raw materials) are never protected by privilege, the court accepted the submission that the processing of knowledge acquired from such material—and its reduction into documentary form for the purpose of seeking legal advice—is different: If such a document comes into existence as part of the process of communicating with a lawyer with the dominant purpose of obtaining legal advice, then compelling its disclosure would impinge on the right to confidential communication between client and lawyer.
As the court explained, “[i]t is meaningless to have a right to confidential legal advice if the protection is confined to communications setting out the legal advice. Lawyers need to have the relevant information from their clients before proper advice can be given. Thus, it is a necessary incidence of the right to confidential legal advice that the whole process is protected by privilege so as to safeguard the confidentiality,”
The court illustrated this by reference to large companies 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. As privilege protects not just the advice but also the process of disclosing the facts that leads to the advice, it should cover documents created by a client (including non-legally qualified members of staff of a client) for the purpose of obtaining legal advice. In those circumstances, “. . . there is a need to protect the process of gathering such information for the purpose of getting legal advice.”
To summarize, the court disagreed with the artificial definition of “client” laid down in Three Rivers (No 5):
“A restrictive definition . . . would tend to frustrate the policy of [legal professional privilege] and it cannot be the right test for identifying the proper limit for legal advice privilege. . . [T]he dominant purpose test . . . sets the proper limit for legal advice privilege. It is sound in principle and is consistent both with the authorities and with the fundamental nature of [Legal Professional Privilege] as guaranteed under [the Basic Law].”
This decision should be of particular interest to large corporate organizations for which litigation, arbitrations and internal/external investigations are a regular occurrence, and—subject to the outcome of any appeal—the decision will provide them with reassurance that their internal communications, when conducted for the dominant purpose of taking legal advice, are privileged.