CITIC Pacific Limited v Secretary for Justice & Commissioner of Police [2015] CACV 7/2012 (CA)

Introduction 

The decision of the English Court of Appeal in Three Rivers District Council v Governor and Company of the Bank of England (No. 5) [2003] QB 1556 (“Three Rivers (No. 5)”) has caused much concern in the legal profession as to the limitation it placed on the protection given by legal advice privilege to corporations. 

In this case, the Court of Appeal took the opportunity to review the applicability of Three Rivers (No. 5) in Hong Kong as the court below, amongst other grounds, applied Three Rivers (No. 5) in rejecting the claim of legal advice privilege over certain documents. 

Background 

In April 2009, with search warrants issued by a magistrate, officers of the Commercial Crime Bureau seized a large number of materials in relation to (i) CITIC Pacific Limited (“CITIC Pacific”)’s Forex contracts in 2007 and 2008; and (ii) its announcements published from 1 July 2007 to 15 March 2009 from various premises. CITIC Pacific then made a blanket claim of legal professional privilege (“LPP”) over all materials. 

Whilst there were some discussions between the parties’ lawyers, there was still disagreement over a large number of documents. CITIC Pacific therefore commenced legal proceedings seeking the return of the documents on the ground of LPP. 

On the issue regarding legal advice privilege, the trial Judge at the Court of First Instance considered and applied the restricted approach in what is meant by “client” as determined in Three Rivers (No. 5) and held the following:

  1. only CITIC Pacific’s Group Legal Department and its Board of Directors (pursuant to which the direction the Group Legal Department acted) were the “clients” of CITIC Pacific’s external legal advisers; and 
  2. the remaining employees, including a qualified solicitor in the Company Secretariat Department, were regarded as “third parties” for the purposes of legal advice privilege and therefore such communications would not be privileged even if they are intended for submission to CITIC Pacific’s legal advisers or prepared at the request of CITIC Pacific or its legal advisers.

CITIC Pacific appealed on this aspect of the decision amongst others. The Court of Appeal judgment dated 29 June 2015 is confined to the Three Rivers (No. 5)point on the proper approach to the definition of “client” for the purpose of legal advice privilege. 

Court of Appeal Decision 

The three judges who sat in the Court of Appeal delivered a joint judgement and overturned the Court of First Instance’s decision. This Court of Appeal Decision is of significant impact on the application of legal advice privilege as the Court of Appeal held the following:

  1. The rejection of a narrow definition of client 

In Three Rivers (No. 5), instead of employing the dominant purpose test, it defined the limit of legal advice privilege by adopting a narrow definition of “client”. As a result, internal communications between employees were regarded as information from third parties, hence were not protected by legal advice privilege. 

The Court of Appeal favours a more liberal approach as to the definition of “client”. It is held that although documents which were generated as part of a transaction or event are not protected by LPP, the processing and the reduction of such knowledge into a documentary form specifically for the purpose of obtaining legal advice is different. 

The rationale behind is that the protection under Article 35 of the Basic Law (the right to confidential legal advice) should not be confined to communications setting out a legal advice. Instead, that advice and the whole process of fact disclosure that leads to the advice, including the production of relevant information before proper advice can be given, should be protected by privilege so as to safeguard confidentiality. 

Further, the same should be said for corporations. It is held that given that necessary information may have to be acquired by the management from employees in different departments, there is a need to protect the process of gathering such information for the purpose of obtaining advice, in order to safeguard corporations’ ability to seek and obtain meaningful legal advice. 

The real definition of “client” should be the corporation itself, and the question that the Courts should be asking is “one of which of its [the corporation] employees should be regarded as being authorised to act for it in the process of obtaining legal advice”.   

  1. The proper limit of legal advice privilege - dominant purpose test 

Generally speaking, legal advice privilege only embraces communications between solicitor and client which was produced or brought into existence for the purpose of obtaining legal advice. 

This area of law was in question because since Three Rivers (No. 5), there had been conjecture that for legal advice privilege, the proper test is the sole purpose test rather than the dominant purpose test. 

The Court of Appeal has now confirmed that the dominant purpose test should be the test to be adopted in Hong Kong when determining what falls within the ambit of legal advice privilege, given that (i) it sets proper limit for legal advice privilege; (ii) it is sound in principle; and (iii) it is consistent with the authorities and the fundamental nature of LPP as guaranteed under Article 35 of the Basic Law.   

  1. Guidance on proper procedure for handling LPP claims 

The Court of Appeal has also provided guidance on the procedure for more effective disposal of LLP claims in the future for the benefit of practitioners. The Court of Appeal emphasises on the following points:

  1. the burden rests on the person claiming LPP to make good his claims; 
  2. any blanket claim of LPP is objectionable and will be rejected by the court; and 
  3. meaningful assistance from both parties must be given to the court or any independent lawyer appointed by the parties to resolve the LPP claims.

It is recommended that the person claiming LPP should seriously consider giving a limited waiver for the specified personnel or independent counsel appointed by the law enforcement agent and/or the Department of Justice to inspect the disputed materials so as to resolve any disputed LPP claims. 

It is also recommended that the parties should consider instructing an independent lawyer to resolve any disputed LPP claim without prejudice to their right to bring the matter to the court for determination. 

Implications 

This case provided the opportunity for the Court of Appeal to clarify the definition of “client” and to confirm the application of the dominant purpose test in legal advice privilege. 

The Court of Appeal also provided helpful and practical guidance to practitioners in dealing with LLP claims. 

It remains to be seen whether this decision will be subject to further appeal, hence it pays to remain cautious about the ambit of this judgement.