The recent Hong Kong Court of Appeal decision in Citic Pacific Ltd v Secretary for Justice and Commissioner of Police1 (Citic) rejected the much criticised Three Rivers (No.5) English authority, which had been followed in Citic at first instance. This departure is particularly relevant to in-house counsel as it does away with a narrow definition of ‘client’ and in so doing, provides greater protection from disclosure for communications covered by legal advice privilege.
Following the Court of Appeal decision in Citic, there is now a broader test for legal advice privilege than applied in Hong Kong before - the “dominant purpose test”. This means that in order to be covered by legal advice privilege and protected from disclosure, a document needs to come into existence for the dominant purpose that it, or its contents, will be used to obtain legal advice.
To put this in context, legal advice privilege is one of the two types of legal professional privilege that can arise. As the name suggests, it protects from compulsory disclosure confidential communications made between client and lawyer for the dominant purpose of giving and receiving legal advice. The other type of legal professional privilege, litigation privilege, provides a broader protection for communications created in contemplation of litigation, made between a solicitor and a third party, and between the client and a third party, for the purpose of obtaining advice, information or evidence relevant to the litigation.
In Hong Kong, the fundamental human right to ‘confidential legal advice’ is guaranteed by Art.35 of the Basic Law and affirmed by case law. As between a lawyer and a client, legal professional privilege respects the interests of justice by protecting confidential communications made for the purpose of obtaining legal advice from being disclosed. The privilege protection extends to both in-house counsel and lawyers in private practice.
As those working as in-house counsel are well aware, the role of in-house counsel includes much more than just strict legal advice. Increasingly your input is likely to be sought in respect of commercial matters. As an employee, and an in-house counsel, you juggle a fiduciary duty to act in the interests of the business, to maintain confidentiality over the company’s business and to meet the standards of professional conduct expected of a lawyer in Hong Kong. For in-house counsel, legal advice privilege will only work to protect confidential communications when you act in the capacity of legal advisor. The need to manage the dual nature of the role - as ‘client’ of external lawyers and as legal/commercial advisor for your internal corporate clients - is an added level of complexity in dealing with issues relating to legal advice privilege.
What happened in Citic?
At first instance in Citic, the court applied the Three Rivers (No.5.) narrow definition of ‘client’ and held that only the group legal department (and Board of Directors) were the ‘client’ of external legal counsel. This limited the extent to which legal advice privilege protected documents from disclosure: communications between employees from outside the defined group and external lawyers would not be protected by legal advice privilege. Citic appealed.
In a judgment concerned to uphold the fundamental right to confidential legal advice, the Hong Kong Court of Appeal held that the definition of ‘client’ should not be restricted to the limited definition in Three Rivers (No.5) as this would tend to frustrate the purpose of legal professional privilege. Instead, the ‘client’ will simply be the relevant corporation or institution. Further the dominant purpose test is the proper test to set the limit for legal advice privilege, namely the document must have come into existence for the dominant purpose of obtaining legal advice.
How will this affect you?
The decision in Citic provides additional protection against the compulsory disclosure of confidential communications over which legal professional privilege is claimed. Legal privilege is a ground to oppose the production of documents in arbitration and litigation. The wider definition of client in respect of legal advice privilege ensures that in-house counsel can look to employees throughout the business to collate information for the purpose of obtaining legal advice without losing privilege. Moreover, there are several investigatory bodies in Hong Kong with the right to seize documents, and two more will shortly have such powers under the Competition Ordinance. A corporation faced with an investigation is now in a stronger position to resist inspection of confidential materials on grounds of legal advice privilege.
We consider the Court of Appeal decision a welcome development which demonstrates a pragmatic approach to legal advice privilege in the context of large corporations. That said, there are no grounds for complacency as privilege can only attach to confidential communications. From an in-house perspective, it would therefore still be prudent to discourage the use of wide e-mail circulation lists. Instead, in-house counsel are advised to adopt best practices to minimise circulation groups, to keep written communications to a minimum and provide legal advice separately from other issues so as to ensure that the dominant purpose test is satisfied.