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Three Rivers runs through it - Consequences of applying the dominant purpose test to legal advice privilege

  • Asia
  • Hong Kong
  • Litigation and dispute management

20-02-2020

Introduction

At the end of last month, the English Court of Appeal handed down its judgment in Civil Aviation Authority v Jet2.com (“Jet2”)1. The decision received some attention because it confirmed that the “dominant purpose test” should apply to legal advice privilege (“LAP”) under English law. In other words, the court resolved that in a claim that LAP should protect a relevant communication, the proponent of the privilege must show that communication was created or sent for the dominant purpose of obtaining legal advice.

The purpose of this e-bulletin is not to recount the English Court of Appeal’s decision (see our separate e-bulletin). Instead, it is to consider the extent to which the English Court of Appeal’s decision on this point in Jet2 re-aligns the English and Hong Kong law definitions of LAP.

Prior to the Jet2 decision, there had been a clear distinction between Hong Kong and English law on this point following the decision of the Hong Kong Court of Appeal in Citic Pacific Ltd v Secretary for Justice and Commissioner of Police (“Citic Pacific”) . In Citic Pacific, the Hong Kong Court had expressly declined to follow the English law position regarding the scope of LAP, described in the English Court of Appeal’s decision in Three Rivers District Council v Governor and Company of the Bank of England (No 5) (“Three Rivers (No 5)”)3, and had incorporated a dominant purpose criterion into LAP under Hong Kong law. The decision of the Hong Kong Court in Citic Pacific was broadly welcomed by practitioners, particularly those advising corporate clients (whether as in-house or external counsel), since it provided far greater clarity in identifying the “client” when advising a corporation.

Indeed, one of the grounds to which the English Court referred when reaching its decision in Jet2 that the dominant purpose test should apply for LAP was that other common law jurisdictions, including Hong Kong4, had already incorporated a dominant purpose test in LAP. The English Court recognised that this is “a legal area in which there is advantage in the common law adopting similar principles.”.

Given this perceived advantage, it may seem initially surprising then that the Law Society of England and Wales had sought and was granted leave to intervene in the Jet2 appeal to argue against the incorporation of the dominant purpose criterion into the English law of LAP and that the subsequent decision of the Court is being treated with some caution by practitioners. In fact, these responses to Citic Pacific and Jet2 are not as contrarian as they may seem. Rather, they highlight distinctions that remain between the Hong Kong and English law definitions of LAP, including how those distinctions may affect practitioners.

Background

Under Hong Kong law and English law, there are two strands to legal professional privilege: litigation privilege (“LP”) and LAP.

LP protects confidential communications between a client or lawyer and a third party for the dominant purpose of litigation or other adversarial proceedings which are in existence or in reasonable prospect.

LAP protects confidential communications and documents evidencing those communications between a client and a lawyer made for the purpose of giving or obtaining legal advice whether or not there is existing or contemplated litigation. However, as discussed below, English law and Hong Kong law have diverged on the proper test for LAP. This divergence particularly affects clients that are corporations or other entities which must operate through their employees or other staff.

The difficulty created by the English Courts in Three Rivers (No 5)

In Three Rivers (No 5), the Court of Appeal held that “client” within a corporation means the person who instructs or communicates with external legal counsel.

Following Three Rivers (No 5), only persons tasked with obtaining legal advice are able to conduct privileged communications with external counsel. Internal confidential correspondence between in-house counsel and other employees of the corporation (e.g. for the purpose of fact gathering and collation of information) is excluded from the scope of LAP.

Three Rivers (No 5) has, therefore, posed difficulties for corporations. For example, in-house counsel invariably rely on information from employees in other departments in order to obtain legal advice from external counsel. The decision has been criticised for adopting a restrictive approach in defining the client and using that as the test for LAP.

Rejection of Three Rivers (No 5) by the Hong Kong Court in Citic Pacific

In Citic Pacific, the Hong Kong Court of Appeal considered the difficulty posed by Three Rivers (No 5) and declined to follow it.

Instead, the Hong Kong Court held that in determining the test for LAP, the focus should be on the purpose for which the document came into existence and it was unnecessary, and potentially unconstitutional, to adopt a narrow definition of “client”.

As a matter of Hong Kong law, the client is simply the corporation (including its employees) and LAP protects all confidential internal communications produced or brought into existence for the dominant purpose of obtaining legal advice.

The consequence of this more pragmatic approach is that in Hong Kong the employees of the corporation may be involved in collating relevant material required to obtain legal advice, since the whole process of giving and obtaining legal advice should be protected.

Does Jet2 align English law with Hong Kong law?

In contrast to the Hong Kong Court of Appeal in Citic Pacific, the English Court of Appeal in Jet2, in concluding that a dominant purpose test should apply to LAP, seems primarily to have been concerned with whether multi-addressee emails should be protected by LAP where a number of the addressees were non-lawyers. This was one of the points on which the Law Society intervened, concerned that a dominant purpose test would be overly restrictive by limiting communications that would benefit from LAP.

The Court of Appeal nevertheless concluded that where a multi-addressee email is sent simultaneously to various individuals for their advice/comments, including a lawyer for her input, the purpose(s) of the communication needs to be identified. In this exercise, the wide scope of "legal advice" (including the giving of advice in a commercial context through a lawyer's eyes) and the concept of "continuum of communications" must be taken fully into account. If the dominant purpose of the communication is, in substance, to settle the instructions to the lawyer then, subject to the principle set out in Three Rivers (No 5), that communication will be covered by LAP. That will be so even if that communication is sent to the lawyer herself, by way of information; or if it is part of a rolling series of communications with the dominant purpose of instructing the lawyer. However, if the dominant purpose is to obtain the commercial views of the non-lawyer addressees, then it will not be privileged, even if a subsidiary purpose is simultaneously to obtain legal advice from the lawyer addressee(s). In fact, the Court’s preferred view was to treat multi-addressee communications as separate bilateral communications between the sender and each recipient with the question remaining whether the email’s dominant purpose was to obtain instructions or disseminate legal advice.

The response from the lawyer, if it contains legal advice, will almost certainly be privileged, even if it is copied to more than one addressee.

Applying English law therefore, the reality is likely to be that the dominant purpose test will not assuage practical concerns for corporations in identifying the relevant “client” for the purposes of LAP. Employees who are not specifically authorised to instruct the lawyers are still unlikely to be treated as the client and their employers will still need to exercise caution when seeking legal advice.

The Court of Appeal in Jet2 recognized that Three Rivers (No 5) was out of step with overseas common law regarding the definition of client, but it was not within the Court’s power to overrule Three Rivers (No 5). Therefore, until Three Rivers (No 5) is overruled, there will remain an inherent tension under the English law definition of LAP between the restricted definition of the “client” and the logical consequence of the incorporation of the dominant purpose test as applied by the Hong Kong Court.

This is in addition to the tension under English law as to how far privilege will extend to protect legal advice once disseminated (wide protection) but not the communications necessary to allow lawyers to prepare that advice (limited protection, as a result of Three Rivers (No 5)). This tension is significantly ameliorated under Hong Kong law, since LAP will extend to protect communications between employees of the corporation.

Privilege and third party communications

However, even under Hong Kong law, the question remains whether LAP should extend to communications with third parties for the giving and obtaining of legal advice.

In Citic Pacific, the Hong Kong Court explicitly declined to decide whether communications between lawyers (whether internal or external) and “third parties” (as opposed to the “client”) in order to provide legal advice would also be offered the protection of LAP. The position under Hong Kong law (and English law) remains that, if a lawyer speaks to third parties in order to provide legal advice, those conversations are not privileged. This means that even in Hong Kong the tension between the wider protection potentially given to the dissemination of legal advice versus the process of giving and obtaining legal advice is not entirely resolved.

The dominant purpose test in LAP should not be confused with the test in the context of LP: both Hong Kong law and English law recognize that a confidential communication between a lawyer and his client, or a lawyer or client and a third party which comes into existence for the dominant purposes of litigation is covered by LP and need not be disclosed. The types of communication and documents that may be protected by LP are, therefore, potentially broader than LAP in both jurisdictions.

The importance of a relevant legal context

More reassuringly, the Jet2 decision emphasized the importance of a “relevant legal context” in relation to LAP. In this regard, English law and Hong Kong law (as recognized in Citic Pacific) appear to remain more aligned.

In Jet2, the Court clarified that consideration of LAP has to be undertaken on the basis of particular documents, and not simply the brief or role of the relevant lawyer. However, the Court confirmed that most communications between a lawyer and a client (where the lawyer’s role is as lawyer) will arise in a relevant legal context. A proper assessment of LAP therefore requires a full and comprehensive understanding of the context in which the document was created and the roles of the sender and recipient in such context.

If, for example, the lawyer was not retained in the role of a lawyer, but as a commercial person, the document may still fall within the scope of LAP if a specific legal context (outside the lawyer’s usual brief in that role) can otherwise be ascertained.

However, the Court is unlikely to be persuaded by fine arguments as to whether a particular document or communication falls outside legal advice because, in practice, “the legal and the non-legal” might be so intermingled that severance is impossible. The dominant purpose test applies, but given the wide scope of "legal advice" and "continuum of communications", the Court will be extremely reluctant to engage in the exercise of determining whether, in respect of a specific document or communication, the dominant purpose was the provision of legal (rather than non-legal) advice.

Key takeaways for Hong Kong

  1. LAP can apply to communications with both in-house lawyers and lawyers in independent practice;
  2. In relation to a corporation, the lawyer’s “client” is the corporation itself and not a select group of employees within its corporate legal department;
  3. Internal communications within a corporation are covered by LAP if they came into existence as part of a process in the communication with a lawyer with the dominant purpose of obtaining legal advice;
  4. Communications such as emails sent to multi-addressees will not be protected by LAP simply by copying a lawyer. Even if a subsidiary or ancillary purpose of the communication is to seek legal advice from that lawyer, the communication may not be protected by LAP (especially as regards the copies sent to non-lawyers). LAP will only protect communications created or sent for the dominant purpose of giving or obtaining legal advice;
  5. To ensure requests for legal advice are privileged, clients should maintain written records in relation to the collection of information and the purpose for which information is required to show that the dominant purpose test is met;
  6. LAP does not cover communications between a lawyer and a third party in order to provide legal advice. Third parties may include subsidiaries or shareholders of a client corporation as well as other (non-legal) advisers;
  7. Where a claim for LAP is made, the claimant should provide the relevant legal context on the basis of which privilege is claimed; and
  8. English law may only more fully align with Hong Kong law on LAP if, in due course, the UK Supreme Court overrules the narrow definition of client laid down in Three Rivers (No 5).

1 [2020] EWCA Civ 35
2 [2015] HKEC 1263
3 [2003] QB 1556
4 And other common law jurisdictions such as Australia and Singapore.

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