Going it alone? Neil Swift & Nicholas Querée highlight a further common law decision criticising Three Rivers (No 5) in the context of regulatory investigations
Legal professional privilege (LPP) is acknowledged as a fundamental right in all enlightened systems of jurisprudence. Courts in this and other common law jurisdictions recognise two distinct specie of LPP. First, litigation privilege, protecting from compulsive disclosure communications made for the dominant purpose of providing legal advice between a lawyer, client and third parties, where some contentious dispute in reasonably in prospect. Second, legal advice privilege, which protects communications between lawyer and client made for the purpose of giving (or receiving) legal advice. The scope of legal advice privilege in England and Wales has for some years been restricted following the decision of the Court of Appeal in Three Rivers District Council and Others v The Governor and Company of the Bank of England [2003] EWCA Civ 474, [2003] All ER (D) 59 (Apr) (Three Rivers No 5). A recent judgment from an appellate court in Hong Kong has added further weight to existing criticisms of that decision, and commended a more practical, expansive approach to be adopted where a corporate entity seeks to claim legal advice privilege over internal communications produced by its employees or agents.
Identifying the client
When dealing with an individual, identifying the client for the purposes of legal advice privilege will be straightforward. It may, however, prove complex when considering the position of corporate entities who can only act through their officers and employees, and more complex still when considering the position of larger, modern company structures. The issue is one of practical significance.
“Unless litigation is sufficiently in prospect at the time, the evidence gathering process may not be entirely protected by LPP”
Consider the example of an internal investigation. Unless litigation is sufficiently in prospect at the time, the evidence gathering process may not be entirely protected by LPP. Unless produced by the client—however identified—for the purpose of seeking legal advice, or the corporate’s legal advisors, potentially sensitive work product may be susceptible to disclosure, perhaps to a regulator, or adversary in civil litigation, at some later stage.
Three Rivers (No 5)
In England, the test for identifying the client in the corporate context for the purposes of providing legal advice is to be found in Three Rivers (No 5) . That case concerned whether legal advice privilege extended to communications between employees of the Bank of England and a dedicated group with the bank (the Bingham Inquiry Unit, or BIU), set up to deal with the Bingham Inquiry into the collapse of BCCI. The first instance judge, Tomlinson J, had held that legal advice privilege would extend to any communications produced for the dominant purpose of giving (or seeking) legal advice. The result was that the communications between the bank’s employees, and the BIU, were protected.
The Court of Appeal overturned that ruling, holding that LPP could only extend to communications between lawyer and client, and, importantly, that the client group only included those mandated to deal with external lawyers to give instructions and receive legal advice. Although the decision was subject to appeal, despite a sustained attack on the Court of Appeal’s narrow definition of client by the Law Society (as intervenor) and others, the House of Lords declined to clarify the position.
Following Three Rivers (No 5) , information provided by an employee to a corporate’s lawyer, or to the client group within the corporate, will not be covered by advice privilege. The effect of Three Rivers (No 5) has been widely acknowledged as unsatisfactory in academic commentary and, significantly, in the courts of other common law jurisdictions. Both the Federal Court of Australia and the Singapore Court of Appeal have declined to follow Three Rivers (No 5) , in Pratt Holdings v Commissioner of Taxation (2004) 136 FCR 357 and Skandinaviska Enskilda Banken v Asia Pacific Breweries [2007] 2 SLR 367 respectively. The US has also rejected a restrictive interpretation of client for the purposes of attorney client privilege in Upjohn Co v United States 449 US 383 (1981).
Citic Pacific
The most recent judicial attack on the reasoning in Three Rivers (No 5) has come from the Hong Kong Court of Appeal in Citic Pacific Limited v Secretary for Justice CACV 7/2012 (29 June 2015). In Citic , the plaintiff had been subject to a compulsive search under warrant by regulatory authorities investigating suspected misconduct in the foreign exchange market. A substantial quantity of material had been seized, of which some the plaintiff argued was covered by legal professional privilege, including legal advice privilege. In considering whether the material was so subject, the Hong Kong Court of Appeal grasped the opportunity to consider whether the reasoning in Three Rivers (No 5) was satisfactory, in particular in relation to its practical effects when considering internal communications between a corporate entity’s employees.
The Hong Kong Court of Appeal held that the approach adopted in Three Rivers (No 5) was unduly restrictive, and should not be followed in Hong Kong. This was because Three Rivers (No 5) failed to protect the evidence gathering process which was itself a necessary precondition to giving instructions and receiving legal advice. “Lawyers,” the court stated, “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”.
The Hong Kong Court of Appeal acknowledged that, in the corporate context, the information necessary for giving instructions or receiving advice would invariably have to be acquired by the management from employees in different departments or at various levels of the corporate structure. The question was not whether or not they formed part of the client group, as the English Court of Appeal had suggested in Three Rivers (No 5). Rather, the better test was to ask, as Tomlinson J had done in that case at first instance, whether the dominant purpose of the communication was of giving (or seeking) legal advice. That test, the Hong Kong Court of Appeal held, was more than capable of confining claims to LPP within their proper limits.
The future for Three Rivers (No 5)
The decision in Citic Pacific highlights, again, the practical difficulties posed by Three Rivers (No 5) , where the challenges of large scale internal investigations or regulatory inquiries intersect with modern corporate entities. That the issue has not received further intervention by the courts in this jurisdiction may be a consequence of a pragmatic approach to Three Rivers (No 5) adopted by investigative and regulatory agencies, or a more generous approach to when litigation may be considered sufficiently in prospect to protect communications with employees or agents outside the corporate client group. If and when this uneasy peace breaks down, and an opportunity presents itself to revisit these issues, it is to be hoped that appellate judges here think practically, follow their counterparts in other common law jurisdictions, and dispense with the test in Three Rivers (No 5) for once and for all.
Neil Swift, partner, & Nicholas Querée, associate, Peters & Peters Solicitors LLP (nswift@petersandpeters.com; nqueree@petersandpeters.com; www.petersandpeters.com)
