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Legal Update

Court of Appeal Adopts a Broader and More Generous Interpretation of “Client” for Legal Advice Privilege

28 July 2015
Mayer Brown JSM Legal Update

On 29 June 2015, the Court of Appeal handed down judgment in the case of Citic Pacific v. Secretary for Justice1 and rejected the narrow definition of “client” found in the leading English Court of Appeal case on legal advice privilege, Three Rivers (No.5)2.

The Court of Appeal preferred the liberal approach to defining “client” for protection of legal advice privilege and confirmed the dominant purpose test was the proper test for such a claim. The Court also offered some guidance regarding the proper procedure for handling future claims of legal advice privilege.

Background

In the leading decision of the English Court of Appeal in 2003, Three Rivers (No.5), it was held that the protection of legal advice privilege was only available to a narrowly defined classification of “client”, comprising of the group of core individuals responsible for obtaining legal advice on behalf of a corporation, and typically confined to the directors and the in-house lawyers of the corporation.

In effect, corporations would only enjoy legal advice privilege if the correspondence and documents were sent to/from this select group of individuals of the corporation and their lawyers. All other relevant communications and materials made with or by “third parties” in the organisation would be outside the scope of legal advice privilege, even if they were prepared for the purpose of obtaining legal advice for the corporation.

Although the decision was controversial and widely criticised, it was expected to be applicable in Hong Kong. Accordingly, at the Court of First Instance hearing of the Citic Pacific case in Hong Kong, Wright J adopted the narrow interpretation of “client” from Three Rivers (No.5). In particular, it was held that a qualified solicitor of Citic Pacific who was in the Company Secretariat Department was still classified as a “third party” and his communication with external lawyers was not protected by legal advice privilege.

Court of Appeal Decision

On appeal, the Court of Appeal disagreed with the adoption by the Court of First Instance of the narrow definition of “client” as the proper limit for legal advice privilege. Ultimately, it held that the right to confidential legal advice, as provided under Article 35 of the Basic Law, requires that all relevant materials produced for the dominant purpose of obtaining legal advice by any staff members of the corporation should be afforded the protection of legal advice privilege.

Such right to confidential legal advice is meaningless if only communications in respect of the advice involving a select few individuals of the corporation is protected rather than the entire process being confidential. This is particularly relevant in the context of a corporation because the necessary information for seeking legal advice is frequently required from different employees in various departments of a corporation. In turn, the restrictive approach would limit a corporation’s ability to obtain meaningful legal advice because corporations would need to take into account the risk of possible disclosure of such materials in the future and would be discouraged from providing any sensitive materials to their legal advisors.

This welcome decision of the Court of Appeal serves to confirm the broad scope of legal advice privilege for corporations, firmly entrenching the right of corporations in Hong Kong to obtain legal advice under the Basic Law.

Judicial Guidance on Procedure in Disputes of Legal Privilege

The Court in the Citic Pacific case was asked to examine and assess a large volume of documents in respect of which the availability of privilege was challenged, the Court of Appeal found without proper assistance from the parties. To prevent a repeat of such a time-consuming and arduous exercise for the Court in the future, the Court of Appeal provided the following guidelines for future disputes in respect of legal privilege:

  1. The burden rests on the person claiming privilege to clearly identify the materials which are the subject matter of his claim and specify the basis and the context of how the item is privileged, because blanket claims of privilege will be rejected by the Court;
  2. The person claiming privilege should strongly consider giving a limited waiver for specified personnel or an independent counsel appointed by the other side to inspect the disputed materials; and
  3. Both parties should consider instructing an independent lawyer to resolve disputes on privilege without prejudice to their right to bring the dispute to Court if the matter remains unresolved by such independent lawyer.

Implications

The Citic Pacific case provided the perfect opportunity for the Hong Kong Court of Appeal to clarify Hong Kong’s treatment of the controversial English decision of Three Rivers (No.5) regarding legal advice privilege. The Court of Appeal seized the chance to reject the narrow interpretation of “client” and in so doing to protect the fundamental right to seek confidential legal advice pursuant to the Basic Law of Hong Kong.

Corporations in Hong Kong will be delighted with the Court of Appeal’s decision, as the decision relieves corporations of the need to very narrowly draw the group of individuals who may safely be involved in preparing and giving disclosure of confidential information for the purposes of obtaining legal advice.

It remains to be seen whether this landmark Court of Appeal decision will be subject to further appeal.


1 CACV 7/2012, 29 June 2015

2 Three Rivers District Council v. Governor and Company of the Bank of England (No.5) [2003] QB 1556

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