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In-house counsel and legal professional privilege

1 October 2014
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Over the years this has been extended beyond communications made for the purpose of litigation to all communications made for the purpose of giving or receiving advice.

For many years the leading authority on the issue of privilege and in-house counsel was the English case of  Alfred Crompton Amusement Machines Limited v Commissioners of Customs and Excise. It is worth quoting the words Lord Denning at some length, but bearing in mind that he wrote in 1972:

“The law relating to discovery was developed by the Chancery Courts in the first half of the 19th Century. At that time nearly all legal advisors were in independent practice on their own account. Nowadays it is very different. Many barristers and solicitors are employed as legal advisors, full time, by a civil employer. Sometimes the employer is a great commercial concern. At other times it is a government department or a local authority. …In every case these legal advisors do legal work for their employer and for no one else. They are paid, not by fees for each piece of work, but by a fixed annual salary. They are, no doubt, servants or agents of the employer. For that reason the Judge [Lord Denning was delivering judgment in an appeal] thought that they were in a different position from other legal advisors who are in private practice. I do not think this is correct. They are regarded by the law as in every respect in the same position as those who practice on their own account. The only difference is that they act for one client only, and not for several clients. They must uphold the same standards of honour and of etiquette. They are subject to the same duties to their client and to the Court.

They must respect the same confidences. They and their clients have the same privileges. …There are many cases in the books of actions against railway companies where privilege has been claimed in this way. The validity of it has never been doubted. I speak, of course, of their communications in the capacity of legal advisor. It does sometimes happen that such a legal advisor does work for his employer in another capacity, perhaps of an executive nature.

Their communications in that capacity would not be the subject of legal professional privilege. So the legal advisor must be scrupulous to make the distinction. Being a servant or agent too, he may be under more pressure from his client. So he must be careful to resist it. He must be as independent in the doing of right as any other legal advisor. It is true….that “the system is susceptible to abuse”, but I have never known it abused. …There is a safeguard against abuse. It is ready to hand. If there is any doubt as to the proprietary or validity of a claim for privilege, the Master or the Judge should without hesitation inspect the documents himself so as to see if the claim is well-founded, or not.”
There are at least two questions which remained unanswered by this judgment.

Firstly, must the in-house legal advisor be admitted to practice in the country in question, and be a member of the relevant professional body? If not, why would Lord Denning have said that such advisors “must uphold the same standards of honour and of etiquette” and be “subject to the same duties to their client and to the Court”.

Secondly, can privilege attach only to communications between that legal advisor and his or her employer, and to no other companies, such as, for example, other companies within a group?

The first question was resolved in both England and Australia this year. The courts in those countries confirmed that privilege would attach to communications between a foreign qualified lawyer, employed as an in-house legal advisor, and his or her employer. In the recent Australian judgment, the court re-enforced the principle that legal professional privilege is the privilege of the client, not the lawyer. Therefore to hold that the privilege may be lost simply because a lawyer is qualified outside Australia would be contrary to this sentiment.

The court found that it was in the public interest for clients to pursue legal advice without fearing disclosure, but it was not in the public interest that such a privilege should not exist because the legal practitioner, although admitted to practice elsewhere, was not admitted to practice in Australia.

In regard to the second question, whether privilege would attach only to communications between an in-house legal advisor and his or her actual employer, we are unaware of any cases dealing with this specific point. Whilst Lord Denning’s judgment seemed unequivocal, and to limit privilege to communications between the legal advisor and his or her actual employer (“the only difference is that they (in-house legal advisors) act for one client only, and not for several clients”) it is doubted that this limitation would be applied by our Courts, and that they would uphold the view that legal professional privilege would attach to statements between an in-house legal advisor and any company within a group which he or she is asked to advise on a professional basis.