When does legal professional privilege apply?
The test is whether the communications between a client and a legal adviser came into existence for the dominant purpose of giving or receiving legal advice or for the purpose of existing or anticipated litigation.
Does it apply to in-house counsel?
Confidential communications between in-house private sector solicitors and their employers have been held to qualify for legal professional privilege in many cases but, in each specific case, the decision will be a question of fact. The main issue is whether in-house counsel are sufficiently independent of their employers for a legal adviser-client relationship to exist between them.
Whether legal professional privilege applies to a particular communication is generally determined by whether the communication:
- arises as a result of the employer consulting the employee in a professional capacity.
To be acting in a professional capacity, the legal practitioner must:
- hold appropriate qualifications
- be admitted to legal practice, and
- hold a current practising certificate under the appropriate state or territory legislation.
- is in relation to professional matters
- is made in confidence
- arises from the relationship of lawyer and client
- satisfies the dominant purpose test.
The dominant purpose test is particularly applicable to in-house counsel as:
‘they may be in a closer relationship to the management than outside counsel and therefore more exposed to participation in commercial aspects of an enterprise’ Seven Network Limited v News Limited [2005] FCA 142 at [4]
- is independent advice, and
- the privilege has not been waived.
The main concerns of the courts in extending legal professional privilege to communications by in-house counsel have been:
- if the in-house counsel has a significant commercial or administrative role, or
- if the in-house counsel is vulnerable to pressure from their client as the lawyer-client relationship is an employee-employer relationship as well.
It should be noted that recent trends have been to narrow, rather than expand, the scope of legal professional privilege for in-house counsel. This was demonstrated in the recent case Telstra Corporation Ltd v Minister for Communications, Information Technology and the Arts (No 2) where the Federal Court ordered production of certain advice made by Telstra’s in-house counsel where the independence of the advice had not been established by the evidence presented to the court. The approach suggested by that case is that wherever a claim for privilege is to be made over a communication or document which concerns in-house counsel, it will be necessary to support that claim at the time it is made, by evidence which demonstrates the necessary measure of independence of the legal adviser and their ability to provide impartial legal advice given other roles they have performed within the company.
The Australian Law Reform Commission (ALRC) released a discussion paper on 26 September 2007 proposing clarification of legal professional privilege, including with regard to in-house counsel. The ALRC is proposing that legislation be enacted dealing with the law and procedure governing legal privilege claims. As part of these reforms it is suggested that communications by in-house counsel be identified with details provided to demonstrate the independence of the counsel. Submissions on the discussion paper were due by 1 November 2007.
How is a claim of legal professional privilege maximised?
The relevant time for determining whether legal professional privilege applies is the time when the communication comes into existence. Consequently, in-house counsel should ensure that they are working appropriately now.
In order to maximise the chances of a communication from in-house counsel being subject to legal professional privilege:
- the in-house counsel should be acting as independently as possible
- there should be a clear delineation between their legal and commercial input. This may involve separate communications dealing with different aspects of the same issue which may ensure that more care is taken in presenting the legal and commercial considerations
- an appropriate note should be included on all items that may attract privilege, such as 'Prepared by internal legal adviser for the dominant purpose of providing legal advice', and
- if dealing with a particularly contentious issue, advice should be sought on the best manner of protecting legal professional privilege at the time of considering the issue. In the current climate, this may require outsourcing the advice to external solicitors.
More information
For information regarding possible implications for your business, contact a member of the Financial Services team.