ARX v Comptroller of Income Tax

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA,Andrew Phang Boon Leong JA,Quentin Loh J
• Judgment Date: 30 September 2016
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 189 of 2015
• Date: 30 September 2016

ARX

and

Comptroller of Income Tax

[2016] SGCA 56

Chao Hick Tin JA, Andrew Phang Boon Leong JA and Quentin Loh J

Civil Appeal No 189 of 2015

Court of Appeal

Civil Procedure — Privileges — Legal professional privilege — Affidavit filed to support claim that suit was not time-barred — Reference made to legal advice having been received — Whether privilege had impliedly been waived — Principles

Civil Procedure — Privileges — Legal professional privilege — Legal advice rendered by in-house counsel in 2008 — Whether legal professional privilege extended to communications with in-house counsel under Evidence Act (Cap 97, 1997 Rev Ed) before passage of Evidence (Amendment) Act 2012 (Act 4 of 2012) — Whether communications with in-house counsel are privileged under common law — Requirements for privilege to be claimed under common law — Whether such requirements satisfied — Section 131 Evidence Act (Cap 97, 1997 Rev Ed)

Civil Procedure — Privileges — Legal professional privilege — Whether state of mind exception to legal professional privilege should be part of Singapore law — Whether it applied on facts

Facts

In 2002, the appellant (‘the Appellant’) restructured its Singapore operations. It incorporated a new subsidiary (‘the Subsidiary’), which acquired the Appellant's interests in most of its other Singapore subsidiaries through a complex financing scheme. This was referred to as the ‘Corporate Restructuring and Financing Arrangement’. Between 2005 and 2007, the respondent (‘the Respondent’) paid approximately $9.6m in tax refunds to the Subsidiary. In 2008, the Respondent formed the view that the Corporate Restructuring and Financing Arrangement was a tax avoidance arrangement and attempted to recover the sums paid out in tax refunds through the assessment of additional sums in tax but was unsuccessful.

On 1 April 2014, the Respondent commenced a suit against the Appellant and the Subsidiary to seek recovery of the tax refunds, relying on, among other things, the law of unjust enrichment. The Respondent applied to serve its writ of summons out of jurisdiction on the Appellant in Malaysia. In a supporting affidavit, Ms Ng, the Respondent's employee, deposed that the Respondent had only concluded that the Corporate Restructuring and Financing Arrangement was a tax avoidance arrangement ‘on or about’ 7 April 2008 so the suit was not time-barred. In this affidavit, Ms Ng made reference to the fact that the Respondent had sought and obtained advice from lawyers from its in-house legal department (‘the Advice’) and that this advice had been received on 3 April 2008.

The Appellant entered an appearance in the Suit and filed an application to seek production of the Advice (‘Production Application’). It argued that (a) communications with in-house legal counsel were not protected by legal professional privilege before the passage of the Evidence (Amendment) Act 2012 (Act 4 of 2012) (‘the 2012 Amendment Act’); (b) the prerequisites necessary for privilege to be asserted under the common law had not been satisfied; (c) even if the Advice was privileged, privilege had been waived by reason of the reference made to it in Ms Ng's affidavit; and (d) privilege had been waived under the so-called ‘state of mind exception’.

The Judge did not order the production of the Advice. He ordered that the Respondent was to elect whether he was relying merely on the fact that the Advice had been given or was seeking to rely upon the contents of the Advice. If it was the former, the Respondent would have to file a supplemental affidavit to confirm that it was not relying on the ‘substance or contents’ of the Advice. If it was the latter, the Respondent would to produce the Advice. Dissatisfied, the Appellant appealed, reprising the same arguments it had presented in the court below and also arguing that the Judge had erred in law by failing to render a decision on the application for production and had, instead, left it to the Respondent to ‘decide for himself’ what the outcome of the application should be.

Held, dismissing the appeal but varying the order made by the High Court:

(1) The EA was enacted in 1893 and it reflected the legal reality which existed then, when almost all legal advisers were in independent practice. Thus, before the EA was amended in 2012, communications with in-house counsel fell outside the ambit of the provisions of the EA which related to legal professional privilege: at [21] and [24].

(2) The common law had long recognised that legal professional privilege extended to confidential communications with in-house counsel. However, this common law rule was not without limits and subject to three conditions: (a) it only applied to communications with legal professionals; (b) the communication had to have been in relation to a professional matter and the in-house counsel concerned had to have been acting independently in rendering the legal advice in question; and (c) the communication had to have been made in confidence: at [25], [27], [28] and [30].

(3) The common law rule that communications with in-house counsel were privileged was wholly consistent with the rationale as well as spirit undergirding the existence of the doctrine of legal professional privilege as it was embodied in the provisions of the EA. Thus, this common law rule applied in Singapore before the passage of the 2012 Amendment Act. The relevant statements in the Parliamentary debates that accompanied the passage of the 2012 Amendment Act were, at best, neutral and even assuming that Parliament might have thought otherwise, this was irrelevant as it was quintessentially the function of the judiciary to state what the law is: at [32], [33] and [42].

(4) The party who was asserting privilege bore the burden of proving that the preconditions necessary for privilege to attach had been satisfied. This was done, in the first instance, by the swearing of an affidavit in which privilege was asserted because the assertion of privilege implied also the assertion that the requirements necessary for privilege to subsist had been satisfied, namely, the communications were made confidentially and the legal adviser had exercised independent judgment in rendering the advice. If the court was not satisfied, it was open to the court to look behind the affidavit to the documents themselves to ascertain if privilege was rightly asserted. There was no presumption that in-house counsel lacked independence: at [43] to [46].

(5) The matters deposed to in Ms Ng's affidavit sufficed to present a prima facie case that the Advice was privileged and the Appellant had not – in response – adduced any material to rebut this prima facie case: at [48] and [50].

(6) Like all rights, privilege might be waived either expressly or, as was more common, impliedly (the latter of which was in issue in the present case): at [51] and [68].

(7) A waiver of privilege was not to be easily implied. A court tasked to determine whether there has been an implied waiver of privilege by reason of a reference made to privileged material should approach the matter by examining all the circumstances of the case including what had been disclosed (the materiality of the information in the context of the pending proceedings); the circumstances under which the disclosure took place (in particular, the position in the authorities appeared to be that disclosures of privileged material during trial almost invariably resulted in a waiver); whether it might be said (albeit only as a relevant factor as opposed to a single test) that the party had ‘relied’ or ‘deployed’ the advice to advance his case; and whether it could be said that there was a risk that an incomplete and misleading impression had been given. The list was not exhaustive, and no one factor was determinative of the issue. Ultimately, the court should consider whether, in all the circumstances of the case, it might be said that – given what had already been revealed – that fairness and consistency required disclosure. This was a fact-sensitive exercise of judgment and the inquiry was objective and not subjective: at [69].

(8) The reference to the Advice in Ms Ng's affidavit was scant. The court could neither make any assumptions as to its contents nor could it rely on it to establish when the Respondent had formed the view that there was a tax avoidance arrangement. The references to the Advice in Ms Ng Affidavit were, for all intents and purposes, neither here nor there. Fairness and consistency did not require disclosure of the Advice: at [72] and [74].

(9) The Judge's intention, in making the order to elect, was that the Respondent should indicate (in advance) whether he wished to rely on the Advice. This was intended to save time and costs. In making the order to elect, the Judge did not intend, as the Appellant submitted he did, to have the Respondent ‘determine for himself’ the outcome of the Production Application: at [79].

(10) On these facts, it would be inconsistent and unfair for the Respondent to rely on the effect of the Advice to advance his case while simultaneously withholding it from disclosure. Thus, the Judge's order was varied to the extent that it would be specified that if the Respondent wished maintain privilege over the Advice, he would not only be unable to rely on the contents and substance the Advice, but also be precluded from relying on its effect. It was also clarified that the reference to the Advice in Ms Ng's Affidavit could not be used to support the contention that the Suit was not time-barred without such use amounting to an implied waiver of privilege: at [83] and [85].

(11) The state of mind exception was a doctrine recognised in some other jurisdictions. It was originally a broad doctrine based on fairness but its ambit had been greatly attenuated. It now provided that there would be an implied waiver of privilege if the holder of privilege, in explaining or justifying his/her state of mind, put...