Case Note: EXTENDING THE SCOPE OF LEGAL ADVICE PRIVILEGE1
| Date | 01 December 2007 |
| Published date | 01 December 2007 |
| Author | CHIN Tet Yung LLB (London), BCL (Oxford), Dip Econs (LSE); Barrister (Inner Temple); Associate Professor, Faculty of Law, National University of Singapore; |
Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd [2007] SGCA 9
The Court of Appeal (CA) in Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd rendered a thorough re-examination of legal professional privilege (LPP) at common law and statute. Problems arise when the rules of LPP (based as it were on “natural persons” as clients) are applied to corporations claiming privilege especially legal advice privilege. The CA’s decision to consider extending the scope of advice privilege might be in response to modern corporate practices, but it is argued that extending the scope of the privilege following the Australian position may raise more problems than it solves. A re-making of the rules relating to corporate client privilege needs to be formulated.
1 In Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd,2 the Court of Appeal took the opportunity to consider the doctrine of legal professional privilege in the light of significant developments at common law, especially in England3 and Australia.4 In so doing the court took the bold step of effectively
widening the scope of advice privilege,5 and departing from the more conservative approach found in the English case of Three Rivers (No 5)6 as regards the issue whether advice privilege in a corporate environment could be successfully claimed for communications made or generated by third parties (that is, not the client directly or acting for the client as a mere conduit). This is distinct from the other branch of legal professional privilege, namely litigation privilege, where third party communications have long enjoyed the privilege provided they are produced for the dominant purpose of reasonably contemplated litigation. The nub of the issue before the court is well summarised by McCormick:7
The scope of the privilege in the corporate context … has presented an exceptionally troublesome question which is even yet not fully resolved. The difficulty is basically one of extrapolating the essential operating conditions of the privilege from the paradigm case of the traditional individual client who both supplies information to, and receives counsel from, the attorney. Are both of these aspects of the relationship to be protected in the corporate setting, in which the corporate agents in a position to furnish the pertinent facts are not necessarily those empowered to take action responsive to legal advice based upon those facts?
2 The issue before the court was whether draft reports (regarding a massive fraud perpetrated by the financial officer8 of the company9 on four banks) prepared and produced by an accounting firm (jointly with a law firm) attracted both advice and litigation privilege. The trial judge had held that the documents were protected by both advice and litigation privilege.10 The court reached the same conclusion, but disagreed with
parts of the trial judge’s reasoning.11 Particularly pertinent is the disagreement on whether s 128 of the Evidence Act (“professional communications”) and Three Rivers (No 5) are inconsistent with each other on the issue of who is the client for the purposes of advice privilege.12
3 The court held that there was no inconsistency between the provision and the case. It follows that if Three Rivers (No 5) were to apply, the advice privilege claim would fail in that the PWC draft reports would be regarded as not communications by the client to the legal adviser. PWC would on this view be regarded as a third party. The adoption of the test as propounded in Pratt Holdings Pty Ltd v Commissioner of Taxation13 would on the other hand provide a different result, as the Australian Federal Court extended the advice privilege to third party (ie, not agents or representatives of the client) communications where these were for the dominant purpose of obtaining legal advice. The focus of discussion in this note is on the problems of the corporate client in claiming legal advice privilege and on the court’s preference for the Australian position, rather than the narrower view expressed in England.14
4 It is accepted that the statutory provisions (ss 128 and 131) do not stand in the way of accepting either position. As was made clear in the court’s opinion, the provisions are not inconsistent with the common-law and reference can therefore be made to the latter without compromising the integrity of the code.15 Given the findings made by the trial judge and
agreed to by the Court of Appeal, it was not necessary for a decision to be made whether the draft reports were prepared for the sole or dominant purpose of obtaining legal advice. Andrew Phang JA (delivering the judgment of the court) continued:
If as a matter of legal policy it is necessary to ensure that parties do not cloak every piece of evidence with immunity from disclosure, it would be necessary for the courts to find a modus vivendi between the two extremes. It will suffice for the present to observe (in a narrower area of third party communications) that if the approach in Pratt Holdings is adopted, the “dominant purpose” test might, as observed in that case itself, constitute an appropriate safeguard against an overly broad application of legal advice privilege.16
5 Holding that advice privilege could cover third party communications, but restricted to those communications that could be shown to be made for the dominant purpose of legal advice is the modus vivendi proposed by the court. Is this defensible in principle and practice?
6 Many attempts have been made to justify the privilege, seen from the standpoint of the lawyer (protecting the lawyer’s honour and his livelihood) as well as from the client’s (candour, confidentiality, privacy, allowing the client to enjoy rights fully).18 In truth, the privilege presents a paradox: in facilitating communication between client and solicitor, it promotes the administration of justice through free, full and frank disclosure so as to get the best advice, but when a claim for privilege succeeds, it hinders the administration of justice, for relevant evidence might be excluded and the truth-finding process suffers as a result. Thus
the contours of the privilege must be carefully sculpted to strike the right balance in the face of competing interests — and one of the areas in which there appears to be some uncertainty in recent years is that of legal professional privilege in the corporate environment.19 One of the concerns is that in the corporate environment, advice privilege might be used as a means to cover up corporate misgovernance from seeing the light of day, ie, from ever getting to court. If it has that tendency, then the administration of justice would suffer just as much as not having it, if not more.
7 Any extension of the privilege, therefore, should be cautiously attempted, if at all, if the profession is not to be seen as self-interested and self-serving. This is particularly so in an era where the lawyer is required to multi-task and renders advice not strictly on legal matters all the time. A detailed analysis of all these matters lies elsewhere. Suffice it to say that in Skandinaviska, the court seems to have accepted the candour rationale for advice privilege. The candour rationale has been criticised as being more gut-feel (or as McCormick puts it “compelling common sense appeal”20) than capable of demonstrable proof.21 Also, the candour argument does not work for lawyers alone; even financial advisers might profit from a dose of candour from their clients as to their wealth position, let alone more obvious professionals like doctors and priests. So it is not immediately apparent why lawyers should enjoy the privilege to the exclusion of others.
8 On occasions, the forthrightness with which judges and counsel declare the durability and strength of the privilege (as a fundamental right, an essential part of the ‘rule of law’) contrasts sharply with the privilege as seen by others such as doctors, accountants and financial advisers. For example, it was observed by the Director of Fair Trading (UK) that in areas where there are overlaps between professions, such as tax lawyers or financial lawyers and accountants, the privilege provides an unfair advantage to lawyers.22
9 Candour alone cannot justify the advice privilege — it must also be tied closely to the administration of justice, or as put by Taylor LJ (as he then was) in Balabel v Air India23 there must be a ‘relevant legal context’ for the privilege to operate. Taylor LJ was particularly perturbed that “to extend privilege without limit to all solicitor and client communication upon matters within the ordinary business of a solicitor and referable to that relationship [would be] too wide”.24 It might be said that the further one moves away from the core of legal representation —ie, litigation or dispute settlement, and into the penumbra of seeking advice, the more necessary it is to find the “relevant legal context”. Lord Scott in Three Rivers DC v Bank of England (No 6) adopted the language of Taylor LJ and went on to say,
If a solicitor becomes the client’s “man of business”, and some solicitors do, responsible for advising the client on all matters of business, including investment policy, finance policy and other business matters, the advice may lack a relevant legal context. There is, in my opinion, no way of avoiding difficulty in deciding in marginal cases whether the seeking of advice from or the giving of advice by lawyers does or does not take place in a relevant legal context so as to attract legal advice privilege. In cases of doubt the judge called upon to make the decision should ask whether the advice relates to the rights, liabilities, obligations or remedies of the client either...
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