Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd and Others and Other Suits

• Jurisdiction: Singapore
• Judgment Date: 08 March 2007
• Date: 08 March 2007
• Docket Number: Civil Appeals Nos 17, 18, 19 and 20 of 2006
• Court: Court of Appeal (Singapore)

Skandinaviska Enskilda Banken AB (Publ), Singapore Branch

Plaintiff

and

Asia Pacific Breweries (Singapore) Pte Ltd and other appeals

Defendant

[2007] SGCA 9

Chan Sek Keong CJ

and

Andrew Phang Boon Leong JA

Civil Appeals Nos 17, 18, 19 and 20 of 2006

Court of Appeal

Evidence–Documentary evidence–Private documents–Draft reports by lawyers and accountants commissioned by directors of company after discovery of fraud on company perpetuated by company's employee–Defrauded banks bringing action against company and seeking order for disclosure of draft reports–Whether draft reports protected by legal advice privilege and/or litigation privilege–Whether privileged information forming integral part of draft reports–Whether court should inspect draft reports to assess whether privileged information contained therein–Sections 128, 131 Evidence Act (Cap 97, 1997 Rev Ed)

Between 1999 and September 2003, one Chia Teck Leng (“Chia”), who was employed by Asia Pacific Breweries (Singapore) Pte Ltd (“APBS”) as its finance manager, had used APBS's name to obtain credit and loan facilities from four foreign banks (“the appellant banks”). On 2 September 2003, officers from the Commercial Affairs Department of the Singapore Police Force (“CAD”) visited the premises of Asia Pacific Breweries Limited (“APBL”), the parent company of APBS, to meet with senior officers of APBL. CAD informed them that Chia had used bank accounts fraudulently opened in the name of APBS by using forged documents and resolutions to borrow money for his own use.

After writing to the appellant banks to ascertain if there had been accounts opened in its name (by Chia of which it had no prior knowledge), APBS requested for all account-opening documents and bank statements in its name, and instructed the appellant banks to immediately suspend operation of the unauthorised accounts until further notice.

On 4 September 2003, a special committee was constituted by APBL's board of directors (“the Special Committee”). The Special Committee immediately appointed PricewaterhouseCoopers (“PWC”) and Drew and Napier LLC (“D&N”) and made an announcement on MASNET (“the first MASNET announcement”) in which the APBL announced that PWC and D&N had undertaken to identify the nature of the unauthorised transactions, quantify their financial impact, assist the company in taking the necessary action to prevent such unauthorised transactions and to conduct a review of the system of internal control and procedures to prevent the occurrence of such unauthorised transactions in the future. On 24 September 2003, APBL released a second MASNET announcement (“the second MASNET announcement”) in which it was noted, inter alia, that APBS had sought legal advice on the claims and had been advised that it had legal defences, and accordingly had instructed D&N to contest the claims by the appellant banks vigorously.

Preparation of the PWC draft reports pursuant to the first MASNET announcement ceased sometime in late 2003 and a final report was never issued. In early March 2004, the appellant banks made an unsuccessful application for pre-action discovery against APBS, seeking disclosure of documents including the PWC draft reports. In September 2004, the appellant banks commenced this action against APBS and subsequently made applications for specific discovery. The assistant registrar ordered that the PWC draft reports be produced by APBS as they were not privileged information. On appeal, the High Court reversed the assistant registrar's decision on the ground that the PWC draft reports were protected by both legal advice privilege and litigation privilege. The appellant banks appealed against the High Court's decision.

Held, dismissing the appeal:

(1) Section 128 of the Evidence Act (Cap 97, 1997 Rev Ed) (“the Act”) read with s 131 of the Act made it clear that the full effect of the legal advice privilege was that the client was protected from having to disclose to any other party any legal advice which he had obtained from his legal adviser, whether he was an advocate or a solicitor. In that connection, it was implicit that the nature of the business or enterprise involved in a client obtaining legal advice from a lawyer had to have the element or quality of confidentiality in the communication to the lawyer or the advice given to the lawyer: at [32], [33] and [35].

(2) There was no inconsistency between s 128 of the Act and the English Court of Appeal decision of Three Rivers District Council v Governor and Company of the Bank of England (No 5) [2003] QB 1556 (“Three Rivers No 5”). While Three Rivers No 5adopted an exceedingly narrow meaning of a “client” for the purposes of legal advice privilege, it did not lay down a general principle that all communications between a company and its legal advisers had to be made by a specially-appointed committee or that no communication made by an employee to the company's legal adviser was privileged. Three Rivers No 5 had to be, instead, read in the context of the court's finding that only the unit set up to deal with all matters relating to the inquiry in that case had been authorised to communicate with the bank's solicitors. Accordingly, as Three Rivers No 5 represented good law in the light of the relevant provisions of the Act, legal advice privilege at common law was not inconsistent with the parameters of s 128 of the Act: at [36], [37], [39], [41] and [42].

(3) As legal advice privilege was concerned with protecting confidential communications between lawyers and clients, and litigation privilege was concerned with protecting information and materials created and collected for the dominant purpose of litigation, there were a number of operational differences between the two. First, legal advice privilege existed regardless of whether litigation was contemplated, though it did not apply to communications by third parties to the solicitor unless they were made to the solicitor as agent, as a conduit, for the client. Second, litigation privilege applied to every communication, whether confidential or otherwise, as long as it was for the purpose of litigation, including communications from third parties, whether or not they were made as an agent of the client. However, as the two forms of privilege overlapped, in that if legal advice was sought or given in connection with current or contemplated litigation, the advice would fall into both of the two categories, if it was proved that the communications made by APBS to PWC and D&N (and vice versa) in connection with the joint undertaking under the terms of the first MASNET announcement, were related to contemplated or imminent litigation, then it would follow that such communications would be covered by both legal advice privilege and litigation privilege. Indeed, in that context, the only communications that would not be covered by legal advice privilege would be those which emanated from third parties, and even then only if the decision in Wheeler v Le Marchant (1881) 17 Ch D 675 was preferred over the decision of Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 136 FCR 357 (“Pratt Holdings”): at [43] to [46].

(4) There were two requirements to litigation privilege. First, the threshold question was whether litigation must have been contemplated. For this purpose, it was clear that there was no requirement that the chance of litigation had to be higher than 50% and that satisfaction of the general criterion of a “reasonable prospect” of litigation was sufficient to raise the privilege. The second requirement, related to the purpose for which legal advice had been sought, namely that the dominant purpose for which legal advice had been sought and obtained was for anticipation or contemplation of litigation: at [69] to [71], [73]and [74].

(5) On the evidence, the first draft report could only have been created within a reasonable period after 4 September 2003. In the court's view, the facts of the case supported the factual finding that the dominant purpose of the reports at the time they had been created had been in aid of litigation as there would have been little point in appointing D&N to undertake jointly with PWC the work that was referred to in the first MASNET announcement. Indeed, given that from 4 September 2003, demands and disavowals flew fast and furious between the parties and/or their respective solicitors, it would be reasonable to conclude that by the time PWC and D&N set to work, litigation had gone beyond a reasonable prospect and had become a reality. In this respect, by the time the joint investigation by PWC and D&N really got going, the prospect of litigation and the need to get the best legal advice to mount the best defence in court would have been foremost in the mind of the respondent: at [84], [87], [88] and [97].

(6) While parties should be slow to claim privilege for entire documents where there was only partial or even trifling reference to legal advice or communications leading to the giving or obtaining of legal advice, and/or where the ostensibly non-privileged parts did not play an integral role in the context of the relevant legal analysis, in this case, the legal advice was so embedded or had become such an integral part of the reports that it could not be redacted from them. This was because even if the PWC draft reports did, literally,contain ostensibly non-privileged material, such material would only form the backdrop for the legal advice as to how the respondent should mount the best legal defence against the appellants' claims: at [98] to [100].

[Observation: In Singapore, legal professional privilege was a statutory right enacted in ss 128 and 131 of the Act. As the Act was modelled on the Indian Evidence Act of 1872 (Act I of 1872), which itself had its roots in English law, the court would need to refer to English decisions in order to determine the scope of the said provisions as well as...