Proctor : March 2017
24 PROCTOR | March 2017 Down to business with legal privilege Practical considerations for in-house counsel The protection and maintenance of legal professional privilege presents an ongoing challenge for in-house lawyers. Clients often don’t sufficiently understand the concept, or its importance, which can result in inadvertent loss or waiver of privilege. Most organisations will be involved in litigation in some capacity at some point, whether as an active party or a third party from whom documents are subpoenaed. They may also find themselves the subject of a regulatory investigation. Being forced to disclose, for example, advice to the effect that your client has breached a contractual obligation or highlighting the deficiencies in a case could be extremely damaging to a business both in financial and reputational terms. This article aims to provide practical guidance on how to protect privilege in an in-house context. A quick refresher Legal professional privilege is a fundamental concept in Australian law and a creature of both common law and statute. It protects communications to which it attaches from disclosure to courts, third parties and regulators. It can apply to communications between lawyer and client, 1 as well as other communications made in connection with giving or receiving legal advice. 2 In order for a communication to be the subject of legal professional privilege, it must be: • confidential, and • made for the dominant purpose of either seeking legal advice or for use in legal proceedings, whether existing or anticipated (the ‘dominant purpose test’. 3) What’s different about in-house lawyers? There has been much judicial discussion about the differences between in-house lawyers and those engaged on a more traditional retainer basis in the context of privilege.4 It is established law in Australia that communications between an in-house lawyer and their employer or client may be the subject of legal professional privilege, provided the lawyer is giving advice in his or her professional capacity as a lawyer, that is, legal and not commercial advice, and in so doing exercising their own independent judgement. In-house lawyers are commonly called on to give advice of a commercial nature, in addition to legal advice. Tamberlin J recognised the difficulties this can present in determining the purpose of a communication in Seven Network Limited v News Limited at :5 “[T]here is no bright line separating the role of an employed legal counsel as a lawyer advising in-house and his participation in commercial decisions. In other words, it is often practically impossible to segregate commercial activities from purely ‘legal’ functions. The two will often be intertwined and privilege should not be denied simply on the basis of some commercial involvement.” Whether or not an in-house lawyer is performing a legal function will depend on the context and, most importantly, the purpose of the communication in question. Practical tips Although the functions of an in-house lawyer may not be entirely legal in nature, when giving advice in your capacity as a legal advisor, it will assist in establishing that the advice given is legal advice, where it is given separately from commercial advice. When dealing with a mix of legal and commercial issues, it is important to consider the purpose of the communication, since this is fundamental to the existence of privilege. Consider whether the legal and commercial advice should be separated into two emails or letters to protect the privilege attached to the legal component, and ensure the document containing legal advice is more formal and confined to the relevant issues. Legal professional privilege will only attach to advice provided by an in-house lawyer if they have the requisite degree of independence. Independence requires in-house counsel to act, “independently of undue pressure from their employer”,6 and in-house lawyers should ensure that their employment conditions (including lines of reporting and delegation) are not inconsistent with the Australian Solicitors Conduct Rules 2012 or the holding of a current practising certificate (NB: By law, in-house lawyers must hold current practising certificates. 7 ) Many legal departments use independence statements or policies to assist in demonstrating their independence. This informs the business about the functions of the legal department and highlights lawyers’ ultimate duty as officers of the court. It is also highly advisable for in-house legal teams to enshrine this independence in employment contracts, including specifying that an in- house lawyer cannot be directed to change legal advice or act in a manner inconsistent with their fundamental duties. It is important that the head of the legal department has direct access to the CEO, the board, and other executives when appropriate, to ensure advice is able to be given freely and without the possibility of being tainted by influence from superiors. It is critical that the legal department is able to demonstrate an absence of interference by management.