Hong Kong Court of Appeal rejects the narrow definition of "client" in Three Rivers (No.5) and adopts a more liberal approach for protection of legal advice privilege
07 July 2015
In a welcome decision handed down last week, the Hong Kong Court of Appeal ("Court") rejected the narrow definition of "client" adopted in Three Rivers (No.5), the leading but controversial English Court of Appeal case.
The Court adopted a more liberal approach for protection of legal advice privilege under Hong Kong law, and confirmed the dominant purpose test as the correct test.
The Court also gave guidance on the proper procedure to be adopted when a dispute arises over claims of privilege.
The full text of this latest decision in Citic Pacific v Secretary for Justice can be found here.
The 2003 decision of the English Court of Appeal in Three Rivers (No 5) essentially held that internal communications between employees of a company who are not members of the core client team (typically in-house lawyers and certain directors) would not be protected by legal advice privilege, even if such communications were for the purpose of obtaining information for legal advice. Such non-core employees would be equated with third parties for the purposes of legal advice privilege. The distinction between legal advice privilege and litigation privilege was noted.
This decision has not been without criticism but has been widely viewed as likely to be followed in Hong Kong until now.
In its judgment last week, the Court disagreed that the English narrow definition of "client" should be adopted as the proper limit for legal advice privilege.
The Court noted the reality of today's corporations, where necessary information may have to be acquired by management from employees in different departments or various levels of a corporate structure, in order to provide suitable instructions to lawyers.
The whole process should be protected by privilege, as lawyers must have the relevant information from their clients before proper advice can be given. It would be meaningless to have a right to confidential legal advice if the protection is confined only to communications setting out the legal advice.
While documents generated in the course of a transaction or event are not protected by legal advice privilege, "the processing of such knowledge and the reduction of such knowledge into a documentary form for the purposes of seeking legal advice (whether for litigation purpose or for non-litigious purpose) is different."
Privilege should cover documents created by a client for the purpose of obtaining advice even though it contains factual information, including preparatory material.
The Court concluded that instead, the dominant purpose test was to be adopted: "an internal confidential document, not being a communication with a third party, which was produced or brought into existence with the dominant purpose that it or its contents be used to obtain legal advice is privileged from production."
Procedure when privilege disputed
In the present case, the Court was asked to examine and assess a large number of documents over which privilege was disputed, without proper assistance of the parties. On account of the unsatisfactory nature of the procedure, the Court set out guidelines for future disputes.
The guidelines include:
1. a requirement that the person claiming privilege (the "Claimant") properly identify the materials, specify the nature of the privilege claimed and provide a supporting statement setting out the basis of the claims and the full factual context;
2. the Claimant must consider giving a limited waiver for specified personnel from the other side and/or an independent lawyer to examine the documents;
3. further detailed steps to be followed in the event the Court is asked to give a determination.
This is a welcome re-examination of the decision in Three Rivers (No 5), which has caused concern due to the limitations it placed on the protection given by legal professional privilege to companies.
This ruling should assist companies carrying out internal investigations with the comfort that relevant internal communications will be afforded the necessary protection of legal professional privilege.
Counsel, Hong Kong
T +852 2840 5079
 Three Rivers District Council v Governor and Company of the Bank of England (No 5) [ 2003] QB 1556
 CACV7/2012, 29 June 2015
 para.44 Citic Pacific, supra.