Legal professional privilege and in-house counsel

Christine Meechan | Tuesday 15 March 2005

The law of legal professional privilege was very much in the spotlight last year with the English Court of Appeal and House of Lords decisions in Three Rivers District Council v Bank of England.[1]  The House of Lords' affirmation that "presentational advice" was protected by legal professional privilege brought sighs of relief throughout both the commercial world and the legal profession.

The decision by Crispen J in the ACT Supreme Court in Vance v McCormack[2] has received little attention in comparison to Three Rivers but is probably of greater value to in-house counsel as it deals directly with the question of whether communications between in-house counsel and their employer are protected by legal professional privilege.

The plaintiff, Vance, was a former squadron leader in the Royal Australian Air Force (RAAF) who was dismissed, ostensibly on medical grounds in 1998.  Vance believed his dismissal was in fact tied up with the findings of a board of enquiry which had undertaken a review of his performance as the officer in charge of the RAAF base at Butterworth in 1995.

The RAAF was administered by the Department of Defence.  The Department of Defence operated an in-house legal unit called "the Defence Legal Office".  This unit had a staff of 190, including military and civilian "DLOs" – defence legal officers.  The DLOs were all legally qualified and admitted to practice. 

Vance had been represented by two DLOs in the 1995 board of enquiry.  Other DLOs had been involved in providing advice to the RAAF in respect of the board of enquiry and also in relation to Vance's dismissal.

In its list of documents filed in the unjustified dismissal proceedings the RAAF claimed privilege for two particular sets of documents:

• The "Hilton documents" which consisted of communications between the DLOs and Mr Hilton SC, counsel retained to give advice in relation to determination of Vance's employment; and
  
  
• The "DLO documents" which consisted of communications between the DLOs and superior officers which either contained requests for legal advice or responses to those requests.

According to Crispen J, the decisive question was whether as a matter of fact, "the relationship between the lawyers and their employer involved professional relationships which secured to the advice sought or conveyed by the relevant documents an independent character notwithstanding the employment".

In rejecting the claim for privilege for the "DLO documents" but upholding the claim for privilege in respect of the "Hilton documents", Crispen J focused on the nature of the relationship between the DLOs and the RAAF and found that the requisite degree of independence that is the hallmark of a true solicitor client-relationship did not exist.  Crispen J's starting proposition was this:

"If communications with employed lawyers are to be privileged the lawyers must retain the independence required by their professional standing and obligations notwithstanding the employment relationship." 

The emphasis on the need for in-house counsel to maintain independence in relation to their professional work comes through strongly in the Australian authorities which Crispen J reviewed, including the decision of the Supreme Court of Victoria in Downey v O'Connell[3] where the majority noted:

"There are a number of things which are marks or characteristics of a practising solicitor.  The most important of these is an independence of any superior control in the conduct of his professional work and a direct responsibility to the client or person who stands in an analogous relationship to that client."

While all the DLOs who had either created or received the communications in Vance were legally qualified, none of them had current practising certificates.  In making this findings Crispen J placed great emphasis on this, concluding that a DLO could not possibly enjoy a status parallel to that of independent counsel if the DLO was not in fact entitled to practice law:

"In my opinion privilege arises to protect the confidentiality of communications with a legal advisor only when he or she has an actual right to practise not merely when he or she has been admitted…"

The judge stressed that the need to maintain a current practising certificate was not simply a matter of form and that the requirements for practising certificates established by the Law Society were intended to ensure that those entitled to practice remain in good standing throughout their legal careers by demonstrating continued adherence to current ethical and professional standards.

The absence of current practising certificates was the end of the argument as far as Crispen J was concerned but he also went on to analyse the relationship between the DLOs and their alleged "client" (the RAAF) and concluded that even if the DLOs had held current practising certificates, the requisite degree of independence did not exist.

The DLOs operated in a rather unusual environment in that they were governed by the Defence Force Disciplinary Act which made it an offence punishable by up to two years imprisonment for them to disobey an order from a superior officer.  The Judge noted that once lawyers are subject to statutory obligations of obedience which are enforced by criminal sanction, the degree of independence with which they can be expected to undertake their professional role will be limited!

Obviously few in-house counsel will be subject to practising under the shadow of something as intimidating as the Defence Force Discipline Act, but many will work within a culture of "obedience and loyalty", something which Crispen J also found to operate very strongly within the armed forces.  Such was the force of the culture in this case that two DLOs who had acted for Vance in the Board of Enquiry complied without demur to an order that they "handover all files, all papers and all documents in relation to all advice that they may have given to squadron leader Vance".  Crispen J was aghast that the DLOs complied with that request without any protestation or assertion that such documents were privileged.  He noted:

"The most obvious explanation for their conduct is that both officers had been so influenced by the cultural milieu in which they worked that they were effectively unable to make an independent judgment based on legal and ethical duties that should have been accepted without question by any legal practitioner."

Practical implications for in-house counsel

Maintaining a current practising certificate is a fundamental requirement for in-house counsel if they are to assert the professional independence necessary to protect communications with their employer/client.  This may raise difficulties for solicitors qualified in jurisdictions other than New Zealand who are not entitled to obtain a New Zealand practising certificate. 

In these days where a trans Tasman and global corporations are commonplace, New Zealand in-house counsel are often involved in giving advice to corporate divisions or related companies based outside New Zealand.  If they are not qualified to practice in that other jurisdiction, and a challenge is made to privileged claimed for that advice in that jurisdiction, then on the basis of Crispen J's approach a claim for privilege may be difficult to uphold.  Lawyers in the EU, whose 25 member states have different laws in relation to privilege, frequently have to grapple with these "cross border" privilege issues. 

The formal agreement under which an in-house solicitor is employed should be different from the standard form of contract under which other managers are employed.  Ideally, it should contain some reference to the need for counsel to maintain the necessary element of independence, record a requirement for them to maintain their practising certificate and reinforce their obligation to adhere to the ethnical and professional standards established by the Law Society.  The expectation that in-house counsel will also keep abreast of developments in the law and legal professional ethics should also be explicit.

Legal professional privilege cannot be achieved simply by putting the word "privileged" at the head of a document.  The true nature of the role played by counsel creating the document and his or her relationship with the client/employer for whom the document was created will be scrutinised by the courts.  The decision in Vance v McCormack is a timely reminder that the courts will always look at substance rather than form.

 

[1] Three Rivers District Council v Governor and Company of the Bank of England [2004] UK HL 48. 

[2] Vance v McCormack (in his capacity as Chief of Air Force) [2004] ACTSC 78

[3] Downey v O’Connell [1951] VLR 119