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Serious hole in the new Evidence Act removes privilege in foreign legal advice
The Ministry of Justice's failure to use the machinery of the new Evidence Act means that legal advice from non-New Zealand and Australian lawyers will not be protected by legal privilege in New Zealand proceedings. The implications of this hole in the statutory regime are alarming.
Under the new Act, legal professional privilege in New Zealand is not automatically extended to overseas lawyers, as was the case under the common law. The hole arises because the new Evidence Act extends legal professional privilege only to overseas practitioners if they have been specified in an Order in Council. The legal community had been expecting that there would be a broad extension to lawyers in overseas jurisdictions and had been proceeding on the assumption that Orders in Council would be made recognising "overseas practitioners" in all jurisdictions recognised by New Zealand. However, the Ministry of Justice has indicated that it currently has no plans to designate any overseas jurisdictions.
This means, for example, that BP's English legal advice is not privileged before a New Zealand court, and that Lion Nathan's legal advice obtained in the United States or Japan similarly must be disclosed before a court in New Zealand if it is relevant to that proceeding. Accordingly, New Zealand businesses and individuals obtaining overseas legal advice do not have the benefit of privilege and, even more alarmingly, the absence of an Order in Council means they have been stripped of their right to claim privilege in existing advice.
The lack of privilege has very serious implications for businesses and individuals obtaining legal advice from foreign lawyers – especially in commercial transactions or international regulatory inquiries. So where, for example, a company requires Samoan or Californian legal advice relating to the exporting of goods to those jurisdictions, and there are proceedings in New Zealand in relation to the goods, that advice will not be privileged. The courts have long acknowledged that clients are not likely to communicate candidly with their legal advisers if their communications can be used against them in court proceedings. Communications between lawyer and client are therefore "privileged" from being produced in court. The Privy Council has even gone so far as to describe this privilege as fundamental to the administration of justice.
However, the Ministry of Justice says it must first vet the overseas jurisdictions to see whether their lawyers meet standards it will develop to entitle advice to have legal professional privilege before the New Zealand courts. As a result, the only overseas lawyers covered by the new Evidence Act are lawyers and patent and trade mark attorneys from Australia. It is extraordinary that New Zealand would pass judgement on the professional and ethical standards of foreign lawyers on a case by case basis. New Zealanders and the New Zealand legal community would be justifiably alarmed if other jurisdictions sought to abrogate privilege in legal advice provided by New Zealand lawyers in the context of foreign proceedings in the manner that the new Evidence Act does for foreign legal advice in New Zealand proceedings.
In summary, the effect of the Act is that, for the purpose of preparing for court proceedings:
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there is a legal advice privilege for communications in the course of obtaining professional legal services from a New Zealand or Australian lawyer; and
- there is a litigation privilege for communications between a New Zealand lawyer and a third party, and between a client and a third party; and information compiled or prepared by the client, New Zealand lawyer, or a third party under instructions from the client or New Zealand lawyer for the dominant purpose of preparing for a proceeding in a New Zealand court.
The effect of the Act - combined with the absence of a suitable Order in Council - is that:
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there is no legal advice privilege for communications between a client and a foreign lawyer (other than an Australian lawyer); and
- although there is no legal advice privilege for communications between a client and a foreign lawyer, there may be a litigation privilege - but only where the communications between the client and the foreign lawyer occurred for the dominant purpose of assisting a New Zealand lawyer in relation to a proceeding in a New Zealand court.
This difficulty only arises over the introduction of legal advice in court proceedings. The normal common law rules will continue to apply outside of court proceedings. For example, the normal test for legal professional privilege will continue to apply when resisting a notice or search warrant from a regulator, or in an arbitration.
If left unresolved, the impact on New Zealand's reputation in the international business community could be considerable and the risk to investment cannot be overlooked. Because of the importance of this matter, we have written to the Secretary of Justice requesting that the matter be addressed with all urgency.
