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08 Dec 2011

Privilege and in-house counsel - Tips to ensure privilege applies

by Karen Ingram, Danielle Briers

The challenges for in-house counsel are to ensure privilege attaches – and stays attached.

With organisations increasingly relying on their in-house legal teams, and in‑house counsel taking on more commercial responsibilities, it has never been more important to understand how legal professional privilege applies to work performed by in-house counsel.

This is the first in a two-part article on legal privilege, with a focus on tips for in-house counsel. In this first part, we outline the principles governing legal privilege (particularly in the case of in‑house advice), and give some practical tips for establishing privilege in communications between an organisation and its in-house legal team.

Legal professional privilege

Broadly speaking, legal professional privilege applies to confidential communications created for the dominant purpose of a client obtaining legal advice, or for use in actual or anticipated litigation.

Particular issues arise in relation to documents prepared by in-house counsel. In-house counsel often have legal and non-legal responsibilities (particularly if they have a dual role, such as general counsel / company secretary). Privilege will only apply to work performed by the in-house counsel in their legal capacity.

Even where in-house counsel are clearly acting in their legal capacity, privilege will only apply if they are sufficiently independent from the organisation to be truly acting as an independent legal adviser. For example, in Rich v Harrington (2007) 245 ALR 106, the Federal Court held that there was no privilege in advice given by the general counsel of PricewaterhouseCoopers, where she was also a partner of the firm and therefore a likely respondent to the claim on which she was advising.

Tips for in-house counsel to ensure privilege attaches to your work product

There are some easy steps that in-house counsel can (and should) take to maximise the likelihood their legal advice will be privileged.

1. Keep a current practising certificate

It is prudent to keep a current practising certificate, as this will help to demonstrate you are acting in a professional legal capacity and have the necessary independence from the organisation you are advising (which is also likely to be your employer). While not fatal to a claim for privilege, not having a practising certificate can make it easier for a court to infer that you perform non-legal work and were performing such work when making the communication in question.

2. Don’t attempt to wear two hats at once

If you have both legal and non-legal roles, keep those roles as separate as possible, or you risk your legal advice being viewed by a court as commercial advice to which privilege does not apply. Only mark a document "privileged" when you are genuinely performing your legal function – overuse of the "privilege" label can diminish its effect when used in communications to which privilege genuinely applies.

3. Keep legal and non-legal communication separate

Keeping legal and non-legal communications separate helps minimise any risk that the legal purpose will not be the dominant one in any document which deals with legal matters. It also makes it clearer to readers that the document dealing with legal matters is privileged, and thereby reduces the risk of inadvertent disclosure of the document (which could lead to a waiver of privilege).

4. Document the dominant purpose of the advice

When commissioning a document from a third party for the dominant purpose of actual or anticipated litigation, privilege will not apply unless the organisation (not just the in-house counsel) had that as its dominant purpose – see, for example, Sydney Airports Corporation v Singapore Airlines Ltd [2005] NSWCA 47. Any request for such a document should be set out in writing from the board or a senior executive of the organisation to the in-house counsel, and should state that the document is being sought for the relevant (legal) dominant purpose. Subsequent use of the report should also be consistent with that purpose.

Once privilege applies to a document, it is crucial not to do anything inconsistent with the confidentiality of the document, as this could waive privilege. In the next issue we'll discuss the principles relating to waiver of privilege, and give some practical tips to help organisations avoid a waiver.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.