Privilege and confidentiality
Legal advice privilege
Introduction and background
10.6The former “legal professional privilege” is now encapsulated in three sections:
- section 54: privilege for communications with legal advisers (also known as legal advice privilege);
- section 55: privilege and solicitors’ trusts accounts; and
- section 56: privilege for preparatory materials for proceedings (also known as litigation privilege).
10.7Legal advice privilege is covered by s 54 of the Act:
54 Privilege for communications with legal advisers
(1) A person who obtains professional legal services from a legal adviser has a privilege in respect of any communication between the person and the legal adviser if the communication was—
(a) intended to be confidential; and
(b) made in the course of and for the purpose of—
(i) the person obtaining professional legal services from the legal adviser; or
(ii) the legal adviser giving such services to the person.
(2) In this section, professional legal services means, in the case of a registered patent attorney or an overseas practitioner whose functions wholly or partly correspond to those of a registered patent attorney, obtaining or giving information or advice concerning intellectual property.
(3) In subsection (2), intellectual property means 1 or more of the following matters:
(a) literary, artistic, and scientific works, and copyright:
(b) performances of performing artists, phonograms, and broadcasts:
(c) inventions in all fields of human endeavour:
(d) scientific discoveries:
(e) geographical indications:
(f) patents, plant varieties, registered designs, registered and unregistered trademarks, service marks, commercial names and designations, and industrial designs:
(g) protection against unfair competition:
(h) circuit layouts and semi-conductor chip products:
(i) confidential information:
(j) all other rights resulting from intellectual activity in the industrial, scientific, literary, or artistic fields.
10.8Legal advice privilege attaches to communications between a person and their legal adviser. This can be contrasted with s 56 where privilege attaches to communications with, and information prepared by, “any person” provided that it was made for the dominant purpose of preparing for a proceeding. This difference in approach reflects the different origins and purposes of the privileges. Litigation privilege is said to arise out of the adversarial nature of litigation:
It is based on the idea that legal proceedings take the form of a contest in which each of the opposing parties assembles his own body of evidence and uses it to try to defeat the other, with the judge or jury determining the winner. In such a system each party should be free to prepare his case as fully as possible without the risk that his opponent will be able to recover the material generated by his preparations.
10.9 On the other hand, legal advice privilege is directed at encouraging the full disclosure of relevant facts by the client to his or her legal adviser so that the lawyer can give accurate legal advice to enable the client to order his or her affairs in accordance with the law. On the basis of this rationale, communications made by third parties will only attract the protection of the privilege if they are made by the third party acting as the client’s agent, or as has been said, “… as 'the man on the spot', as the client’s 'alter ego', and on its behalf.” For this reason, at common law in New Zealand, legal advice privilege only applied to communications with third parties if the third party was the agent of the client or the legal adviser. Section 54(1) is to the same effect. This is in direct contrast to litigation privilege, which protects communications between the lawyer or client and third parties where the “dominant purpose” is “preparing for a proceeding or an apprehended proceeding”.
Third party involvement in the receiving or giving of legal advice
10.10 It has been suggested to us that the limitation of legal advice privilege to third parties acting as the client’s agent does not reflect the realities of modern day practice, particularly in complex cases. We were told that third parties are now commonly utilised, as more than mere agents, where advice is sought on detailed commercial or financial arrangements. We were asked to consider whether s 54 should be amended to apply to documents (and potentially all communications) between the client or legal adviser and third parties, where the dominant purpose of that document / communication was to enable legal advice to be provided to the client.
10.11 It was the recognition of such commercial realities that led the Full Court of the Federal Court of Australia to recognise privilege in relation to accountants’ documents in Pratt Holdings Pty Ltd v Commissioner of Taxation. In that case, the Court unanimously held that, even if no litigation is on foot or anticipated, where a person requests a third party to prepare a document for the dominant purpose of that person providing it to their lawyer to obtain legal advice, that document is privileged. One of the key arguments underpinning the Court’s decision in Pratt Holdings was that to require an agency relationship between the client and the third party (in that case, accountants) would undercut the policy objectives of the privilege itself as it would not facilitate access to effective legal advice or communication with legal advisers.
10.12 Despite the decision having been criticised on a number of grounds, the extension has subsequently been adopted in the Evidence Amendment Act 2008 (Cth), based on a recommendation by the Australian Law Reform Commission. The Commission made its recommendation citing the following passage from Pratt Holdings:
… recognising that the situations in which people need legal advice are increasingly complex and that the client may need the assistance of third party experts if he is to be able to instruct the legal adviser appropriately.
10.13Section 118 of the Evidence Act 1995 (Cth) now relevantly provides that privilege attaches to:
(c) the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person;
for the dominant purpose of the lawyer, or one or more lawyers providing legal advice to the client.
10.14This is, perhaps, even wider than Pratt Holdings, as it says nothing of the distinction between who instructed the third party to provide the confidential document (ie the lawyer or the client). Such a distinction was important in Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority, a decision that Finn J approved of in Pratt Holdings.
10.15In Mitsubishi Electric Australia Pty Ltd, Batt JA had rejected a claim for privilege in respect of reports commissioned by Mitsubishi’s solicitors (as opposed to being commissioned by the client) for precisely that reason. The suggestion from Pratt Holdings, therefore, is that it was intended to apply only where the client had requested the document from the third party.
10.16Pratt Holdings has also been applied by the Full Court of the Federal Court of Australia to documentary communications prepared by the client for the third party, provided that the communication was made with the dominant purpose of the client seeking or obtaining legal advice.
10.17 However, a recent decision of the UK Supreme Court should also be noted. In R (on the application of Prudential plc) v Special Commissioner of Income Tax the Supreme Court was required to consider whether legal advice privilege attached to legal advice where it was given by accountants in relation to a tax avoidance scheme. The more general question before the Court was:
… whether [legal advice privilege] extends, or should be extended, so as to apply to legal advice given by someone other than a member of the legal profession, and, if so, how far [legal advice privilege] thereby extends, or should be extended.
10.18While recognising the strength of some of the arguments for extending legal advice privilege to cover advice such as that given by the accountants in the appeal before the Court, the majority held that such an extension of privilege was a significant policy decision that should be taken by Parliament and not by the courts.
10.19Against this background, it is necessary to consider the reasons for and against extending s 54. In our view, there are several key arguments in favour of an extension.
10.20First, it is artificial to distinguish between situations where an agent provides expert advice to a client / lawyer and those where a third party does the same. Rather, as Finn J stated in Pratt Holdings, the “important consideration … is not the nature of the third party’s legal relationship with the party that engaged it but, rather, the nature of the function it performed for that party.” This argument was also regarded by Lord Neuberger in Prudential plc to be a strong one:
[Legal advice privilege] is based on the need to ensure that a person can seek and obtain legal advice with candour and full disclosure, secure in the knowledge that the communications involved can never be used against that person. And [legal advice privilege] is conferred for the benefit of the client, and may only be waived by the client; it does not serve to protect the legal profession. In light of this, it is hard to see why, as a matter of pure logic, that privilege should be restricted to communications with legal advisers who happen to be qualified lawyers, as opposed to communications with other professional people with a qualification or experience which enables them to give expert legal advice in a particular field.
10.21Second, as noted above, there is an argument that the realities of contemporary business are such that it is unrealistic to expect a client to always be in a position to set out his or her affairs adequately for the purposes of seeking legal advice without the assistance of specialist advisers. This is probably the strongest argument in favour of extension.
10.22Finally, there is also the fact that extension of the privilege would ensure harmonisation with Australia. This is, arguably, an area of evidence law where there would be real benefits in a common approach, given the extension is likely to be most relevant in larger-scale business settings, many of which will have a trans-Tasman element.
10.23However, against these factors, it could be argued that this is tilting the balance too far away from the fundamental idea, contained in s 7 of the Act, that all relevant evidence should be before the court. As one author states, the Full Federal Court in Pratt Holdings:
… acted contrary to repeated admonitions to judges by the High Court that because the doctrine is “potentially destructive of respect for their decisions [since] … they are obliged to arrive at them, deprived of access to potentially relevant and important communications”, it “should be closely confined”.
10.24In a similar vein, our own Court of Appeal, in the course of discussing the scope of litigation and legal advice privilege, has said that “[t]he privilege should be as narrow as its principle necessitates”.
10.25On the other hand, the judges in Pratt Holdings were of the view that the dominant purpose test would not be an “uncontrollable extension of the privilege” and that the “difficulties in proving the relevant purpose should not be underestimated.”
10.26Following on from this, there could be a concern that parties may be tempted to “try their luck” and withhold any and all information that they have given to, or received from, third parties. This could lead to an increasing number of interlocutory hearings, which will inevitably lead to delay in the courts. This is tempered by lawyers’ professional obligations, although this may not be a complete answer.
10.27As the majority of the Supreme Court in Prudential plc recognised, any extension of legal advice privilege is a complex policy decision involving consequences that are not easy to identify or assess. This point was also made by a member of our advisory group, who raised the question of how such an extension of legal advice privilege would interact with the privilege for tax advisers in the Tax Administration Act 1994. For this reason, we consider that the issue is one that goes beyond the scope of a narrowly focused “fine tuning” review such as the review we are mandated to carry out under s 202 of the Evidence Act.
10.28Furthermore, while there may be compelling arguments in favour of an extension of privilege at a principled level, we are not aware of any evidence demonstrating widespread problems in practice with the current application of legal advice privilege. A member of our advisory group questioned whether there really had been such a widespread change in business practices as suggested and thought that it was probably possible for parties to arrange their affairs to ensure privilege would be available where necessary.
10.29Accordingly, we are not recommending an extension of legal advice privilege in this manner. It may be that matters such as the desirability of trans-Tasman harmonisation suggest that some further consideration of this issue is required. However, it should be done in circumstances that allow widespread consultation and consideration of the likely consequences of any extension.
Initial communications prior to “obtaining” of information
10.30The final wording of s 54(1) of the Act provides that legal advice privilege attaches when a person obtains professional legal services from a legal adviser. This was changed by the Select Committee from the previous wording of “requests” professional legal services.
10.31It has been suggested to us that any initial communications with a legal adviser who is unable or refuses to act (for example, due to a conflict of interest) will not amount to “obtaining” professional legal services, and as such no privilege will attach. This would be a departure from the common law.
10.32Ironically, we understand that the wording was changed by the Justice and Electoral Committee specifically to catch such initial communications, because they considered that the word “requests” may not adequately do so, rather than any desire to change the position at common law. Indeed, one would have expected that they would have included commentary if that had been their intention. Instead, it seems that any change brought about by this drafting choice was an inadvertent one.
10.33Against this background, we consider that the s 54(1) should be amended to cover both situations, namely where a person requests and / or obtains professional legal services.
R20 We recommend that the word “obtains” in s 54(1) be replaced with “requests and / or obtains”.