In-House Counsel And Client-Legal Privilege - Don´t Take Your Independence For Granted

Independence. The ability to function without depending upon another. The ability to remain unaffected by others. It was an adolescent concept with which we all struggled but eventually conquered.

Now, independence is a privilege that we all often take for granted.

Yet for in-house counsel, a recent series of cases illustrate that the notion of independence is re-surfacing in adult working life particularly as it relates to the determination of client-legal privilege.

The courts are sending a clear message to in-house counsel – if you want to assert your independence, then you have to prove it.

Client-Legal Privilege And In-House Counsel

Client legal privilege is a privilege which attaches to documents brought into existence "for the dominant purpose of providing legal advice or obtaining legal advice or for use in current or anticipated legal proceedings".

The privilege protects confidential communications between lawyers and their clients from disclosure to third parties.

But be careful - the concept of client-legal privilege and in-house counsel needs a little extra consideration. This is because when it comes to in-house counsel, the client is also the employer. The dual-capacity of in-house counsel makes the purpose for which documents are created questionable.

The courts are making it clear that proving independence is essential when documents created by in-house counsel are claimed to be protected by client-legal privilege.

Take This Example

Imagine you are in-house counsel/company secretary. You have written a memorandum to the board of directors in relation to a prospective commercial venture. The memorandum considers commercial issues but also sets out some advice on legal matters.

Sometime later down the track, after the commercial venture is put in train, your competitor seeks the production of the memorandum in court proceedings. In turn, you claim that the document is protected by client-legal privilege because it was created, you say, for the dominant purpose of providing legal advice.

But was the memorandum really created for that purpose? Were you really acting independently of your employer in preparing the memorandum or were you acting under the influence of the company's commercial goals? The question is a little tricky.

What if you clearly marked the document as being "protected by legal professional privilege"? Even then, the answer is not clear cut.

Simply asserting that the document was created for the dominant purpose of giving legal advice is not enough. You are going to have to actually prove it and in doing so, prove your independence.

Telstra Case

The question of independence and in-house lawyers was reviewed by the Federal Court in September earlier this year. Telstra was faced by a request from its opponent for the production of documents created by Telstra's internal legal advisers.

Relevantly, the only ground put forward by Telstra to support the claim for privilege over documents prepared by the in-house team was that the documents had been prepared by internal legal advisers "for the dominant purpose of providing legal advice". The Court held this was not sufficient to support Telstra's claim for privilege.

The internal legal advisers needed to provide evidence showing their degree of independence from the company in creating the documents. Unable to do so, Telstra was forced to produce to its opponent some of its important internal emails relating to the proceedings.

The case is a timely reminder that independence is not a privilege that can be taken for granted.

Five Practical Tips For In-House Counsel

In-house counsel need to ensure that they are in a position to substantiate any claims for privilege with evidence that they are sufficiently independent from their employer and that they provided impartial legal advice when creating documents in respect of which privilege is claimed.

This may be especially difficult for in-house counsel who hold several positions in a company and are involved in both legal and commercial aspects of its operations.

So what can be done by in-house counsel to establish independence as an internal lawyer? Here are some of our practical tips:

1. obtain and maintain a current practising certificate
2. engage in external legal training
3. if you hold multiple roles within a company, ensure each role is clearly identified not only though document sign-off but by taking steps to inform all other staff members within the organisation of your roles and the role in which you are acting when specific tasks are undertaken
4. keep legal documents separate from other commercial documents and/or non-legal documents
5. have a clear method by which in-house counsel communicates and interacts with the employer including how instructions are obtained and reports are given.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.