Partner, Jonathan Scragg, of Duncan Cotterill discuss the categories of privilege that are most relevant for in-house lawyers.
Legal professional privilege refers to the right to refuse to disclose certain communications in a proceeding. Privilege is a legal right, long recognised by the common law and now, by statute in New Zealand. There are no separate provisions for in-house lawyers concerning the application of privilege, so in-house lawyers ought to be guided by the general rules of privilege. The three primary categories of privilege in New Zealand, and the categories that are most relevant for in-house lawyers, are found in the Evidence Act 2006 (Act): Legal advice privilege (s 54); Litigation privilege (s 56); and Without prejudice communication privilege (s 57).
Legal advice privilege – s 54
Legal advice privilege is the primary category of privilege affecting communications between lawyers and clients. A person who requests or obtains professional legal services from a legal adviser has a privilege in respect of any communication between the person and the legal adviser, provided the communication was intended to be confidential, and made in the course of and for the purpose of the person obtaining professional legal services from a legal adviser or the legal adviser giving such services to the person.
A ‘legal adviser’ is a broader concept than that of a ‘lawyer’ and hence under section 54, a registered patent attorney and an overseas practitioner providing professional legal services may also fall within the requirements of section 54.
The question of what is included within the ambit of “professional legal services” has been developed by the courts over many years. Professional legal services encompasses matters on which it is reasonable for the client to consult the special professional knowledge and skills of a lawyer[1], as well as drafts and working papers[2].
In-house counsel must satisfy the usual requirements for legal advice privilege; hence legal advice privilege will cover communications made by an in-house lawyer where:
- the in-house lawyer is recognised as a “legal adviser” for the purposes of s 54; and
- the communication is:
- intended to be confidential; and
- made in the course of and for the purpose of:
- the client (generally, the employer) requesting or obtaining professional legal services from the in-house counsel; or
- the in-house counsel giving such services to the client.
In-house counsel should maintain a current practising certificate if they or their employer perceives they may need to claim legal advice privilege under s 54.
Practically, in-house counsel should consider clearly demarcating legal advice as being such, to avoid arguments around the scope and application of legal advice privilege. In-house lawyers should operate consciously that not all of their work will attract legal advice privilege. In-house counsel may choose to keep separate commercial and legal files, clearly mark communications in terms of the capacity in which the communication or document is being written, and mark appropriate correspondence as “subject to legal privilege.”
Litigation privilege – s 56
Litigation privilege may become relevant if an in-house lawyer’s organisation becomes involved in a dispute with another party. The Act provides that a person who is, or on reasonable grounds contemplates becoming, a party to a proceeding has a privilege in respect of a range of communications and information prepared in respect of the proceeding.
The test for whether a party reasonably contemplates becoming a party to a proceeding is an objective, rather than subjective test[3]. The privilege only applies to a communication or information if the communication or information is made, received, compiled, or prepared for the dominant purpose of preparing for a proceeding or an apprehended proceeding. Litigation privilege also encompasses a wider range of communications than legal advice privilege. While legal advice privilege only refers to “communications”, litigation privilege covers communications and other forms of information.
Given the breadth of work commonly undertaken by in-house lawyers, it can be difficult to identify and segregate those communications or documents which are made for the dominant purpose of preparing for proceedings. In-house counsel should consider encouraging their organisations to produce documentation for defined purposes, so that the dominant purpose can be easily ascertained, and the application of litigation privilege more easily established.
Where proceedings are already in existence, it is relatively straightforward to establish that litigation privilege applies, provided that the dominant purpose of the communication or information is preparation for such proceedings. The task is made more difficult if litigation privilege is claimed for communications or documents produced before the litigation has commenced. In that case, it must be established that proceedings were reasonably apprehended at the time the document was prepared.
When an organisation is dealing with a potentially litigious matter internally—without the support of external counsel—the point at which communications or information arose in the apprehension of proceedings can be harder to determine. The test is an objective one. Hence the suggestions of keeping good file notes—setting out key material on which judgements are being formed—and maintaining a good awareness of contentious matters as they move towards a dispute phase.
Ultimately, as the discussion suggests, a factual assessment will be necessary to determine whether and from what point, litigation privilege will attach to certain communications. The classification will not always be clear-cut and may itself become the subject of dispute.
Without prejudice communication privilege – s 57
Section 57 of the Act provides that there is privilege in respect of any communication between parties to a dispute if the communication was intended to be confidential and was made in connection with an attempt to settle or mediate the dispute. A party also has a privilege in respect of a confidential document that the person has prepared, or caused to be prepared, in connection with an attempt to settle or mediate the dispute.
Privilege under s 57 requires only a dispute between the parties, which the parties are trying to resolve; it does not require litigation to be contemplated or commenced.
The Act does not require that without prejudice communications be labelled as such to attract the privilege. Likewise, the fact that a communication is labelled “without prejudice” is not determinative. The overall enquiry is into the objective intention of the parties. However, there are some statutory exceptions to without prejudice communication privilege. For example, the terms of an agreement that settles a dispute are not privileged—and indeed it is important for such terms to be recorded and available to be referenced openly.[4]
External correspondence sent by in-house lawyers (or their colleagues) on behalf of their organisations will attract privilege under s 57 in the same way as communications sent by lawyers in private practice on behalf of a client. Without prejudice privilege will attach if:
- the communication or document was intended to be confidential; and
- the communication was made or the document was prepared in connection with an attempt to settle a dispute.
Although selected parts of communications can be deemed privileged, it is recommended to try to separate out correspondence which is intended to be open from that which is intended to be sent without prejudice. It is for that purpose common for lawyers in private practice to write separate, contemporaneous, ‘open’ and ‘without prejudice’ letters. Although labels are not determinative, they can be helpful. One touchstone when assessing whether a letter is in fact one to which without prejudice privilege will attach is whether the letter contains some admission, concession or other statement that the maker would not want to be referred to in open court.
Wavier of legal privilege
The Act provides that any privilege may be waived, expressly or impliedly only by all the persons who have that privilege (section 65(1)).
Section 65(2) deals with express waiver. This includes voluntary production, disclosure or consent by or under the authority of the holder of a “significant part” of the communication in circumstances that are inconsistent with a claim for confidentiality. The High Court[5] has said that whether a “significant part” of a communication has been disclosed is to be assessed by looking to the quality of the disclosure as part of the entire document, and not just the proportion of the disclosure.
As to implied waiver, the basic principle is that waiver is implied where a party’s conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.
Inconsistent conduct amounting to waiver can include putting the communication “in issue” in a proceeding (section 65(3)). This is different from the position at common law[6].
The High Court has formulated a test to determine whether a privilege holder has acted to put the content of legal advice “in issue”: where the content of the advice is integral to the holder’s litigation position, reference to the fact of that advice will impute waiver. This test relates only to whether the privilege holder puts the privileged material in issue, rather than where the privileged material is placed in issue by the other party. Additionally, a party may not choose to disclose some, but not all, privileged material on a particular issue—referred to as collateral waiver or “cherry picking”. The key principle being that when a party discloses some privileged material, the party will be required to disclose other closely related material where the document is relevant to a live issue between the parties and where it would result in injustice or unfairness if the Court did not make an order.[7]
In-house lawyers should be conscious that their colleagues (particularly non-lawyers) may be unfamiliar with the concepts of privilege and waiver. The risk of disclosing privileged communications, or privilege otherwise being waived, is therefore heightened. In-house counsel should encourage their organisations to take pre-emptive measures, such as conducting internal training programmes and implementing systems to prevent the inadvertent disclosure of privileged information.
In-house counsel should advise their organisations to avoid referring directly to the fact that legal advice has been obtained; and the contents of that advice, as this may put the advice “in issue” and constitute an implied waiver.
Partner Jonathan Scragg leads the firm’s Wellington litigation and dispute resolution team. His focus is on commercial disputes, insurance law and public law. He has particular experience managing large, complex disputes and am an experienced advocate in the Courts and in mediation. Jonathan’s insurance law practice is focussed on advising insurers on indemnity issues and defending professional liability claims, complaints & disciplinary processes. He acts regularly for construction, financial services, health, legal and property professionals. He is the immediate past president of the New Zealand Insurance Law Association Inc (NZILA), a member of the Presidential Council of the International Insurance Law Association (AIDA), and a member of the Australian and New Zealand Institute of Insurance and Finance (ANZIIF). Jonathan’s commercial disputes practice is focussed on contract, property and trust disputes. His public law practice involves advising public and private sector entities on the operation and enforcement of legislation and representing parties in judicial review. Jonathan is a contributing author to various legal texts published by LexisNexis and Thomson Reuters and speaks regularly at industry events and conferences on insurance law and dispute resolution. Jonathan is admitted in England and Wales and is a former recipient of the Clearly Memorial Prize. Contact Jonathan at jonathan.scragg@duncancotterill.com or connect via LinkedIn
[1] Three Rivers District Council v Bank of England [2004] UKHL 48 at [62] per Baroness Hale.
[2] Robert v Foxton Equities Ltd [2014] NZHC 726, [2015] NZAR 1351 per Kós J.
[3] Commerce Commission v Caltex (HC Auckland, CL33/97, 10 December 1998) at 3-4.
[4] Evidence Act 2006, s 57(3)(a).
[5] Carter v Coroner’s Court [2015] NZHC 1467, [2016] 2 NZLR 133.
[6] See Miller v CIR [1998] 1 NZLR 275, where the Court of Appeal held it was not a waiver if a person simply offers as an explanation for a cause of action that they are acting on legal advice.
[7] Everest Services Apartments Ltd v Body Corporate [2022] NZHC 1925 at [50].
