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The Disputes Yearbook: Simmons’ Passmore on the flow on effects of Three Rivers

In June this year, the Hong Kong Court of Appeal held that the English Court of Appeal decision in Three Rivers (No.5) does not represent Hong Kong law. This is, of course, the 2003 English Court of Appeal decision well-known for the challenges it presents companies who wish consultations with their legal advisers to benefit from the protection of legal advice privilege.

While the Hong Kong decision – Citic Pacific v Secretary for Justice and Commissioner of Police – will be of little precedent value before the English Courts – and indeed will throw up additional challenges on cross-border matters – it says something that a Special Administrative Region within the People’s Republic of China (albeit one whose jurisprudence is firmly based upon and steeped in the English common law, and whose courts still regard England’s higher court decisions as being of strong persuasive authority) can be guided by ‘rule of law’ principles to reach a decision that is long overdue in the very jurisdiction from which the concept of privilege originated. How has this state of affairs come about?

The Three Rivers (No.5) decision has been treated as meaning that preparatory communications made with or by other representatives of the client, not being those who have been deputed to seek legal advice on the company’s behalf, will be outside the scope of legal advice privilege, even if those communications were intended for submission to the client’s lawyers or prepared at their request in order to enable legal advice to be sought or given. In other words, for the purposes of legal advice privilege, the ‘client’ is a narrowly focused group of individuals within the wider client entity such that the only communications protected by advice privilege are those (a) prepared by this narrow group; (b) addressed to the lawyers; or (c) received by this narrow group from the lawyers.

Citic concerned the execution of search warrants authorising the seizure of a large number of documents held by Citic in relation to its forex trading and various related trading announcements. A blanket claim of privilege was made in respect of the documents thereby seized. One particular category which, by applying Three Rivers (No. 5), Wright J held was not protected by privilege, concerned documents relating to the gathering of information from ‘third parties’, being employees of the plaintiff other than those in the group legal department.

The Court of Appeal thought the ‘rule of law’ rationale of privilege as considered by the House of Lords in Three Rivers (No.6) was equally applicable in Hong Kong as it was ‘perfectly consonant with [privilege] being constitutionally protected [in Hong Kong, under the Basic Law] to reinforce the rule of law as a core value in our society’. The court held that that value was in effect undermined by the Three Rivers (No.5) ‘client’ approach to privilege. Accordingly, the Hong Kong Court’s view was that it is meaningless to have a right to confidential legal advice if the protection is confined to direct communications seeking and setting out that advice. Overturning Wright J’s decision, it held: ‘Lawyers need to have the relevant information from their clients before proper advice can be given. Thus, it is a necessary incident of the right to confidential legal advice that the whole process is protected by privilege so as to safeguard the confidentiality.

In the context of a corporation, where the necessary information may have to be acquired by the management from employees in difference departments or at various levels of the corporate structure, there is a need to protect the process of gathering such information for the purpose of getting legal advice… it is unlikely that a small group of employees within the legal department of a corporation would be likely to have all the technical knowledge or skills that may be required to obtain information for, and put together, suitable instructions for the corporation’s lawyers. To adopt a restrictive definition of who constitutes the client in such circumstances would be just as likely to impinge upon the ability of the corporation to seek and obtain meaningful and useful legal advice, since it might well discourage those defined as the client for the purposes of legal professional privilege from seeking the input or assistance of other employees who might be better qualified or able to provide it.’

So, where does this leave us? It is now clear (subject to any appeal to the Court of Final Appeal) that Three Rivers (No.5) does not represent the law in Hong Kong (nor indeed in Singapore and other common law countries), thus leaving the English position somewhat out on a limb. It by no means follows that the English courts will follow suit, although one hopes it may cause them to stop and think – not least because of the problem practitioners handling cross-border matters between Hong Kong and England now face, namely two competing approaches to advice privilege that cannot lead to the same result in both courts.

Colin Passmore is the senior partner of Simmons & Simmons.

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