Legal Professional Privilege and In-House Counsel

Guidance and Ethics, In-House and Public Sector 03/07/2020

This practice note is the second in a series of two on Legal Professional Privilege (“LPP”). This practice note explores further best practice guidance on the application of LPP for solicitors working in-house in the private and public sectors and should be read in conjunction with the first practice note.

These practice notes represent guidance on best practice for practitioners in the area of LPP and do not constitute legal advice. 

In-house counsel as ‘Professionally Qualified Lawyer’

1) Irish law does not draw any distinction between in-house legal counsel and external legal counsel for the purposes of the application of the law of legal professional privilege (LPP). The High Court recently confirmed their qualifying status in this jurisdiction, noting that “the definition of ‘lawyer’ for this purpose includes solicitors, barristers, salaried in-house legal advisers, foreign lawyers and the Attorney General” (McMahon v Irish Aviation Authority [2016] IEHC 221, at paragraphs 16-17).

2) The origin of the principle, which applies to in-house counsel practising in both the private and public sector, may be found in the decision of the Supreme Court in Geraghty v Minister for Local Government [1975] IR 300 (at page 312), in which Griffin J. approved of the decision reached by the English Court of Appeal in Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (No. 2) [1972] 2 QB 102, in which it was held that “there can be no difference between the position of a full-time salaried legal adviser employed by a government department, a local authority, an industrial concern or any single employer, and the position of a legal adviser who practises his profession independently and is rewarded for his services by fees”. 

3) Therefore, the guidance contained in the practice note on the subject of ‘Legal Professional Privilege’ applies with equal force to in-house counsel insofar as they constitute professionally qualified lawyers under Irish law.

In-house counsel performing multiplicity of functions

4) Frequently, in-house counsel will hold a number of positions and perform a variety of functions for their corporate client, including those of an executive or management nature, in addition to the role they occupy as in-house legal adviser. F&C Reit Property Asset Management plc v Friends First Managed Pension Funds Ltd. [2017] IEHC 383 demonstrates that the courts will require to be satisfied that the in-house counsel was dispensing legal advice in their capacity as a professionally qualified lawyer, as distinct from dispensing legal advice in their capacity as a ‘man of business’, in order to attract the protection of LPP. The case involved a challenge to communications which had taken place with the plaintiff company’s general counsel, who also held the position of partnership secretary within the company. Murphy J. noted that “the courts have had no difficulty in deciding those cases where an organisation has a separate legal department whose purpose is to advise the organisation… more difficult are those cases where a lawyer appears to have a multiplicity of roles or functions within a company” (at paragraph 7).

The test:

5) The court formulated a test for the determination of questions arising in Irish law as follows:

“Does the evidence disclose that at the material time the person claiming legal professional privilege was in fact acting as an independent legal adviser to his employer? If the evidence discloses that he acted in such a capacity, then his communications are privileged. If, on the other hand, the evidence shows that he was acting as a principal rather than as a legal adviser, then the privilege may not attach” (at paragraph 9).

6) It should be noted that the Court of Appeal in BMO REP Asset Management plc v Friends First Managed Pension Funds Ltd [2018] IECA 357 allowed the plaintiff’s appeal, in circumstances where the court was provided with evidence on affidavit which explained the legal role occupied by the general counsel and the capacity in which he provided legal advice to the company. On this basis, the court was satisfied that, at all relevant times, the in-house counsel was acting in his role as legal adviser to the company, rather than as a man of business.

7) Practitioners must, therefore, be scrupulous to make the distinction and ensure that any consultation with them for the purposes of obtaining legal advice takes place in circumstances where it can be demonstrated that they were being consulted in their capacity as a professionally qualified lawyer.

Advice furnished on business matters

8) Even where the in-house counsel is consulted in their capacity as a professionally qualified lawyer, the nature of their role and knowledge of the affairs of the company may result in the ambit of the advice furnished by them extending beyond purely legal advice, to include advice on commercial or strategic matters. Ochre Ridge Ltd v Cork Bonded Warehouses Ltd [2004] IEHC 160 demonstrates that LPP will not attach to advice furnished by a lawyer in respect of business or commercial matters and will only vest in communications containing legal advice. Where advice covering mixed content is provided by the in-house counsel, it is prudent practice to maintain the different advices on separate documents in order to safeguard the privileged status of any legal advice given. 

The corporate client

The English decision in Three Rivers (No 5)

9) The decision of the English Court of Appeal in Three Rivers District Council v Governor and Company of the Bank of England (No 5) [2003] QB 1556 (Three Rivers (No 5)), has created difficulties in England and Wales with regard to the identification of the employees of a corporate entity who may be regarded as authorised emanations of the corporate client for the purposes of communicating with the company’s lawyers. In that case, the Court of Appeal determined that only those employees of the Bank of England who had been expressly authorised to communicate with the Bank’s lawyers - those employees forming what was known as the ‘Bingham Inquiry Unit’ – could attract the protection of LPP, to the exclusion of all others. The recent Court of Appeal decision in SFO v ENRC [2019] 1 All ER 1026 has confirmed that Three Rivers (No 5) still represents the law in England and Wales. Commentators have noted that the question of the identification of the corporate client has particular relevance – and potentially poses more problems – for in-house counsel, who often advise company employees daily, on an ad hoc basis, without any clarity as to the employees’ authorised status to give instructions and obtain advice (Bankim Thanki Ed. ‘The Law of Privilege’ Third Ed. 2018).

Nuanced Approach where Communications with In-House Counsel

10) However, the English High Court has refused to apply Three Rivers (No 5) in a number of cases involving communications with in-house counsel, demonstrating a nuanced approach in that jurisdiction with regard to this particular category of lawyer. In AB v Ministry of Justice [2014] EWHC 1847 and Menon v Herefordshire Council [2015] EWHC 2165, the decision was distinguished and confined to its own facts on the basis that the Bingham Inquiry Unit represented the only group of employees authorised to communicate with the legal advisers. In the absence of any express authorisation conferred on individual employees on the facts of the cases before them, it was implicit that all employees had authority to seek legal advice of the nature and extent that they did from the in-house counsel.

The corporate client in Ireland

11) The same reasoning was adopted by the Irish High Court in Ryanair v Channel 4 [2018] 1 IR 734, which rejected Ryanair’s claims that LAP could not be asserted in respect of communications which took place between Channel 4’s lawyers and all employees of the broadcasting company, as well as those communications which took place with the employees of an independent production company – to whom the production of a television programme had been outsourced – on the basis of the decision in Three Rivers (No. 5). Meenan J. distinguished Three Rivers (No. 5) , reasoning that the decision was predicated on the Bank of England’s creation of a designated unit of employees who were solely and expressly authorised to communicate with the Bank’s lawyers. Absent the establishment of a special unit within Channel 4 or any express authorisation conferred on individual employees, all staff were deemed to be authorised to communicate with the lawyers for the purpose of attracting LAP:

“In the absence of any evidence that there was such a ‘special unit’ in Channel 4, this submission is not sustainable.” (per Meenan J at paragraph 87)

12) In arriving at this decision, the court also had regard to the submissions made by Channel 4 to the effect that its lawyers “were providing advice in their professional capacity as lawyers, specifically tasked with giving advice on the programme… Advice was sought from these lawyers by others within Channel 4 and employers of the second named defendant on the basis that they were consulting their own lawyer, specially tasked with giving them legal advice” (at paragraph 83). Thus, for the present, Three Rivers (No 5), and the restrictive definition of the corporate client, has not been followed in Irish law. Each case will, however, fall to be determined on its own facts.

Communications between in-house counsel and external counsel

13) In-house counsel will often be required to obtain legal advice from external counsel for a number of reasons, including taking expert advice from specialists on complex areas of law, which results in a flow of communications between the in-house counsel, the external counsel and the client. McMahon v Irish Aviation Authority [2016] IEHC 221 demonstrates that the cloak of LAP will extend to cover this ‘continuum’ of communications which, in that case, had involved legal advice passing between senior personnel in the defendant authority, its in-house solicitor and the external law firm from whom advice had been sought.

Freedom of information

14) Section 31(1)(a) of the Freedom of Information Act 2014 obliges a body to whom a request for information has been made, to refuse to grant that request if the record concerned would be exempt from production in proceedings in a court on the ground of legal professional privilege

Proceedings arising in a foreign jurisdiction

15)  Laws of LPP vary from country to country and may protect communications to a greater or a lesser extent than in this jurisdiction. In particular, some jurisdictions, including France and Germany, afford less protection to communications which take place with in-house counsel. In circumstances where proceedings were to arise in a particular jurisdiction, it is possible that the lex fori (law of the forum) - rather than the law of the country in which the communication was made – would apply to the determination of any questions of LPP arising. This could have the effect of depriving a communication of LPP which would have applied had the proceedings taken place in Ireland. In-house practitioners, in particular, should be aware of the risks of losing LPP where the privileged status of the communication falls to be determined by reference to the law of another jurisdiction.

Approach adopted in England and Wales:

16) The lex fori is the approach adopted in England and Wales with the result that, in proceedings before an English court, the English rules of LPP are applied to the determination of questions arising in respect of foreign advice furnished by a foreign lawyer (Re Duncan [1968] P 306). Though it did not concern communications with in-house counsel, the English High Court case of RBS Rights Issue Litigation [2017] 1 WLR 1991 demonstrates that communications with US lawyers, which would have been protected under the more generous American rules of LPP, may not be protected when determined in accordance with the law of England and Wales.

Communications with in-house counsel under EU LPP

17) The EU rules on LPP – formulated in the case of AM&S v Commission [1982] ECR 1575 and Akzo Nobel Chemicals v Commission, [2010] 5 CMLR 19 – apply to written communications which take place with an independent lawyer, who is qualified to practise his or her profession within one of the member states of the European Union, for the purposes and in the interest of the client’s right of defence. The ‘independent lawyer’ is defined as one who is not bound to his or her client by a relationship of employment. As such, in-house counsel do not qualify as lawyers for the purposes of the EU law of privilege. This remains the case notwithstanding the fact that in-house counsel in some jurisdictions may be members of their national Bar Associations or Law Societies and, thus, bound by professional rules regarding conduct and ethics.

18) The EU rules of LPP were developed by the CJEU in proceedings in which the status of privileged documents – which had been obtained in the course of an investigation by the European Commission into alleged contraventions of EU competition law – arose for consideration. Though the precedents are technically confined to the context of investigations conducted in that scenario, some commentators have expressed the view that “the decision may have a spill-over effect should the issue of privilege surface in other areas of EC law … It is significant in this regard that the principle on which the decision rests was enunciated in sufficiently broad and general terms that it could potentially apply to any scenario involving an in-house lawyer regardless of the kind of legal work the lawyer performs or the nature of the European legal proceedings in which the issue arises”(Heffernan, ‘Legal Professional Privilege’, Bloomsbury Professional, 2011, §2.50)

19) Care will therefore need to be taken by in-house practitioners who work for companies which operate within the reach of EU competition law and, where necessary, advice should be taken from external counsel in order to mitigate the risks of losing LPP in advice furnished to the company. The procurement of external legal advice has the undesirable effect of increasing a company’s legal costs, notwithstanding its retention of a dedicated in-house counsel or department. Indeed, it is worth recalling that, where the external advice is sought by the in-house counsel, it must be from a lawyer qualified to practise within the EU for the privilege to apply.

20) It is unclear whether a recent decision of the Grand Chamber of the CJEU will have any relaxing effect on the absolutist, exclusionary nature of the case-law outlined above. In the joined cases of C-515/17P and C-561/17P (Uniwersytet Wroclawski v REAECLI:EU:C:2020:73) the CJEU held, in the context of Article 19 of the Statute of the Court of Justice of the European Union which sets out the rules pursuant to which lawyers may represent parties in proceedings before the EU courts, that the lawyer’s duty of independence was to be understood not as the lack of any connection whatsoever between the lawyer and his client, but the lack of connections which have a manifestly detrimental effect on his capacity to carry out the task of defending his client while acting in that client’s interests to the greatest possible extent (§64). The CJEU held that the the University of Wroclaw was accordingly entitled to be represented by a lawyer who was connected to the University by a contract for lecturing services. He was not in a hierarchical relationship with the University and did not hold a high level management position within the University. However, given that the decision concerned the interpretation of the Statute , rather than questions regarding the application of LPP, it seems unlikely that the EU rules of LPP applicable to in-house counsel have changed in the absence of an express departure from the principles laid down in AM&S and Akzo Nobel.