CORPORATE INTERNAL LEGAL ADVISERS AND THE LEGAL PROFESSIONAL PRIVILEGE

Friday, March 30, 2007
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CORPORATE INTERNAL LEGAL ADVISERS AND THE LEGAL PROFESSIONAL PRIVILEGE
By Pumzo Mbana

This article deals with the extent to which the legal professional privilege protects confidential communication between a company and its internal legal adviser.

Our law of evidence and procedure protects various forms of public and private privilege. The legal professional privilege is a form of private privilege, being a privilege that protects the interest or interests of either an individual or a juristic person to prevent the disclosure of admissible evidence.

Legal professional privilege can be categorized into two forms. The first is the litigation privilege, which arises in the context of pending or contemplated litigation. The second is the legal advice privilege which arises in a litigious or non-litigious context.

In practice the legal professional privilege plays a significant role. A party who claims legal professional privilege may not reveal the content of the privileged information. A legal adviser or third party may also be required by the party not to reveal the content of the privileged information.
Public policy is the rationale behind the protection of legal professional privilege. The public policy being that "there is a strong public interest in individuals and corporations seeking and obtaining legal advice in order that they may arrange their affairs in an orderly way, that effective legal advice can only be provided if the client provides the legal adviser with all relevant information and that the client might well be unwilling to do so if the legal adviser could subsequently be required by a court to disclose the information so provided."

The privilege in other words encourages and ensures a candid discussion between the legal adviser and the client so that the latter may be aware of their rights and obligations in law.

In order to claim the legal professional privilege the confidential communication must be between a legal adviser and a client. Being an advocate or attorney does not give rise to the conclusion that all communication with a client is privileged. Further, the legal adviser must have acted in a professional capacity. Professional capacity is a question of fact. The legal professional privilege may arise not only with regard to an external legal adviser but also in circumstances where a company employs an internal legal advisor. Joubert expressed doubt whether salaried legal advisers can act independently of their employers, in the sense that external legal advisers act towards a company. The prevailing legal position was stated in Mohamed v President of the Republic of South Africa and Others where the Cape Provincial Division refused to limit the scope of legal professional privilege to external legal advisers. However, ‘in house’ legal advisers must scrupulously distinguish between communications made in their capacities as legal advisers, which enjoys the protection of legal professional privilege, and other communications not made in that capacity, which would not be privileged.

It is submitted that as long as an internal legal adviser acts in a professional capacity and confidentially, the legal professional privilege attaches to such communications. When the adviser performs non-legal functions a claim of professional legal privilege will not stand.

A company may claim legal professional privilege in respect of confidential communication between a company and its salaried legal adviser when such communication amounts to the equivalent of an independent legal adviser’s advice to client.

South African court’s, unlike their English counterparts, do not apply the sole or dominant purpose test in order to afford legal privilege to confidential communication by a legal adviser. In A Sweidan and King (Pty) Ltd & Others v Zim Israel Navigation Co Ltd the Durban and Coast Local Division of the High Court stated that, "there is indeed an established rule of practice in this country that a document will be privileged if litigation were pending or thought likely and if a purpose for which the document was made was submission to a legal adviser as material upon which to enable him to advise." When an internal legal adviser acts in a non-legal capacity, such as an executive of the company, such communication falls outside the ambit of the legal professional privilege. However, this does not mean that legal professional privilege will not protect confidential communication made under a non-legal adviser capacity, if the purpose of such communication was in the context of pending or contemplated litigation.

A company claiming legal professional privilege from confidential communications emanating from its internal legal adviser must show that the company was the "client". Stockdale and Mitchell have a problem with this approach because "corporate clients can only communicate through employees or officers. Thus, in order to determine whether legal advice privilege attaches to a communication between an employee or an internal organ (e.g. a committee) of a company and the company’s legal adviser, it will be necessary to determine whether for the purposes of legal advice privilege, the relevant employee or internal organ is to be regarded as the "client"." Consequently, an internal legal adviser must scrupulously identify the relevant corporate employee, officer or internal organ that receives legal advice in non-litigious circumstances. However, legal advice privilege will not protect communication that does not concern the company as the client. As a corollary, not every employee, officer or internal organ that receives communication from an internal legal adviser will qualify as the "client".

There are two issues worth mentioning following from the above discussion. Firstly, the legal professional privilege protects confidential communication such as draft documents prepared by an employee, officer, or internal organ of a company for the purpose of obtaining legal advice from the internal legal adviser. Secondly, the legal professional privilege protects confidential communication transmitted via an agent of the internal legal adviser of the company. The agent must receive the confidential information for the purpose of obtaining legal advice or in contemplation of litigation.

Companies may claim legal professional privilege in respect of communications arising from internal legal advisers. In order to do so it remains crucial that internal legal advisers prudently understand their responsibility as risk managers in a company by diligently distinguishing their legal from non-legal actions when dealing with the affairs of their employers.