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Privilege problematic for in-house lawyers

Privilege problematic for in-house lawyers

DESPITE THE almost mystical appeal that working in-house has for many lawyers, corporate lawyers can face some added complications when it comes to claims for privilege.According to Clayton Utz…

DESPITE THE almost mystical appeal that working in-house has for many lawyers, corporate lawyers can face some added complications when it comes to claims for privilege.

According to Clayton Utz partner Ian Bloemendal, more in-house opportunities for lawyers have opened up as companies increasingly see the advantages to having legal advice on-call.

“I think we live in a legal environment now where there’s a lot more regulation and legal skills are invaluable to have inside the corporation,” he said.

“There’s benefit in having people on hand to answer questions. There are still matters that they will need to brief out [to law firms], but it does give the company a good head start if they’ve got somebody that knows their business very well in that role.”

However he explained problems can arise when companies attempt to claim privilege over documents prepared by in-house lawyers who play a dual role providing both legal and commercial advice,

“The difficulty with these claims sometimes is that senior lawyers often play management roles and that will sometimes involve them creating documents which are not for the dominant purpose of providing legal advice,” he said.

According to Bloemendal, there are important distinctions between legal advice and corporate/commercial advice which in-house lawyers should be keeping in mind.

“People read legal advice from counsel and create recommendations, and those recommendations might follow the advice or choose to disregard it. If people turn to that legal advice to create recommendations, and that document gets into the hands of someone outside the company, then that might inadvertently waive privilege,” Bloemendal explained.

“On the other hand, [in-house lawyers] should also know that they can’t claim privilege just on the recommendations they make for corporate action,” he said. “Sometimes in-house lawyers make recommendations on policies, on administrative issues, on management issues or on strategic action and they should be very careful to keep those recommendations separate from any paragraphs that deal with legal advice.”

There are a number of factors the court will take into account, but there are two pivotal points in particular that have arisen from the case law that in-house lawyers should be continually aware of, Bloemendal explained.

“The first one is the capacity in which the person is acting at the time — did they have their lawyer hat on? The second one is independence; even if they did have their lawyer hat on, has it been shown that the advice was independent notwithstanding the employment relationship.”

The importance this latter requirement was highlighted in the ACT Supreme Court decision of Vance v Air Marshall McCormack (2004) 154 ACTR 12in which the court outlined no less than seven separate factors to take into account when assessing professional independence.

In particular, he said, problems can arise when a company’s policies or conditions of employment conflict this requirement of independence.

“One suggestion I’ve given to clients in the past is that lawyers employed by the company should have their performance reviewed, but their remuneration package shouldn’t be linked to the performance of the business unit they’re involved with, which might be seen as affecting their independence,” he said.

Bloemendal will speak in more detail on the issue at the LexisNexis Ethics and Risk Management conference in Brisbane on 11 March.

For a more detailed analysis of the issue, see our feature story on page 30.

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