Sharon Chong explains this evidential principle.

It is often taken for granted that communications with a professional advisor are confidential, and this is generally the case. However, this assumption conflicts with another common concept, which is that internal correspondences must be disclosed and is subject to inspection in the course of litigation. This article will examine the extent to which communications with legal advisors are privileged from such disclosure.
 
WHAT IS LEGAL PROFESSIONAL PRIVILEGE?
 
Legal professional privilege may for practical purposes be divided into advice privilege and litigation privilege. If a communication or document qualifies for legal professional privilege, the privilege is absolute. It belongs to the client and can only be waived by the client. It can be overridden by statute, but it is otherwise absolute. The two categories are of course not mutually exclusive and may overlap.
 
OBJECT OF LEGAL PROFESSIONAL PRIVILEGE
 
The object of legal professional privilege is to encourage candour between a client and his lawyer. It is in the public interest that not just that exchanges between a client and his lawyer should be immune from compulsory disclosure but also that any rule so protecting them should be absolute in its term. This is because the client must be sure that what he tells his lawyer in confidence will never be revealed without his consent, otherwise he might hold back half the truth.
 
CHARACTERISTICS OF LEGAL PROFESSIONAL PRIVILEGE
 
Privilege is absolute and it remains so until waived by the privilege holder. Some of the characteristics of privilege are¹:
 
1.     The privilege remains after the occasion for it has passed, unless waived -“once privileged, always privileged”².
2.     The privilege is the same whether the documents are sought for the purpose of civil or criminal proceedings and whether by the prosecution or the defence.
3.     The refusal of the client to waive privilege for any or no reason cannot be questioned or investigated by the court.
4.     Save in cases where the privileged communication is itself the means of carrying out a fraud, the privilege is absolute.
 
STATUTORY DUTY OF NON-DISCLOSURE
 
In Malaysia, these principles are codified in Section 126 of the Evidence Act 1950, which provides that no advocate shall at any time be permitted to disclose any communication made to him by or on behalf of his client for the purpose of his employment unless the client gives his express consent. It also extends to any advice given by him to his client. The Federal Court has recently held that reference may be made to English decisions in applying this provision.³
 
IDENTIFYING THE CLIENT
 
In the case of an individual, it is straightforward as to whom the client is. However, where the privilege holder is a corporation and as an artificial entity has to function through its human agencies, it is less clear who is entitled to see and have custody of the legal advice rendered by the lawyer. In a corporate context, those who have such “privilege” include but are not limited to the following:
 
1.     A shareholder of the company, except where the shareholder is engaged in hostile litigation with the company.⁴
 
2.     A director of the company who is involved in the management of the company.⁵
 
3.     Financial controller of the company.⁶
 
4.     External auditors of the company who are required by law to oversee the management of the finances of the company. Note that this is limited to circumstances where the legal advice specifically deals with allegations of mismanagement within the company. It is for this purpose that all companies are required by law to employ external auditors who have to submit their independent report annually to the shareholders.
 
5.     Employees who are authorised to act on behalf of the company.⁷    
 
ADVICE PRIVILEGE
 
Advice privilege arises out of a relationship of confidence between lawyer and client and gives the person entitled to the right to decline to disclose, or to allow to be disclosed, the confidential communication or document in question.
 
What constitutes legal advice depends on the nature of the advice and the context in which it is given, not on the motive of the client in asking for it. There must be a “relevant legal context” in order for the advice to attract legal professional privilege. The privilege does not extend to all solicitor and client communications, but only to those involving legal advice. Taylor LJ in Balabel v Air India [1988] Ch 317 said that “for the purposes of attracting legal advice privilege, legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context”.
 
The House of Lords in the "Three Rivers District"⁸ case suggested that in cases of doubt, the judge called upon to make the decision should ask whether the advice relates to the rights, liabilities, obligations or remedies of the client either under private law or public law. If it does not, then legal advice privilege would not apply. If it does so relate, then the judge should ask himself whether the communication falls within the policy underlying the justification for legal advice privilege. The test is whether the occasion on which the communication takes place and the purpose for which it takes place is such as to make it reasonable to expect the privilege to apply. This test is an objective one.
 
LITIGATION PRIVILEGE
 
Litigation privilege applies to communications between parties or their solicitors and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation. Litigation privilege relates to communications at the stage when litigation is pending or in contemplation. It is based on the idea that in legal proceedings, each party should be free to prepare his case as fully as possible without the risk that his opponent will be able to recover the material generated by his preparations.⁹
 
In order for litigation privilege to apply, (1) litigation must be in progress or in contemplation, (2) the communications must have been made for the sole or dominant purpose of conducting that litigation, and (3) the litigation must be adversarial, not investigative or inquisitorial.¹⁰
 
ADVICE PRIVILEGE VS LITIGATION PRIVILEGE
 
There are 3 main differences between advice privilege and litigation privilege.
 
Firstly, the rationale of the two types of privilege is different. Advice privilege is aimed at promoting candour on the part of the client and to protect confidential communications between lawyers and clients. Litigation privilege is concerned with protecting information and materials collected and created for the dominant purpose of litigation.
 
Secondly, legal advice privilege applies only to lawyer-client communication whereas litigation privilege can extend to communications with a third party and to any document brought into existence for the dominant purpose of being used in litigation.
 
Thirdly, the protection of legal advice privilege arises from the nature of the lawyer-client relationship and is precisely the same whether litigation is contemplated or not. However, for one to rely on the protection of litigation privilege, the communication must be made for the dominant purpose of litigation.
 
WAIVER AND EXPRESS CONSENT
 
Section 126 of the Evidence Act 1950 uses strong language in that no advocate “shall at any time be permitted” to disclose such communication “unless with its client’s express consent”. Section 126 permits only one exception when privilege no longer applies, i.e. upon the express consent of the client given and directed to the advocate who is called to court to disclose the professional communication made to him by his client or the advice given by the advocate. The term “express consent” requires an intentional and deliberate act to waive the legal privilege by the privilege holder.¹¹
 
DISCLOSURE TO ‘THIRD PARTIES’
 
A document cannot be admitted as evidence if it is privileged even if it is in the hands of the opposite party. A document which is privileged can be recovered if it is in the hands of an opposite party.¹² Even if the document has wrongly been released to the opposite side in discovery proceedings or otherwise, it may be injuncted from use.¹³
 
COMMUNICATIONS BETWEEN CLIENT AND IN-HOUSE COUNSEL
 
Section 129 of the Evidence Act 1950 provides that no one shall be compelled to disclose to the court any confidential communication which has taken place between him and his legal professional adviser unless he offers himself as a witness, in which case he may be compelled to disclose any such communications as may appear to the court necessary to be known in order to explain any evidence which he has given, but no others.
 
The common law dictates that privilege applies to communications between client and paid legal adviser who is not a barrister or solicitor, i.e. in-house counsel.¹⁴ The English Court of Appeal held that “they are regarded by the law as in every respect in the same position as those who practise on their own account. The only difference is that they act for one client only, and not for several clients. They must uphold the same standards of honour and of etiquette. They are subject to the same duties to their client and to the court. They must respect the same confidences...”.
 
The European Court of Justice had recently in the case of Azko Nobel Chemicals Ltd and Akcros Chemicals Ltd v European Commission [2007] held that legal professional privilege does not extend to written communications between in-house counsel and their clients. The court’s main rationale was that the employment relationship of in-house counsel rendered them incapable of providing independent legal advice.
 
In any event, whether as advocate and solicitor, or corporate counsel, the crucial point is that such communications with the client must be in the capacity of legal advisers, not in any other capacity.
 
CAN LEGAL PROFESSIONAL PRIVILEGE BE EXTENDED TO OTHER PROFESSIONALS?
 
The House of Lords had the opportunity to clarify the law on this issue in the case of R (Morgan Grenfell & Co) v Special Commissioner of Income Tax [2002] UKHL 21. Lord Hoffman, delivering the judgment of the apex court opined that the court was bound to hold that legal professional privilege does not apply, at common law, in relation to any professional other than a qualified lawyer; a solicitor or barrister, or an appropriately qualified foreign lawyer, and that it is not open to the court to hold that such privilege applies outside the legal profession, except as a result of relevant statutory provisions.
 
His Lordship's view is consistent with the policy of legal professional privilege in that the privilege is based not on the legal enforcement of the lawyer’s honourable obligations but on the public interest in the client having uninhibited access to legal advice and assistance. This is why it is confined to lawyers and only the Parliament may create any statutory extension.¹⁵

Notes:
¹ Lord Taylor CJ in R v Derby Magistrates’ Court, Ex p B [1996] AC 487, 503 G-H.
² Cockburn CJ in Bullock & Co v Corry & Co [1878] 3 QBD 356 followed in the Malaysian High Court case of Dato’ Au Ba Chi & Ors v Koh Keng Kheng & Ors [1989] 3 MLJ 445, which was upheld by the then Supreme Court on appeal.
³Nik Hashim FCJ delivering the Federal Court judgment of Dato’ Anthony See Teow Guan v See Teow Chuan & Anor [2009] 3 CLJ 405 cited with approval the Singapore Court of Appeal case of Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd and Other Appeals [2007] 2 SLR 367. 
⁴ English Court of Appeal case of Woodhouse and Co (Ltd) v Woodhouse [1914] 30 TLR 559.
⁵ English case of Re Hydrosan Ltd [1991] BCLC 418.
⁶ Malaysia Federal Court case of Dato’ Anthony See Teow Guan v See Teow Chuan & Anor [2009] 3 CLJ 405.
⁷ Singapore Court of Appeal case of Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd and Other Appeals [2007] 2 SLR 367.  
⁸ Three Rivers District Council and others v Governor and Company of the Bank of England [2004] UKHL 48 (HL).
⁹ Lord Rodger in Three Rivers District Council and others v Governor and Company of the Bank of England [2004] UKHL 48 (HL).
¹⁰ In re L (A Minor) (Police Investigation: Privilege) [1997] AC 16; Refer also to Lord Scott's comments in Three Rivers District Council and others v Governor and Company of the Bank of England [2004] UKHL 48 (HL).
¹¹ The Federal Court in Dato’ Anthony See Teow Guan v See Teow Chuan & Anor [2009] 3 CLJ 405 cited with approval the High Court judgment of Dato’ Au Ba Chi & Ors v Koh Keng Kheng & Ors [1989] 3 MLJ 445 and the Singapore Court of Appeal case of Yeo Ah Tee v Lee Chuan Meow [1962] 1 LNS 210.
¹² B v Auckland District Law Society [2003] 2 AC 736 (PC).
¹³ Federal Court in Dato’ Anthony See Teow Guan v See Teow Chuan & Anor [2009] 3 CLJ 405.
¹⁴ Alfred Crompton Amusement Machines v Customs and Excise Commissioners (No. 2) [1972] 2 All ER 353 at 376 (CA), per L Denning, not challenged on appeal to the House of Lords.
¹⁵ Duchess of Kingston’s Case (1776) 20 St Tr 355.