Check Your Privilege

Geraldine Goon discusses recent developments in the law on legal advice privilege and litigation privilege.
  
There are broadly three types of legal privilege - legal advice privilege, litigation privilege and “Without Prejudice” privilege.
 
In Malaysia, legal privilege stems from both the Evidence Act 1950 (“Evidence Act”) and common law. Issues arise as to which of these laws provide the basis for legal advice privilege and which for litigation privilege and the application and reach of these two types of privilege.
 
In brief, legal advice privilege is codified in section 126 of the Evidence Act. Litigation privilege remains substantially within the realm of common law save for when section 129 of the Evidence Act applies to remove the protection of privilege in very limited circumstances. “Without prejudice” privilege cloaks written or oral communications which were genuinely made in an attempt at settlement negotiations.
 
This article will consider the recent developments in the law of legal privilege, specifically legal advice privilege and litigation privilege in Malaysia. Where relevant, comparisons will be made to the position in Singapore. “Without Prejudice” privilege falls outside the scope of this discussion. 
 
LEGAL ADVICE PRIVILEGE
 
Legal advice privilege arises out of the relationship between a client and his lawyer. As is evident from the name, this type of privilege relates to the provision and receipt of legal advice. No legal proceedings need to exist or be in contemplation for legal advice privilege to apply.
 
Legal advice privilege is codified within section 126 of the Evidence Act. The extent of the protection rendered by section 126 of the Evidence Act has been extensively elucidated by the Malaysian Federal Court in Dato’ Anthony See Teow Guan v See Teow Chuan & Anor [2009] 3 MLJ 14. Our apex court referred to and relied on the Singapore Court of Appeal judgment of Skandinaviska Enskilda Banken AB (PUBL), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd and other appeals [2007] 2 SLR 367 (“Skandinaviska”). Skandinaviska considered section 128 of the Singaporean Evidence Act which is identical to section 126 of the Evidence Act. In short, legal professional privilege under section 126 of the Evidence Act concerns legal advice or communications between a lawyer and his client with a view to obtaining legal advice. This privilege is absolute and can only be waived by the privilege holder, i.e. the client, save where protection into such privilege has been eroded by legislation. This will be further discussed below.  
 
LITIGATION PRIVILEGE
 
Litigation privilege extends further than legal advice privilege, to communications which is for the purposes of or leading to evidence for use in legal proceedings. This applies to such communications with third parties as well.
 
The Malaysian position is set out in Tenaga Nasional Bhd v Bukit Lenang Development Sdn Bhd [2016] 5 MLJ 127 (“Tenaga Nasional”) and Wang Han Lin v HSBC Bank Malaysia Bhd [2017] 10 CLJ 111 (“Wang”). Both are judgments of the Court of Appeal.
 
Tenaga Nasional seemed to imply at the time, that litigation privilege did not exist any longer as a matter of common law due to section 3 of the Civil Law Act 1956. The Court of Appeal was of the view that section 126 of the Evidence Act codifies the law on privilege. Due to this codification, common law privilege no longer existed. As section 126 of the Evidence Act only describes legal advice privilege and not litigation privilege, the court opined that litigation privilege could no longer be relied upon.
 
The Court of Appeal in Wang subsequently straightened out matters. It clarified that litigation privilege continued to exist based on common law principles as the application of common law litigation privilege does not conflict with the sections 126 to 129 of the Evidence Act. Wang also sets out the two-fold test for determining how litigation privilege is established. First, whether litigation was pending or apprehended when the information or document was obtained; and secondly whether litigation was the dominant purpose for the preparation of the document.
 
The Singaporean Court of Appeal in Skandinaviska also preserved litigation privilege as a matter of common law. The Court of Appeal determined that common law litigation privilege is consistent with sections 128 and 131 of the Singaporean Evidence Act when read together. Hence, as there was no inconsistency between common law and statute, litigation privilege continued to exist by virtue of common law and was not struck down by section 2(2) of the Evidence Act of Singapore which repeals the rules of evidence that are not contained in written law only if such rules are inconsistent with the provisions of the Evidence Act of Singapore.
 
In addition, our Court of Appeal in Wang confirmed that section 126 of the Evidence Act deals with legal advice privilege, but that section 129 of the Evidence Act is broader and expands into the realm of litigation privilege. Reference was made to Skandinaviska which referred to section 131 of the Singaporean Evidence Act which at the material time was identical to section 129 of the Evidence Act. The example scenario given to demonstrate the reach of section 129 of the Evidence Act was where a client offers himself as a witness, in which case he may be compelled to make certain disclosures.
 
A point for consideration that arose out of Wang is the question of whether legal advice privilege, where not codified within the Evidence Act, continues to exist in common law. In response, there are two points for consideration. First, the Court of Appeal in Wang stated that sections 126 to 129 of the Evidence Act deal with the full scope of legal professional privilege and that such privilege covered both legal advice privilege as well as litigation privilege. Hence, if litigation privilege was also dealt with by sections 126 to 129 of the Evidence Act and yet still existed as a matter of common law, the same may be applied to legal advice privilege. Secondly, consideration ought to be given to what alternative principle governs legal advice privilege when it does not come under the ambit of the Evidence Act, for example, in arbitration proceedings or simply where a matter is not the subject of “… judicial proceedings in or before any court”.
 
POSSIBLE EXCEPTIONS TO THE PROTECTION UNDER PRIVILEGE
 
Section 46 of the Malaysian Anti-Corruption Commission Act 2009 (“MACC Act”) and section 47 the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (“AMLATFA”) both contain similar provisions governing disclosure by advocates and solicitors.
 
Both sections provide that an application may be made to a Judge of the High Court, in relation to an investigation into offences under the respective Acts, to order disclosure by an advocate and solicitor. Such disclosure is limited to information available to that advocate and solicitor in respect of any transaction or dealing relating to property liable to seizure under the respective Acts.
 
However, both provisions contain a proviso, in subsection 46(2) of the MACC Act and subsection 47(2) of AMLATFA, that limit the extent of disclosure that can be required of the advocate and solicitor. Both provisions do not permit disclosure of “privileged information or communication which came to his (the advocate and solicitor) knowledge for the purpose of any pending proceedings”.
 
The protection of subsection 46(2) of the MACC Act has been upheld by the Court of Appeal in Suruhanjaya Pencegahan Rasuah Malaysia & Ors v Latheefa Beebi Koya & Anor [2015] 6 CLJ 476 with the court stating that “sub-s 46(2) categorically excludes any privileged information or solicitor-client communication”. Section 47 of AMLATFA has yet to be tested.
 
It is critical to note that the wording of both the above-mentioned subsections potentially limit the protection to information that is the subject of litigation privilege. The question as to whether such protection can be extended to documents that are the subject of legal advice privilege has yet to be considered by the courts.
 
IS A BREACH OF SECTION 126 ACTIONABLE?
 
The issue of whether a breach of section 126 of the Evidence Act is actionable arose very recently in the case of Tan Chong Kean v Yeoh Tai Chuan & Anor [2018] 2 MLJ 669. The Federal Court was of the opinion that a breach of section 126 was tantamount to breach of a principle of fundamental justice. This would entitle an aggrieved party to commence an action for an order to “safeguard the confidentiality of the client-solicitor communication”. As a note of caution, in mounting such an action, it is sufficient to merely mention the privileged documents as any disclosure of their contents may be construed as a waiver of privilege.  
 
EXTENDING SECTION 126(1) TO THIRD PARTIES AND IN-HOUSE COUNSEL?
 
In Toralf Mueller v Alcim Holding Sdn Bhd [2015] MLJU 779, Wong Kian Kheong JC (as he then was) confirmed that section 126(1) of the Evidence Act does not apply to communications between in-house counsel and his employer. However, K.K. Wong JC went on to comment on the need for a provision similar to section 128A of the Singaporean Evidence Act which provides that legal advice privilege protects communications between an entity and its in-house legal counsel.
 
While there is justification in ensuring that all the material facts of a case are not clouded by privilege or such a provision is not abused to prevent material facts from being disclosed, nonetheless an entity ought to be freely able to discuss its concerns with its in-house counsel without fear of disclosure of any internal legal advice given.
 
In addition to the above, in an increasingly international world, K.K. Wong JC also expressed his hope that the legislature would extend privilege to communications between Malaysian and foreign lawyers.
 
Section 128A of the Singaporean Evidence Act was introduced in 2012 to provide for the application of legal advice privilege to in-house counsel. In the wider scope of litigation, the Singaporean courts have generally taken a broad approach in interpreting legal advice privilege. Hence, legal advice privilege encompasses both advice by a lawyer to his client on the law, as well as advice of what should be done in a legal context. It remains to be seen whether the Malaysian legislature will consider an update of the Malaysian position to bring us more in line with other jurisdictions.
 
EROSION BY THE INCOME TAX ACT?
 
Section 142(5) of the Income Tax Act 1967 (“ITA”) purports to erode the protection generally afforded by all the above-mentioned types of legal privilege. As both types of privilege could relate to the relationship between a client and his legal advisor, it is possible that section 142(5) could apply to either scenario.
 
The reach of section 142(5) of the ITA has been considered in the case of Bar Malaysia v Ketua Pengarah Hasil Dalam Negeri [2018] 9 MLJ 557.
 
There the High Court determined that on the following three reasons, section 142(5)(b) of the ITA does not defeat section 126 of the Evidence Act. First, the wording in section 142(5)(b), at the most, is intended to remove protection from “practitioners” or “firm of practitioners”, such as tax accountants and tax agents. The High Court was of the view that the term “practitioners” does not extend to “advocates and solicitors”. Section 126 of the Evidence Act, on the other hand, specifically refers to an advocate. Section 126 of the Evidence Act being more specific would override section 142(5)(b) of the ITA, hence maintaining the protection afforded by section 126 of the Evidence Act. Secondly, the qualification in section 142(5)(b), namely “Notwithstanding the provisions of any other written law …” does not operate to exclude common law. Therefore, common law principles of privilege would not be overridden by section 142(5)(b) of the ITA. Thirdly, as the Evidence Act is more precise, Parliament did not intend to apply the ITA to advocates and solicitors and thus, the provision should not stray beyond Parliament’s intentions. The High Court then highlighted sections 126(1)(a) and 126(1)(b) of the Evidence Act to emphasise circumstances which would permit disclosure.
 
This case is now on appeal to the Court of Appeal.
 
CONCLUSION
 
The Malaysian courts have, insofar as the law permits, upheld the sanctity of legal advice privilege and litigation privilege. We now look to the legislature to ensure that Malaysia is on equal footing with other commonwealth jurisdictions when it comes to the protection of privileged information.