The practical application of legal professional privilege in discovery proceedings

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26 Aug 2016

General Principles

Legal professional privilege applies to communications between a client and legal advisor, where the legal advisor is acting in a professional capacity and is consulted in confidence for the purpose of the client obtaining legal advice (other than advice facilitating crime or fraud), and where legal professional privilege is claimed by that client.

However, it is possible for legal professional privilege to be waived, either expressly or by way of a waiver being implied or imputed. The manner in which legal professional privilege may be implied or imputed was summarised as follows by the court in S v Thandwa and Others at paragraph 18:

“Implied waiver occurs (by analogy with contract law principles) when the holder of the privilege with full knowledge of it so behaves that it can objectively be concluded that the privilege was intentionally abandoned. Imputed waiver occurs where – regardless of the holder’s intention – fairness requires that the court conclude that the privilege was abandoned; imputed waiver proceeds from fairness, regardless of actual abandonment.”

In discovery proceedings, documentation and correspondence in respect of which legal professional privileged is claimed, and in respect of which this privilege has not been waived, are generally listed in a separate schedule to the respective parties’ discovery affidavits. These documents will not be provided to the other side, and may not be relied upon in subsequent proceedings unless a supplementary discovery affidavit is lodged, in which the document previously listed as privileged is fully disclosed.

Practical Application

Each document discovered during litigation proceedings should be considered for purposes of establishing whether or not that document may be subject to legal professional privilege, and/or whether it contains any references to a legally privileged communication that may inadvertently constitute a waiver of privilege in relation to that privileged communication.

Could The Document Be Privileged?

When reviewing documentation and correspondence for purposes of determining whether or not it may be subject to legal professional privilege, it is important to carefully consider whether or not all of the requirements of legal professional privilege have been met, and whether or not legal professional privilege may have been waived.

The first of these requirements that is often overlooked, is that the documentation or correspondence must have formed part of communications between a client and legal advisor, which are intended to be, and remain, strictly confidential.

Where, for example, a client provides their legal advisor with a marked-up document for purposes of on-providing that document to the counter-party to a transaction, it is unlikely that legal professional privilege may be claimed in respect of that document. However, each item should be considered in its particular context, with a view to establishing the intentions of the particular parties involved.

Another requirement that is important to note, especially in the context of tax related matters, is that this privilege currently only extends to lawyers.

For example, communications between clients and their tax advisors who are not also legal advisors, would not be subject to legal professional privilege, despite the fact that such communications may have been entered into in confidence, with a view to obtaining legal advice from the tax advisor acting in their professional capacity.

Has Privilege Been Waived?

Once it has been established that a document may be subject to legal professional privilege, it should be considered whether or not that privilege may have been waived prior to discovery proceedings.

While legal professional privilege may not be waived when privileged advice is disclosed to a third party under express conditions of strict confidentiality, waiver of privilege may be imputed or implied where no such express conditions are stipulated. Any sharing of a potentially privileged document beyond the client/legal advisor relationship should therefore be carefully considered.

Does The Document Reference A Legally Privileged Communication?

In addition, some references to legally privileged communications in non-privileged correspondence and/or documentation may potentially constitute a waiver of privilege in respect of that document. It would therefore be important that, where applicable, any such non-privileged correspondence and/or documentation be redacted.

Preparing For Discovery Is Key

Legal professional privilege is just one of the many complex considerations that must be addressed during the course of discovery proceedings in tax litigation matters. Given the limited time periods applicable in tax litigation and the often voluminous amount of documentation involved, it is critical that clients mandate their advisors to prepare for a discovery well in advance, and provide for sufficient time to properly consider all of the documentation and correspondence being discovered, among other things, with a view to identifying and properly dealing with potentially privileged items.

In addition, given the fact that legal professional privilege is generally assessed for the first time when preparing discovery in a tax matter, it is very important to be aware of the relevant principles during any transaction in which legal advice is obtained so that one can ensure that legal professional privilege is protected. There is more often than not a gap of many years between the time a transaction is entered into and the time an audit of the transaction may be conducted by the South African Revenue Service, which may result in a dispute, and therefore, any party who is the recipient of legal advice should keep such advice well protected.

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(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)

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