Legal Advice Privilege: The Dominant Purpose Test

You’re sitting in a boardroom, about to make a decision that could change the trajectory of your company. There's a lawyer across the table, and you're hoping every word exchanged in this meeting will be protected from prying eyes. But is it? The answer hinges on a critical concept: legal advice privilege. And, within that privilege, one particular factor dominates—the dominant purpose test.

The dominant purpose test is the litmus test for whether or not communications between a lawyer and client are protected by legal advice privilege. Understanding this test can mean the difference between confidential, safeguarded communication and exposure to external scrutiny. But here’s the catch: the law isn’t always straightforward.

The story of legal advice privilege is as much about what’s left unsaid as what is shared. Companies, individuals, and legal professionals alike have, for centuries, navigated the complexities of privilege, trying to balance transparency and confidentiality.

At the heart of this dance lies one question: why were these communications made? The answer must be the provision of legal advice or services for the dominant purpose test to apply. Simply having a lawyer present isn’t enough; what really matters is the intent behind the interaction.

The History and Evolution of the Dominant Purpose Test

Before diving into the implications for today’s business world, it's essential to explore where this concept originated. Legal privilege dates back to English common law, with roots in the 16th century. Over the centuries, courts have carved out the specific situations in which privilege applies, constantly adapting the rules to suit evolving societal and business needs. But the dominant purpose test is a more modern construct, shaped by numerous landmark cases.

A key turning point came in the House of Lords decision in Waugh v. British Railways Board (1980). The case established that if communications serve multiple purposes, the dominant one must be to seek or provide legal advice for privilege to be recognized. This decision transformed the landscape for businesses, who realized that they could no longer rely on blanket privilege in multi-purpose documents.

The dominant purpose test was refined further in the case of Three Rivers District Council v. Bank of England (2004). Here, the courts stressed that even if legal advice was one of several purposes, it must still be the overriding reason for the communication. In other words, the legal tail must wag the dog.

The Practical Application: How the Dominant Purpose Test Protects (and Sometimes Fails to Protect) Clients

Theoretical knowledge is one thing, but how does this play out in real life? Imagine a company executive who sends an email to their legal team but cc’s a host of non-legal staff. Is this communication privileged? The answer depends on the dominant purpose.

If the email's primary aim is legal advice, privilege may apply. But if the email is about operational matters, with the legal question tacked on, privilege might be denied. The court doesn’t just look at the sender or recipients; it scrutinizes the content and purpose of the message.

Take, for example, the complex case of SFO v. Eurasian Natural Resources Corporation Ltd (2018). In this case, the UK High Court ruled that documents prepared during an internal investigation were not protected by legal privilege because they were for the purpose of fact-finding and not legal advice. This ruling sent shockwaves through the corporate world, reminding executives that privilege is not automatic and must be carefully considered.

Another classic pitfall occurs when communications serve multiple purposes—some legal, others commercial. The lines get blurred, and so does the protection.

What Must Be Considered When Applying the Dominant Purpose Test?

To fully understand the dominant purpose test, businesses and legal professionals need to grasp the factors that influence its application:

1. The True Intention: Courts will look into the real motivation behind the communication. Was legal advice the main reason for the exchange?
2. Multiple Purposes: If there are several reasons for the communication, only the dominant one matters. Courts often look beyond the surface.
3. The Role of Non-Legal Staff: Including non-legal staff in communications can weaken a claim for privilege. Businesses should be cautious when cc’ing other departments.
4. Document Labeling: Simply marking documents as ‘privileged’ won’t suffice. The substance of the communication is what the courts focus on.
5. Jurisdictional Variations: The rules surrounding the dominant purpose test can vary across jurisdictions, adding a layer of complexity for multinational companies.

It’s important to consult with legal professionals early in the process of preparing sensitive documents to ensure privilege is protected. Otherwise, your confidential communication might become tomorrow’s courtroom evidence.

The Risks of Failing to Protect Privileged Communication

Failing to understand the dominant purpose test can have significant repercussions. If your communications aren’t deemed privileged, they may be disclosed in litigation or regulatory investigations, leading to severe consequences:

• Legal Exposure: Sensitive information could be used against you, damaging your legal standing.
• Reputational Damage: Leaked communications can tarnish a company’s reputation, impacting shareholder trust and market perception.
• Financial Penalties: Regulatory bodies may impose fines for non-compliance with legal obligations, especially if privileged documents are mistakenly disclosed.

The dominant purpose test isn’t just a legal formality—it’s a shield against external threats. But like any shield, it must be properly maintained and understood to be effective.

Case Studies: When Privilege Worked—and When It Didn’t

Consider the case of Westpac Banking Corporation v. The Commissioner of Taxation (2011). In this situation, the court found that communications between the bank and its lawyers regarding a complex tax arrangement were protected by legal advice privilege. The court ruled that the dominant purpose of the communications was to obtain legal advice on the tax implications, even though commercial considerations were also discussed.

On the flip side, in Australian Competition and Consumer Commission (ACCC) v. Cadbury Schweppes Pty Ltd (2009), privilege was denied because the communications involved mixed purposes. The court determined that while legal advice was sought, the dominant purpose was commercial strategy, which stripped the communication of privilege.

Conclusion: Navigating the Dominant Purpose Test in Modern Business

For businesses today, the dominant purpose test is more relevant than ever. With global communication channels, multiple jurisdictions, and increasingly complex regulatory environments, protecting privileged communications requires careful planning and strategic legal advice.

But here's the key takeaway: it’s not just about having a lawyer in the room—it’s about why you’re talking to them in the first place. By focusing on the dominant purpose of your communication, you can safeguard the advice that really matters, and keep your company's most sensitive information out of harm's way.

In today’s litigious and highly regulated world, the stakes are too high to leave this to chance.