Secondment of In-House Legal Counsel and Legal Advice Privilege
10 April 2019
In Asplenium Land v Lam Chye Shing (2019), the Singapore High Court had to consider whether emails to and from a person acting as a company’s legal counsel were protected by legal advice privilege where that person had been seconded to the company by a company that was not its parent company. It also discussed the factors required to show that an employment contract had arisen. The case illustrates the need to put in place proper documentation to ensure the preservation of privilege.
Many corporations have their own in-house legal teams. For large corporations, such teams can be quite sizeable and in-house counsel within such teams may often be called on to give legal advice not only to the corporation directly employing them but to other companies within the group. The recent case of Asplenium Land v Lam Chye Shing  SGHC 41 illustrates the risks that can arise in secondment situations and highlights the importance of ensuring proper documentation to ensure that legal privilege is not lost.
In this case, the communications in question were emails to and from Mark Hwang (Hwang), who was acting as the legal counsel for Asplenium Land Pte Ltd (Asplenium). However, Hwang was not directly employed by Asplenium. Instead he was employed as a legal counsel by Nuri Holdings (S) Pte Ltd (Nuri).
Nuri held shares in Tuan Sing Holdings Ltd (Tuan Sing) and it was Tuan Sing that was the parent company of Asplenium. However, Nuri only held 46.6% of the shares in Tuan Sing. Tuan Sing was therefore not a subsidiary of Nuri.
Legal advice privilege protects documents from having to be disclosed in legal proceedings. Legal advice privilege generally applies to advice between a lawyer and his client. It has also been applied to communications to and by a company’s in-house legal counsel which take place in a legal context.
In Singapore, legal advice privilege is governed by the Evidence Act which provides, among other things, that communications to and from legal counsel employed by a corporation are protected by legal advice privilege if the communications are for the purpose of his employment as legal counsel. Section 128A of the Evidence Act also extends legal advice privilege to situations where the legal counsel acts as legal counsel not for his direct employer but for related companies of his employer. The legislative intent behind this extension was to recognize the fact that many group companies will house the in-house legal team within one company for organisational purposes but the members of the team will work flexibly to provide legal advice to other companies within the same group.
In order to be considered to be within the same group for the purposes of section 128A, however, the companies must be “related companies”. This is defined in the Companies Act and a company is a related company of another corporation if it is:
• the holding company of that other corporation;
• a subsidiary of that other corporation; or
• a subsidiary of the holding company of that other corporation.
The issue in this case was that Tuan Sing was not a subsidiary of Nuri and therefore the secondment of Hwang to Tuan Sing’s wholly-owned subsidiary, Asplenium, would not attract legal advice privilege if the secondment was only as part of his employment as legal counsel with Nuri.
Court finds that Hwang was an employee of Tuan Sing
The Singapore High Court examined the facts and held that the facts showed that there was an employment contract between Hwang and Tuan Sing, even though this was an undocumented employment contract. As there was a direct employment contract between Hwang and Tuan Sing, Hwang could act as Asplenium’s legal counsel and communications sent and received for the purpose of that role were protected by legal advice privilege under section 128A.
In determining whether there was an employment relationship between Hwang and Tuan Sing, the Court applied the standard test for whether an employment relationship exists. This states that whether an employment relationship has arisen will depend on a weighing of the following factors:
• The extent of control exerted by the putative employer over the putative employee;
• The extent of integration by the putative employee into the enterprise of the putative employer;
• The remuneration of the putative employee;
• Whether the putative employee has an obligation to work for the putative employer only;
• Whether the putative employer provides tools, equipment and training to the putative employee;
• Whether the putative employer is obliged to provide work, and the putative employee obliged to accept that work; and
• Whether the putative employer has the right to dismiss, suspend or evaluate the putative employee.
In this case, the Court held that Hwang was an employee of Tuan Sing in addition to being an employee of Nuri. It based its decision on the following factors.
• Hwang had been working for Tuan Sing as legal counsel since 2009.
• Tuan Sing would assign work directly to Hwang without the need for clearance from Nuri and there was no evidence that Hwang had the discretion to decline such assignments.
• Hwang was Tuan Sing’s only in-house legal counsel and his work was integral to Tuan Sing’s business.
• Tuan Sing paid half of the cost of Hwang’s salary on a reimbursement basis to Nuri.
• Tuan Sing provided Hwang with his office space and all office equipment to do his job with Tuan Sing.
There were however factors that the Court noted pointed away from a direct employment relationship with Tuan Sing:
• Hwang had not been told that he was on secondment and he himself was not sure if Tuan Sing was also his employer.
• Tuan Sing only started paying for half of Hwang’s salary as from 2014 even though he had worked for both Tuan Sing and Nuri since 2009.
• There was also a lack of formal documentation on the arrangement.
Ultimately, these factors were, in the Court’s balancing exercise, not as significant as those that supported a determination that Hwang was an employee of Tuan Sing. Accordingly, as Hwang was an employee of Tuan Sing, and as Asplenium was a subsidiary of Tuan Sing, the emails that he sent on Asplenium’s legal matters were covered by legal advice privilege.
This case is a useful reminder to companies to put in place proper arrangements particularly when in-house counsel are asked to provide services to companies that do not fall strictly within the Companies Act definition of “related companies”. The decision could well have gone the other way on a different set of facts. For example, if Hwang had only been asked on an occasional basis to provide discrete pieces of advice to Tuan Sing and Asplenium or only advised on some projects and not others.