Whilst it is now quite common for lawyers to be employed in both legal and management positions in companies, it must not be assumed that all advice they give has the benefit of legal professional privilege if it cannot be proved they were acting in a legal (rather than a management) capacity when they gave the advice.

In Telstra Corporation Limited v Minister
for Communications, Information Technology and the Arts (No. 2) [2007] FCA 1445, Telstra sought to prevent disclosure of documents produced by in-house lawyers. It failed.

Whilst there was evidence to establish that the persons referred to as internal legal advisers were legal practitioners (ie they had practising certificates), there was no evidence to establish the role which the various legal practitioners performed within Telstra.  In particular,
no evidence was advanced to disclose the measure of independence of the legal practitioners in question and their ability to provide impartial legal
advice, given the roles they had to perform.

Judge Graham said:

"In my opinion an in-house lawyer will lack the requisite measure of independence if his or her advice is at risk of being compromised by virtue of
the nature of his employment relationship with his employer.  On the other hand, if the personal loyalties, duties and interests of the in-house lawyer do not influence the professional legal advice which he gives, the requirement for independence will be satisfied…In the case presently before the Court, there is no evidence, as I have earlier remarked, going to the independence of the internal legal advisers involved in the communications said to have been brought into existence for the dominant purpose of providing or receiving legal advice."

Judge Graham adopted the principles In Seven Network Limited v News Limited [2005] FCA 142 at [4]
when Tamberlin J said in respect of legal professional privilege:

‘4. The dominant purpose test has particular importance in relation to the position of in-house counsel because they may be in a closer relationship to the management than outside counsel and therefore more exposed to participation in commercial aspects of an enterprise. The courts recognise that being a lawyer employed by an enterprise does not of itself entail a level of independence. Each employment will depend on the way in which the position is structured and executed.  For example, some enterprises may treat the in-house adviser as concerned solely in advising and dealing with legal problems. As a matter of commercial reality, however, both internal and external legal advisers will often be involved in expressing views and acting on commercial issues.

5. The authorities recognise that in order to attract privilege the legal adviser should have an appropriate degree of independence so as to ensure that
the protection of legal professional privilege is not conferred too widely.
…’

In the Seven Network Limited v News Limited case the Judge decided that News’ chief general counsel was not acting in a legal capacity when he gave the relevant advice.