In a recent ruling, the High Court has reminded us of the limitations of legal advice privilege (the right not to have to disclose certain confidential communications between lawyer and client). We consider the reminder this case gives to large institutions about how they instruct legal advice.

The High Court[1] has confirmed that for the purposes of legal advice privilege, the client consists only of those employees authorised to seek and receive legal advice from a lawyer. Legal advice privilege does not extend to information provided by employees and ex-employees to or for the purposes of being placed before a lawyer. In reaching its decision, the court adopted the narrow interpretation of the ‘client’ for the purposes of legal advice privilege as established by the Court of Appeal in Three Rivers (No 5).

What is legal advice privilege?

Legal advice privilege is a type of privilege which attaches to confidential communications between a lawyer and client for the purposes of giving advice and assistance on the client’s rights, liabilities and obligations. We often hear about it when a dispute arises and, a party may feel that disclosing its communications with its lawyer could be damaging. The intention is to ensure those instructing lawyers can do so freely without worrying that things they tell their lawyer could end up being disclosed. It does not apply to communications between the client or lawyer and third parties.

Who is the client?

The decision reinforces the importance for corporations and large organisations, such as banks, to identify who the client is at the outset. The court indicated that only those employees who are duly authorised to seek and receive legal advice from its lawyer may be regarded as the client. The case explored whether this should only be those people that can be said to constitute part of the ‘directing mind and will’ of the organisation but this point was not decided upon. A corporate client faces the risk of generating non-privileged communications if the distinction is not made at the outset. Stating that an entire organisation or group is a client for contractual purposes does not mean that all communications between all employees of that organisation or group are privileged.

In large organisations, the court will take a restrictive approach in determining who the client is. In this particular case, the court held that interview notes with employees and ex-employees taken by in-house lawyers, an external lawyer and their agents were not covered by legal advice privilege. The notes were part of an information gathering exercise which was preparatory to the organisation obtaining legal advice. The communications were not between client and legal adviser and there was no sufficient basis for not applying Three Rivers No 5.

Practical considerations

Corporate clients should carefully identify those persons within its organisation who are given the authority to instruct lawyers on behalf of the company and to communicate with them in order to seek and receive legal advice, and distinguish them from the employees who are only permitted to communicate factual information to lawyers. In the latter case, this information will not be protected by legal advice privilege. Care should also be taken in deciding what should be recorded and in what manner. If employees of an organisation are required to provide information to its lawyers, the case determined that a lawyer’s interview notes were not subject to legal advice privilege as lawyers’ working papers. The notes were not taken in contemplation of providing legal advice but simply a fact finding exercise. Recorded notes must include something that may ‘give a clue as to the trend of advice being given to a client by its lawyer’.

Where distribution or discussion of information and advice received by a corporate client from its lawyers is required within a company, the document or information’s privileged nature should be clearly identified. However, marking all documents as privileged and confidential will not automatically result in it being subject to legal advice privilege.

Going forward…

The restrictive definition of the ‘client’ set out by the Court of Appeal in Three Rivers No 5 has been much criticised and has not been followed in other jurisdictions. The court noted the criticisms and suggested that in a suitable case, the Supreme Court may revisit the decision, It is possible that this particular case may proceed on appeal as a ‘leapfrog’ certificate for permission to appeal to the Supreme Court has been granted. It remains to be seen how the policy reasons behind this decision will be re-examined. In the meantime, clients who engage firms through general umbrella or panel agreements would be prudent to ensure that either in those agreements or in individual transaction instructions the people or group in the organisation authorised to seek and receive legal advice for purposes of privilege are clearly identified.

EDIT: Since publication of this blog post, it has been reported that the appeal has been dropped and so this issue will not, on this occasion, go before the Supreme Court.

For further information, please contact:

Sharon Malhi, solicitor, Banking and Finance

T: 0121 234 0226

E:Sharon.Malhi@gateleyplc.com

[1] The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch)


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.