WHO IS A LAWYER?
The Supreme Court decision in R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another  UKSC 1 confirmed that legal advice privilege does not apply, at common law, to any professional other than a qualified lawyer, ie a solicitor or barrister or an appropriately qualified foreign lawyer. The court rejected Prudential’s contention that documents by which it had sought or received legal advice on tax matters from its accounting advisor were within the scope of legal advice privilege. Any extension of privilege outside the legal professions is properly a matter for Parliament.
Various bodies including the Law Society (represented by Herbert Smith Freehills), the Bar Council and the Institute of Chartered Accountants in England and Wales (ICAEW) intervened in the appeal. See “The UK Supreme Court refuses to extend privilege to accountants” (23 January 2013) for more detail on the case.
Under English law, in-house lawyers are included within the ambit of legal advice privilege so long as they are acting in a legal rather than an executive capacity: Alfred Crompton Amusement Machines Ltd v Customs & Excise Commissioners (No 2)  2 QB 102.
Essentially, the test is the same as for external lawyers, ie whether the communications take place in a relevant legal context and are directly related to the performance of the lawyer’s professional duty as legal adviser (see “Giving/obtaining legal advice”). However, in the in-house context there is greater scope for individuals to mix legal and non-legal roles, and therefore for the waters to be muddied as to the capacity in which an in-house lawyer was acting at a given moment. As a practical matter, mixing legal and business advice in the same communication should be avoided so far as possible.
Qualification to practice
Where a solicitor is not entitled to practice because he or she has been struck off the record, communications with that solicitor will not be covered by legal advice privilege unless the client can show that it believed the solicitor was entitled to practice at the time the communications were made. This was confirmed by the High Court in Dadourian Group International Inc v Simms  EWHC 1784 (Ch).
In Dadourian v Simms, the judge said that the client had to demonstrate a belief that the lawyer “held a practising certificate as a solicitor” at the relevant time in order to benefit from privilege. This was in the context of a case about a solicitor who had been struck off, so it is not clear whether privilege would be denied due to the absence of a practising certificate in itself. However, the safe course must be for solicitors to keep their practising certificates up to date if they wish their advice to be privileged.
Qualified foreign lawyer
As noted above, legal advice privilege applies to qualified foreign lawyers, as well as English solicitors and barristers. The privilege may apply whether the foreign lawyer is advising on English law or the law of his or her qualification, so long as there is a lawyer / client relationship and the other requirements for privilege are satisfied.
In IBM Corp v Phoenix International (Computers) Ltd  1 All ER 413 the court stated: “The fact that the advice given [by American attorneys] related predominantly to English law is irrelevant. It was advice of foreign lawyers, acting as lawyers, to be used by Phoenix to decide what strategy to adopt in carrying on business…”
Supervision by a lawyer
Communications with non-legally qualified personnel (eg trainees or paralegals) will be covered by privilege if the individual in question was acting under the supervision of a qualified lawyer (whether in private practice or in-house).
Alternative Business Structures (ABSs)
As a result of the implementation of the Legal Services Act 2007, ABSs and multi-disciplinary partnerships are permitted so that legal services can be offered by partnerships between lawyers and accountants (among other structures).
The Legal Services Act contains specific provisions dealing with legal professional privilege in the context of ABSs. Essentially, privilege is available only to advice given by, or under the supervision of, the lawyers in an ABS and not by other professionals. So the key point is whether the person actually providing the legal services is a lawyer or is appropriately supervised by a lawyer. There is obvious scope for debate as to what amounts to supervision by a lawyer in this context.
In the Prudential case, the Supreme Court declined to give the guidance sought by the Legal Services Board, intervening in the appeal, as to how it should discharge its statutory duties in this regard.
WHO IS THE CLIENT?
Outside the litigation context, only lawyer / client communications are covered by privilege. Legal advice privilege (unlike litigation privilege) does not extend to communications with third parties, even if they are for the purpose of obtaining information to enable the lawyer to advise (see for example Price Waterhouse v BCCI Holdings (Luxembourg) SA (1992) BCLC 583).
Restrictive view of the “client”
The Court of Appeal decision in Three Rivers District Council v Bank of England  EWCA Civ 474 (“Three Rivers No 5”) led to uncertainty over what had until that point seemed clear – the question of who is a lawyer’s “client” for the purposes of assessing the application of legal advice privilege.
In that case, creditors of BCCI sued the Bank of England for misfeasance in public office. The Bank asserted privilege in documents prepared by its employees which were to be provided to its external solicitors to assist in preparing the Bank’s submissions to the Bingham Inquiry on the collapse of BCCI. The Court of Appeal held that, for the purpose of assessing privilege, the “client” did not encompass all employees of the Bank but was limited to a particular group of three individuals (the “Bingham Inquiry Unit”) who had been given responsibility for coordinating communications with the Bank’s solicitors. Everyone else at the Bank was a third party to the lawyer-client relationship, so legal advice privilege did not apply. On this narrow view of the “client”, even communications between the solicitors and the Bank’s Governor (who had appointed the Bingham Inquiry Unit) would not be privileged. Click here for more detail on the judgment.
Following this decision, there was concern at the prospect of a flood of decisions restricting the “client” to some limited group of employees within an organisation. In fact, in the first 13 years following the decision, there was (to our knowledge) no reported English decision applying Three Rivers No 5 on this point. Further:
- The decision was given a decidedly chilly reception by the House of Lords in its later decision on a different point in Three Rivers No 6. Although their Lordships declined to express an opinion on the issue, as it did not arise for consideration in the appeal, Lord Carswell said that he was “not to be taken to have approved of the decision” and reserved his position on its correctness.
- The High Court declined to apply the same reasoning in Managing General Partner Ltd and others v Babcock & Brown Global Partners  EWHC 2176 (Ch). The defendant (Global) was a limited partnership of which the claimant (General) was the managing general partner. The claimant argued that General was the sole “client” for the purposes of privilege, in the same way that the Bingham Inquiry Unit rather than the Bank of England itself was the client in Three Rivers No 5. The judge rejected that argument saying: “General was undoubtedly the party with whom the contract of retainer was entered because it alone had authority within Global to enter into relations with third parties. But that does not mean that it alone was the client. It entered into the contract as agent for and on behalf of Global, not in its own right in its own interest.”
- The decision was specifically not followed by the Australian courts (who in fact went the other way and broadened the scope of legal advice privilege to include third party communications, so long as they were prepared for the purpose of obtaining legal advice: see Pratt Holdings Pty Ltd v Commissioner of Taxation  FCAFC 122).
- The Hong Kong Court of Appeal overturned a first instance decision which followed Three Rivers No 5 in restricting the “client” to the group legal department (comprising two in-house lawyers) and the Board of Directors of the relevant organisation: Citic Pacific Limited v Secretary for Justice and Commissioner of Police (unrep, 29/06/2015, CACV 7/2012). The appeal court said the client is simply the corporation and the question is which employees should be regarded as being authorised to act for it in the process of obtaining legal advice. It adopted a “dominant purpose” test for legal advice privilege – ie the privilege protects internal confidential documents of the client organisation which are produced for the dominant purpose that they or their contents be used to obtain legal advice. See “Hong Kong Court of Appeal rejects narrow interpretation of “client” and adopts broader test for legal advice privilege” (29 February 2012).
However, throughout that time there has remained a risk that the English courts could apply a narrow view of “client” in any given case, finding that privilege is restricted to some limited group of employees since they (and only they) were authorised to instruct and receive advice from the external lawyers on behalf of the client organisation. That risk has since materialised, with a number of decisions applying the narrow “client” point with the result that interviews between an organisation’s solicitors and its employees were not covered by legal advice privilege: see for example the High Court decisions in RBS Rights Issue Litigation  EWHC 3161 (Ch) and Astex Therapeutics Ltd v Astrazeneca AB  EWHC 2759 (Ch) considered in “High Court applies narrow interpretation of ‘client’ for purposes of legal advice privilege” (8 December 2016) and the Court of Appeal decision in SFO v Eurasian Natural Resources Corporation Ltd (ENRC)  EWCA Civ 2006, considered in “Court of appeal decision in ENRC: orthodoxy restored on litigation privilege but narrow interpretation of client remains for now” (5 September 2018).
In the RBS case, the judge concluded that the effect of Three Rivers No 5 is to limit the “client” to those who are authorised to seek and receive legal advice on behalf of a client corporation, and that authority to provide information to the lawyers is not sufficient for these purposes. In ENRC, referred to above, the High Court strongly endorsed the narrow approach to the question of who is the “client” for the purposes of legal advice privilege, which excludes those who are authorised only to communicate relevant facts to the lawyers. The judge commented that the decision in RBS was “plainly right” and there was no justification for departing from it.
The Court of Appeal in ENRC agreed with the judge’s interpretation of Three Rivers No 5, which it said was binding authority that legal advice privilege is limited to those tasked with seeking and receiving legal advice on behalf of the client company – though it did not endorse that approach. If it was free to depart from Three Rivers No 5, it would have done so. Similar comments were made by the Court of Appeal in The Civil Aviation Authority v The Queen on the application of Jet2.com Ltd  EWCA Civ 35, considered in “Court of Appeal finds legal advice privilege is subject to a “dominant purpose” test” (30 January 2020). However, any change to the law on this point will have to await a suitable case to go to the Supreme Court.
In Glaxo Wellcome UK Ltd v Sandoz Ltd  EWHC 2747 (Ch), the High Court applied Three Rivers No 5 to find that an in-house lawyer’s communications with an employee of the business, who was accepted to be her in-house “client” for some purposes, were not protected by legal advice privilege where those communications were to seek and obtain information to provide to external solicitors in order to obtain their legal advice – see “Information gathering by in-house lawyer in order to obtain external advice may not be protected by legal advice privilege” (7 November 2018).
The court found that it was the in-house lawyer, not this other employee, who was tasked with obtaining the advice and who was therefore the external lawyer’s client for these purposes. The decision underlines the importance of considering, in any given context, who is likely to be considered the lawyer’s “client” for that particular purpose.
Defining the client?
Since Three Rivers No 5, different views have emerged as to whether it is advisable to seek to define who within a client organisation is the “client” for the purposes of privilege. Setting out an exhaustive definition of the “client” seems unlikely to be helpful: if the court is minded to restrict the “client” to a particular group within the client organisation, it may not be swayed by the fact that the “client” had been defined more widely, particularly if that appeared artificial or self-serving. On the other hand the court might use such a definition to exclude anyone who did not appear on the list, which leads to obvious risks if others become involved and the definition is not updated (perhaps as people come and go within the client organisation).
The better approach may be to set out those individuals primarily responsible for instructing the external lawyers, but leave flexibility for the lawyers to act on instructions of others within the organisation as they consider appropriate. Even if such flexibility is retained, however, it is best to limit communications with the external lawyers, so far as practicable, to those individuals named in the retainer. If it is necessary for significant communications to take place with other individuals within the client organisation, this should be recorded expressly (perhaps in a supplementary engagement letter) to maximise the chance that those individuals would be considered part of the “client” if the court decided to take a restrictive view.
Who is the in-house lawyer’s client?
Three Rivers No 5 took a restrictive view of the “client” in the context of communications with an external lawyer. In principle, however, the same approach would appear to apply in the in-house context – see for example the Jet2.com case, referred to above, in which the Court of Appeal noted that the relevant non-lawyers were “all relatively senior executives” and there appeared to be no evidence suggesting that any of them did not have the ability to seek legal advice from the relevant in-house lawyers.
Applying this approach, a court might consider the “client” to be different groups of employees for different purposes, depending on which individuals have responsibility for the particular matter on which the in-house lawyer’s advice is sought. Caution should therefore be exercised in considering which individuals should communicate with the lawyers in the in-house context, as well as when instructing external advisers.
Where a solicitor is retained jointly by more than one client, joint privilege will arise. The existence of joint privilege has important practical implications: none of those entitled to the privilege can waive the privilege without the others’ consent; nor can they assert privilege against the others if a dispute arises in future.
The High Court decision in R (on the application of Ford) v Financial Services Authority (defendant) and Johnson and another (interested parties)  EWHC 2583 (Admin) clarified the circumstances in which a company director or officer is entitled to assert joint privilege in legal advice received by the company where the individual was not an express party to the solicitor’s retainer. The court held that the individual must in fact have been the solicitor’s client at the time the advice was received, even if there was no express retainer. See “Test for joint interest privilege clarified” (1 November 2011) to read more on the decision.
REQUIREMENT FOR COMMUNICATION?
In Three Rivers No 5 the Court of Appeal considered the status of “preparatory materials” created by individuals within the client organisation for the purpose of obtaining legal advice, but which did not actually constitute lawyer/client communications – eg factual reports or summarises put together so that the lawyer can advise. The court held that such materials created by “non-client” employees (in the narrow sense of “client” referred to above) were not privileged. The court did not address the status of any such preparatory materials produced by the actual “client”. Given its emphasis on the need for a lawyer / client communication, the effect of Three Rivers No 5 may be that preparatory materials will not be privileged even if they are created by the actual client, if they are not in fact communications (or draft communications) with the lawyer.
The subsequent High Court decision in National Westminster Bank Plc v Rabobank Nederland  EWHC 2332 (Comm) interpreted Three Rivers No 5 as denying privilege to such preparatory materials. In that case the court had to consider whether the defendant could claim privilege over documents prepared by the head of the defendant’s credit audit group (which had been disclosed “in error” and which the defendant sought to recover). The defendant claimed legal advice privilege on the basis that:
- the relevant individual from the audit department had been acting as the agent for the lawyers in collecting information, and his function was part of the “stream of information” between lawyer and client; and
- legal advice privilege extended beyond communications between client and lawyer, provided the documentation “was directed at the production of a report which was designed to provide legal advice” to the defendant.
The court dismissed these submissions. Following Three Rivers No 5, it said, legal advice privilege could only be claimed for documents passing between the client and its legal advisers. Accordingly, where communication was via the audit department of the defendant, legal advice privilege did not apply.
To illustrate the point, imagine that Employee A (who is part of the “client”) asks Employee B to put together a summary of relevant facts so that the external lawyers can advise. Employee B creates the summary and sends it to Employee A, who forwards it on. It may be (based on Three Rivers No 5 and Rabobank) that Employee B’s summary is not privileged, even if Employee B forms part of the “client”, unless it can be considered a lawyer/client communication with Employee A acting as agent. In contrast, if Employee B had written directly to the external lawyer with his summary, it seems clear that the communication would have been privileged so long as Employee B was part of the “client”.
It is unsatisfactory that the presence or absence of legal advice privilege might depend on such fine distinctions, in effect putting form over substance, but that may be the effect of Three Rivers No 5.
Given the uncertainties, if it is necessary to create factual reports or summaries on which the lawyer will advise (in circumstances where litigation privilege is not available) and a party wishes to be able to assert privilege in such documents:
- They should be prepared by those who are likely to form part of the “client” for the purposes of legal advice privilege.
- They should ideally be prepared in the form of a memo or letter addressed directly to the lawyers whose advice is sought, rather than either a free-standing document or a communication to another individual within the client organisation.
- If there is any uncertainty as to whether privilege will attach, they should be as factual as possible and avoid unnecessary statements of opinion or attributions of blame. Sensitive issues may be best dealt with orally.
Of course, if all of the information included in the report or summary is available elsewhere in a non-privileged (and therefore discloseable) form, there may be nothing to be gained by trying to ensure that the report or summary is privileged.
Drafts and working papers
Draft lawyer / client communications may also be covered by legal advice privilege, even if they are not sent. In Three Rivers No 5 it was accepted that it is not necessary for a communication in fact to have been received for privilege to attach, eg if the client had died before a letter was sent to his lawyer, or if the letter had been lost in the post. The Court of Appeal said that in these situations “there would be no difficulty in saying that a document which was intended to be a communication between client and solicitor was still privileged even if not in fact communicated”.
Notes or working papers of either lawyer or client may be privileged even if they don’t amount to lawyer / client communications or draft communications. The test is whether they betray the trend of the legal advice. This is addressed further in “Documents evidencing privileged communications”.
Communications through agents
It is well settled that the communication need not be directly between lawyer and client, but can be through an agent of either of them. See for example Wheeler v Le Marchant (1881) 17 Ch D 675: “The actual communication to the solicitor by the client is of course protected, and it is equally protected whether it is made by the client in person or is made by an agent on behalf of the client, and whether it is made to the solicitor in person or to a clerk or subordinate of the solicitor who acts in his place and under his direction.”
On the lawyer’s side, therefore (and as noted above), communications with non-legally qualified personnel will be privileged so long as they are acting under the supervision of a lawyer.
On the client’s side, the question of when a third party is acting as agent in the necessary sense is slightly more complicated. Privilege will be available only where the third party is the client’s agent for the purpose of communicating with the lawyers to obtain legal advice, and not where the third party is instructed to provide information to the lawyers. As noted above, communications from a third party are not covered by legal advice privilege, even if they are for the purpose of providing information to enable the lawyer to advise.
In Wheeler v Le Marchant, the defendants sought to assert privilege over communications between their solicitors and surveyors instructed to prepare a report for the solicitors. The Court of Appeal held that the communications were not privileged. The surveyors were not employed as agents to communicate with the solicitors to obtain legal advice.
In contrast, in Managing General Partner Ltd and others v Babcock & Brown Global Partners  EWHC 2176 (Ch), referred to above, communications between the legal advisers of a limited partnership (Global) and its managing general partner (General) were privileged because General retained the lawyers as agent for Global and obtained their advice on its behalf.
Communications will be similarly privileged where the agent acts as nothing more than a channel of communication, eg an interpreter.
Note: Content up to date as at 14 February 2020
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