A recent Employment Appeal Tribunal decision contains an interesting discussion of some difficult issues relating to legal professional privilege: Moving Brands Ltd v Heinl [2023] EAT 34.

The decision relates to communications between a solicitor (instructed on behalf of an individual client) and a third party, some but not all of which were copied to the client. The decision distinguishes between the two categories, finding that where the client was copied in the communications were “effectively” between solicitor and client and so questions of agency did not need to be considered. Where the client was not copied, the communications could not be covered by legal advice privilege unless the third party was acting as the client’s agent, as legal advice privilege is limited to solicitor-client communications (including via an agent).

The decision raises interesting questions as to what counts as a solicitor-client communication, including the test for agency for these purposes. Despite the decision, it should not be assumed that all communications to which a client is copied will be considered to be solicitor-client communications: no details are given in the present case as to why that conclusion was reached, but presumably the tribunal was satisfied, on the facts, that the substance of the solicitor’s communication in each case was with the client rather than the third party.

Where the client was not copied, the tribunal concluded that legal advice privilege did not apply. The third party in question was not an agent of the client for these purposes as they did not act merely as a “means of communication”.

The whole question of when communications via an agent will be covered by legal advice privilege is a difficult one, made more difficult by the different meanings of the word “agent” as discussed in the case law. As well as where an agent is merely a “means of communication” with no personal input into the communication, it seems clear that legal advice privilege applies to communications between a solicitor and the client’s agent, or representative, where that individual is engaged to seek/obtain legal advice on the client’s behalf. As stated in the classic Court of Appeal decision in Wheeler v Le Marchant (1881) 17 Ch D 675:

“If the representative is a person employed as an agent on the part of the client to obtain the legal advice of the solicitor, of course he stands in exactly the same position as the client as regards protection, and his communications with the solicitor stand in the same position as the communications of his principal with the solicitor. But these persons were not representatives in that sense.”

This is the foundation for the (often criticised) principle that the “client”, for the purposes of legal advice privilege, is limited to those tasked with seeking or obtaining legal advice on behalf of a corporate entity (as per the infamous Three Rivers No 5 decision, as interpreted in SFO v ENRC [2018] EWCA Civ 2006, considered here). In any event, there does not appear to have been any suggestion in the present case that the communications were with an agent or representative in that sense.

The present decision is also of interest in its discussion of the principle that a document can be privileged on the basis that it evidences, or reveals, legal advice sought or given. The decision suggests that the principle can apply where the legal advice in question is to be given in future, as well as where the document evidences advice already given. Continue reading →

In a recent decision, the High Court has held that advice from accountants on a proposed new tax structure was not prepared for the dominant purpose of litigation, and was therefore not protected by litigation privilege, even if litigation over the relevant tax affairs was in reasonable contemplation at the time the advice was given: The Financial Reporting Council Ltd v Frasers Group Plc (formerly Sports Direct International Plc) [2020] EWHC 2607 (Ch).

The decision emphasises that, for litigation privilege to apply, a communication or document must have been prepared for the dominant purpose of obtaining advice or evidence in relation to litigation that is reasonably in contemplation. As the judge explained, even if it is contemplated that a particular tax structure will be subject to challenge, and eventual litigation, advice as to how to implement the new structure is not primarily advice as to the conduct of the potential litigation.

While not surprising, the decision illustrates the point that advice about a potential course of action may not be covered by litigation privilege, even if that course of action is expected to lead to litigation. Where the advice in question is legal advice given by lawyers, legal advice privilege (rather than litigation privilege) is likely to apply. However, legal advice privilege does not apply to advice from other professionals, as confirmed by the Supreme Court in R (Prudential plc) v Special Commissioner of Income Tax [2013] UKSC 1 (considered in this blog post). Continue reading →

The High Court has held that an auditor required to produce documents to its regulator, the Financial Reporting Council (“FRC”), must form its own view on whether documents are privileged and can therefore be withheld on that ground, regardless of whether the privilege is that of the auditor or its underlying client: A v B and another [2020] EWHC 1491 (Ch).

The court considered that the duty to disclose was on the auditor and disclosure could only be refused on the grounds that a document was actually privileged. Mere assertion of privilege by the client was insufficient.

In practical terms, where there is a dispute between a client and its auditor over whether documents are privileged, the client can seek an injunction prohibiting the auditor from disclosing the documents on the basis that the client’s privilege will be infringed (or the auditor could seek a declaration that documents are not privileged if the client is not engaging). The status of the documents will then be determined in those proceedings. The FRC will not necessarily be party to those proceedings, but can be joined if necessary.

Where, conversely, the auditor asserts the client’s privilege, the FRC can bring proceedings challenging the refusal to produce the documents and the court can, if necessary, join the client to the proceedings.

The decision presupposes that the client is made aware of the auditor’s intention to disclose. The judge considered it unrealistic to suggest that an auditor would not engage with its client before making disclosure in sufficient detail to enable the client to seek an injunction if it wished to do so.

This decision is also of relevance outside of the audit regulatory context, given that regulators’ powers to obtain documents are often subject to exceptions for privileged documents. Subject to any appeal, and the terms of the particular regulatory regime, the decision suggests that the regulated entity cannot refuse to produce documents on the grounds that a claim to privilege has been asserted or could be asserted by a client (or other third party to whom duties of confidentiality are owed); the regulated entity must take its own view on the privilege claim. Where it gets this wrong and discloses documents that are privileged, it will likely be in breach of its obligations to its client (or other third party). While there are ways of having the status of documents determined by the court, these are likely to be costly and time consuming.

Finally, the case is of interest in rejecting, in a separate judgment, most of A’s claim to privilege in respect of the disputed documents, including minutes prepared by a lawyer: A v B [2020] EWHC 1492 (Ch). Continue reading →