No appeal against controversial decision in RBS case applying narrow interpretation of “client” for purposes of legal advice privilege

In a widely publicised decision last December arising out of the RBS Rights Issue Litigation (reported here), the High Court found that interviews conducted by a bank's solicitors with its employees were not covered by legal advice privilege as the employees in question did not form part of the "client" for privilege purposes. The judge took the view that he was bound to reach this conclusion, applying the narrow interpretation of "client" from the notorious Court of Appeal decision in Three Rivers No 5.

It was anticipated that RBS would appeal the decision directly to the Supreme Court, the judge having granted a "leapfrog" certificate to allow that to happen (subject to the Supreme Court granting permission). However, we can now confirm that the appeal will not take place, as recent amendments to the claimants' case mean the disputed documents are no longer relevant to the issues in the action.

It is regrettable that the Supreme Court will not be considering this issue, as the current position causes significant practical problems for corporates wishing to take legal advice with the benefit of privilege. As Three Rivers No 5 has been interpreted in the RBS decision, legal advice privilege is restricted to communications between a lawyer and those individuals who are authorised to seek and obtain legal advice on behalf of the organisation. Importantly, it does not extend to those who are authorised only to provide information to the lawyers, even if the lawyers need that information to be able to advise the organisation.

If this approach is followed in other cases, it may significantly restrict the number of communications that are likely to benefit from legal advice privilege in the corporate context. In some cases, the group of individuals authorised to instruct the lawyers and obtain their advice, as opposed to providing factual information to the lawyers, may be quite small. And the problem will become even more stark if other judges take the view that a further implication of Three Rivers No 5 is to restrict this group to those who are the "directing mind and will" of the organisation; the judge in the RBS case did not think it was necessary to determine this point, but suggested that he inclined to that view.

The current position will be seen as unhelpful and unworkable by many corporates, and arguably risks undermining the policy rationale underlying legal advice privilege – to allow clients (including corporate clients) to take legal advice based on complete and accurate information, without fear that they will prejudice their position by creating material that can be used against them in subsequent legal proceedings.

Had the appeal proceeded, it is likely that two principal arguments would have been put forward against the position taken in the judgment:

  • Legal advice privilege should apply to all communications between a lawyer and those who are authorised to communicate with the lawyer on behalf of the client organisation. It should not matter whether that authority is to communicate factual information or instructions, which should not be distinguished for these purposes. This conclusion is arguably not inconsistent with Three Rivers No 5 or, if it is, that decision should be confined to its particular facts or alternatively overruled.
  • In any event, there are compelling reasons for adopting a "dominant purpose test" in the context of legal advice privilege (similar to that recently approved in some other jurisdictions, including Hong Kong), so that it is no longer limited to lawyer-client communications, but instead covers all documents created for the dominant purpose of obtaining legal advice. This would avoid arbitrary distinctions, provide greater certainty, and better enable the underlying purpose of the privilege to be fulfilled.

Given the difficulties highlighted by the RBS decision, which as a first instance decision is not binding on other High Court judges, contested applications relating to privilege may become increasingly common, and it may not be long before these issues arrive at the door of the Supreme Court via some other route. Corporate clients will no doubt hope that, when that day comes, a clearer and more workable test for legal advice privilege will emerge.

High Court applies narrow interpretation of “client” for purposes of legal advice privilege

In a decision handed down today, the High Court has applied the much-criticised Court of Appeal decision in Three Rivers No 5 to find that interviews conducted by a bank's solicitors with its employees were not covered by legal advice privilege, as the employees in question did not form part of the "client" for privilege purposes: The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch).

The Three Rivers No 5 decision has caused difficulties for corporates since it was handed down in 2003. It has led to a risk that in any given case the "client" might be restricted to some limited group of employees, so that communications or documents prepared by anyone else in the organisation would not be privileged, unless they were prepared for the purposes of contemplated litigation. That is because, as is well-established, legal advice privilege (unlike litigation privilege) does not apply to communications with third parties; it only covers lawyer / client communications.

Significantly, however, in the 13 years since the Three Rivers No 5 decision was handed down, there has not (to our knowledge) been any reported English case in which the decision was applied to restrict the identity of the "client" for privilege purposes. Not, that is, until the past month, when we have seen two judgments in quick succession, the first being Astex Therapeutics Ltd v Astrazeneca AB [2016] EWHC 2759 (Ch) in which Chief Master Marsh held that certain employees were not part of the "client" for privilege purposes, but with only brief analysis on the point.

In the present decision, Mr Justice Hildyard considers the question in much greater detail. In doing so, he reaches a conclusion which narrowly interprets the definition of "client" and which will require careful consideration by corporates seeking legal advice. In essence, although the judge could see force in the criticisms of Three Rivers No 5, and recognised that these may need to be considered by the Supreme Court in due course, he concluded that the effect of the decision (which is of course binding on him) is to limit the "client" to those who are authorised to seek and receive legal advice on behalf of a client corporation. Importantly, he concluded that authority to provide information to the lawyers is not sufficient for these purposes.

The judge did not think it was necessary to determine whether the effect of Three Rivers No 5 goes further, so that the "client" comprises only those who are the "directing mind and will" of the organisation – which RBS argued would impose an undesirable restriction on the scope of legal advice privilege available to corporates, go beyond the findings in Three Rivers No 5 and undermine the policy underlying legal advice privilege. The judge did suggest, however, that he inclined to that view.

The decision also contains interesting discussion of when a lawyer's notes of a non-privileged discussion will be subject to privilege, the law the English courts will apply to determine questions of privilege, and when the court will exercise its discretion to allow a party to withhold disclosure or inspection.

RBS has indicated an intention to seek permission to appeal.

Continue reading

Article published on legal advice privilege

A recent Hong Kong Court of Appeal judgment has rejected the narrow approach to legal advice privilege established by the English Court of Appeal in Three Rivers No 5 and adopted a broader “dominant purpose” test more akin to the test that applies to litigation privilege.

Maura McIntosh has published a post on Practical Law’s Dispute Resolution blog which considers the decision and its potential implications in England and Wales. Click here to download a copy of the post “Legal advice privilege: is there light after Three Rivers?” (or here for the Practical Law Dispute Resolution blog homepage).

Hong Kong Court of Appeal rejects narrow interpretation of “client” and adopts broader test for legal advice privilege

In a decision handed down yesterday, the Hong Kong Court of Appeal (HKCA) has rejected the narrow view adopted by the first instance court as to who from within a client organisation constitutes the "client" for the purposes of considering whether legal advice privilege applies: Citic Pacific Limited v Secretary for Justice and Commissioner of Police (unrep, 29/06/2015, CACV 7/2012).

The first instance judgment (considered here) had restricted the “client” to the group legal department and Board of Directors of the relevant organisation, applying the English Court of Appeal's much discussed (and much criticised) decision in Three Rivers District Council v Bank of England [2003] EWCA Civ 474. The Three Rivers decision has caused difficulties for corporates, as it leads to a risk that some employees may not be considered part of the “client” for the purposes of legal advice privilege. This means that communications or documents prepared by those employees will not be privileged, even if intended for submission to the legal advisers (unless for the purposes of contemplated litigation). The HKCA rejected that approach, saying 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.

As well as rejecting the narrow view of "client", the HKCA has adopted a "dominant purpose" test for legal advice privilege. This means that (under Hong Kong law) legal advice privilege is no longer restricted to communications between a lawyer and a client, but will protect 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. This brings Hong Kong's position in line with other major jurisdictions such as Australia, Singapore and the US – though notably not England and Wales.

Although not directly relevant here, the HKCA's decision seems likely to add to the view that the Court of Appeal's decision in Three Rivers is ripe for review, as the courts of so many common law jurisdictions have failed to see the benefit of the Court of Appeal's approach. For the moment, however, corporates should exercise caution: the Three Rivers decision remains binding under English law and could be applied in any given case to limit who within an organisation qualifies as the "client" for the purpose of legal advice privilege. Further, English law does not, at present, apply the dominant purpose test to legal advice privilege: the privilege can apply only to confidential communications between lawyer and client (directly or through an agent). For more information on the HKCA's decision, see this post on our Asia Disputes Notes blog. For more information on the position under English law, see our Handy client guide to privilege, including this section on lawyer/client communications.

Hong Kong court applies narrow view of “client” for privilege purposes

The much discussed decision of the English Court of Appeal in Three Rivers District Council v Bank of England [2003] EWCA Civ 474 led to a risk that not all employees of a company or organisation will be considered part of the “client” for the purposes of legal advice privilege. There is however little subsequent guidance in the English case law as to whether, and if so when, such a narrow interpretation of “client” might be applied in other cases. It is therefore noteworthy that the Hong Kong Court of First Instance has applied the decision to restrict the “client”, on the facts of the case before it, 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 anor (unrep, 19/12/2011, HCMP767/2010). Continue reading

Legal advice privilege and preparatory documents

A recent High Court case held that legal advice privilege protects confidential communications passing between a lawyer and his client and does not protect “preparatory” materials even if created for the purpose of enabling lawyers to advise: National Westminster Plc v Rabobank Nederland [2006] EWHC 2332(Comm). These documents are not privileged unless they are subject to litigation privilege, namely the documents were created for the dominant purpose of gathering evidence to use in pending or contemplated legal proceedings or for giving legal advice in relation to those proceedings. If litigation is not pending or contemplated, it is important to be aware that preparatory materials will not be privileged and may need to be disclosed in any subsequent litigation. Continue reading

The House of Lords reaffirms the importance of legal advice privilege – but practical problems remain

The House of Lords has today handed down its much anticipated judgment in the Three Rivers litigation: Three Rivers District Council and Others v The Governor and Company of the Bank of England . On 29th July 2004 the Lords allowed the Bank of England’s appeal from the Court of Appeal’s decision in relation to “presentational” advice. The Lords have today given their reasons for that decision, fundamentally rejecting the Court of Appeal’s reasoning and re-emphasising the right to seek legal advice in confidence.

Disappointingly, their Lordships have not taken the opportunity to comment on the earlier Court of Appeal decision which had cast doubt on whether communications between a lawyer and the client’s employees are covered by legal advice privilege (see post). Continue reading

Court of Appeal overturns legal advice privilege decision

On 3 April 2003, the Court of Appeal handed down a judgment which defines the scope of legal advice privilege more narrowly than may previously have been assumed to be the case.

In doing so, the Court of Appeal overturned the widely reported decision of Tomlinson J in the Commercial Court in Three Rivers District Council and Ors v The Governor and Company of the Bank of England. The Court of Appeal (the Master of the Rolls, Lord Phillips, and Lord Justices Longmore and Sedley) found that the material in question, which comprised documentation and internal memoranda prepared by employees, was not protected by legal advice privilege. Information from employees was held to stand in the same position as information from an independent agent or third party and was thus not protected by legal advice privilege. The Court of Appeal decision ([2003] EWCA Civ 474) limits legal advice privilege so that it only protects communications between the client itself and its legal advisers and evidence of the contents of such communications. Continue reading