Sarah Speller

Sarah Speller

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17 February 2017

High Court affirms narrow interpretation of the "client" for purposes of legal advice privilege

In The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch), the High Court affirmed the narrow definition of the "client" for the purposes of legal advice privilege, following Three Rivers District Council and others v Governor and Company of the Bank of England (No. 5) [2003] EWCA Civ 474.  

Legal advice privilege only applies to confidential communications between a lawyer and his client which come into existence for the purpose of giving or receiving legal advice.  In Three Rivers (No. 5), the Court of Appeal held that the "client" for these purposes was not the Bank of England as a whole, but a particular group of three individuals within the Bank who were responsible for coordinating communications with its external lawyers. The decision has been much-criticised as creating uncertainty as to whether some or all of the employees of a client company will be considered part of the client in this context.

Here, Mr Justice Hildyard applied the narrow definition from Three Rivers (No. 5), holding that interviews of RBS employees and former employees conducted by the bank's in-house and external solicitors were not privileged because the employees in question did not form part of the client.  Drawing on a recent decision of Chief Master Marsh (Astex Therapeutics Ltd v Astrazeneca AB [2016] EWHC 2759 (Ch)), he held that the client consisted only of those employees authorised to seek and receive legal advice from the lawyer, and that legal advice privilege did not extend to information provided by employees and ex-employees to, or for the purpose of being placed before a lawyer.  As the judge put it:

"Three Rivers (No. 5) confines legal advice privilege to communications between lawyer and client, and the fact that an employee may be authorised to communicate with the corporation's lawyer does not constitute that employee the client or a recognised emanation of the client".

Hildyard J did not consider it necessary to determine whether the effect of Three Rivers (No. 5) was to restrict the meaning of the client even further, to those who constitute "part of the directing mind and will of the corporation".  He was, however, inclined towards that view, noting that it would often reflect reality: "a corporation is unlikely to authorise an individual to seek and receive legal advice on its behalf to an individual or body which is not its directing mind and will".

The court also considered whether the lawyers' notes of the interviews were privileged as lawyers working papers.  As the employees were not part of the client, the interviews themselves were not privileged, and verbatim transcripts of them could not be either.  For the notes to be privileged as lawyers' working papers, RBS had to show some attribute of the notes which distinguished them from verbatim transcript and which betrayed or at least gave a clue as to the trend of advice being given to the client.  It was not enough to merely assert that because the notes were not verbatim accounts of the interviews they would reveal some degree of selection or the lawyer's train of enquiry.

Hidlyard J rejected an argument that the court should depart from the established rule that the law of the forum (the lex fori) governs the issue of privilege and instead apply the law of the place with the relevant engagement or instructions had their closest connection (here, US law).  The established rule had been settled since the mid-19th Century. 

Hildyard J granted RBS permission to appeal against the decision and granted a "leapfrog" certificate enabling the appeal to proceed directly to the Supreme Court.  However, RBS subsequently decided not to appeal, as following an amendment to their case, the disputed documents were no longer relevant to the issues.  This is regrettable, as it means the Supreme Court will not have the opportunity to clarify this difficult area, which causes significant practical problems for corporate litigants.  

At present, the narrow definition of “client” in Three Rivers (No. 5) still stands, and arguably has been narrowed further by the interpretation placed on it by Hildyard J (although this was a first instance decision and is not binding on other High Court judges).  If that is the case, legal advice privilege is restricted only to communications between a lawyer and those authorised to seek and receive legal advice.  Communications with those authorised to provide information to the lawyer will not be protected by such privilege, even if the lawyer requires that information to advise the company.  At the very least, this is likely to give rise to more contested applications concerning privilege. 

The judgement is here.