By Oliver Browne and Daniel Smith
Following Three Rivers (No 5)  EWCA Civ 474, the High Court has held that notes of interviews of employees, prepared as part of certain internal investigations by a bank’s solicitors, for the purpose of enabling the bank to seek and receive legal advice are not protected by legal advice privilege. Central to the ruling was the finding that relevant employees did not fall within the definition of the “client” for legal advice privilege purposes. The Court also confirmed that English privilege rules should be applied in cases before the English court so that, even though the interview notes were likely to have been privileged as a matter of US law, they were not privileged in English proceedings.
The decision follows the recent judgment in Astex Therapeutics Ltd v Astrazeneca AB  EWHC 2759 (Ch) in which Chief Master Marsh held that certain employees were not part of the “client” for legal advice privilege purposes, but with only a brief analysis on the point. In the present decision, Mr Justice Hildyard considered the question in much greater detail.
The issues of privilege arose in the context of group litigation brought against RBS relating to a rights issue of shares in the bank announced in April 2008.
RBS attempted to resist disclosure and inspection of interview notes on the grounds that:
- they were covered by legal advice privilege;
- with the exception of the interview notes taken by the Secretariat, the interview notes constituted lawyers’ privileged working papers;
- the English court should apply US federal law under which the interview notes were said to be privileged; and
- the English court should exercise its discretion to withhold the documents on the basis that they are privileged under US law, even if English law governs the question of privilege.
RBS made no claim to litigation privilege. The distinction between legal advice and litigation privilege is that the former applies to lawyer-client communications for the purpose of giving or receiving legal advice, whereas the latter applies where documents are prepared for the dominant purpose of litigation that is pending or is reasonably in prospect.
Mr Justice Hildyard rejected the claim to legal advice privilege on all grounds.
- Legal Advice privilege
It was common ground that the leading authority on legal advice privilege is the Court of Appeal decision in Three Rivers (No 5). In that case, the Court held that, for the purpose of assessing legal advice privilege, the “client” did not encompass all employees of the Bank of England but was limited to a particular group of three individuals (the Bingham Inquiry Unit or “BIU”) 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 could not apply to their communications.
In the present case, RBS claimed that the interview notes were protected by legal advice privilege on the basis that they recorded communications between lawyers and persons authorised by RBS (including current and former employees) to communicate with the lawyers for the purpose of RBS seeking and receiving legal advice.
RBS attempted to confine the decision in Three Rivers (No 5) to the particular context where a special unit had been established as the exclusive conduit for communications between the client and its lawyers. RBS further submitted that, in any event, it was not contrary to Three Rivers (No 5) that where an employee communicates instructions or factual information in confidence to the corporation’s legal advisers to seek or receive legal advice, those communications should be treated as if the employee was the “client” and therefore be protected by legal advice privilege.
In reaching his decision, Mr Justice Hildyard considered the Three Rivers (No 5) decision to rest on principles of general application, and was binding authority that legal advice privilege is limited to communications between a lawyer and his or her client. The judge held that “the fact that an employee may be authorised to communicate with the corporation’s lawyers does not constitute that employee the client or a recognised emanation of the client”. In other words, authority to provide information is not sufficient for the purposes of a claim for legal advice privilege. In this regard, information from an employee “stands in the same position as information from an independent agent”. Instead, only communications between lawyers and individuals authorised to seek and receive legal advice on behalf of a client corporation are privileged.
Having concluded that the communications were not protected by legal advice privilege, the judge did not think it necessary to go further and consider the decision in Winterthur Swiss Insurance Company and others v AG (Manchester) Limited (in liquidation) and others  EWHC 839 (Comm) where Aikens J concluded that the effect of Three Rivers (No 5) was to restrict the meaning of client to the “directing mind and will” of the corporation. The judge did note, however, that “such a restriction will often reflect reality” on that basis that, in the judge’s view, a corporation is unlikely to authorise an individual to seek and receive legal advice on its behalf which is not its directing mind and will.
2. Lawyers’ working papers
The judge noted that it is common ground that, as a matter of English law, lawyers’ working papers are privileged on the basis that disclosure of them would give a clue to the trend of advice which had been given to the client.
However, having held that the interview notes were not covered by legal advice privilege, the judge held that it follows that verbatim transcripts of those interviews would also themselves not be privileged. The question was ultimately evidential and the burden was on RBS to demonstrate some attribute or addition which distinguished the transcripts from interview notes.
RBS’s evidence indicated that the notes included “mental impressions” and reflected the lawyers’ “train of enquiry”, and contained statements to this effect, but the judge held this was not sufficient. There was “a real difference between reflecting a “train of enquiry” and reflecting or giving a clue as to the trend of legal advice”, a difference that was recognised by the Court of Appeal in Sumitomo Corporation v Credit Lyonnais Rouse Limited  EWCA Civ 1152.
3. Applicable law
RBS submitted that the court should depart from the established rule that the lex fori (or the law of the forum) should govern issues of privilege because legal professional privilege is a fundamental human right.
Instead, RBS contended that US federal law should apply on the basis that it was the jurisdiction with which the engagement or instructions, pursuant to which the documents came into question or the communications arose, had their closest connection.
However, the judge considered the lex fori position to be well-established and, although privilege was long-recognised as a substantive right, he did not think that there was a sufficient basis for applying a different rule where the foreign law gave broader protection. The judge also noted the practical difficulties in identifying and applying rules of multiple legal systems in multi-jurisdictional cases.
The judge accepted that courts have a discretion to prevent disclosure or inspection notwithstanding that a document is disclosable. However, he considered that a court is likely to lean heavily in favour of disclosure unless compelling grounds pertaining to the public interest and private entitlement to trial on all disclosable evidence are of exceptional concern. The judge did not consider that the present circumstances amounted to such a special case.
The case confirms the narrow definition of “client” for the purposes of legal advice privilege. Only communications between lawyers and individuals authorised to seek and receive legal advice on behalf of a client corporation (as opposed to individuals simply authorised to provide information), will be privileged. The case is also an important reminder that what is privileged in one jurisdiction will not necessarily be privileged in another: the outcome may ultimately depend on the law of the forum.
It is therefore crucial to establish who is the client at the outset of, and throughout, any matter in order to ensure that all legal advice can be withheld from disclosure and inspection on grounds of legal advice privilege. It will also be prudent to consider what should, or should not, be committed to writing during an investigation, and how that material should be handled, in order to minimise inadvertently creating non-privileged documents.
This post was prepared with the assistance of Alexander Hughes in the London office of Latham & Watkins.
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