The decision clarifies how lawyer-client privilege applies in the context of transactions.

By Daniel Smith and James Fagan

The recent English High Court decision Raiffeisen Bank International AG v Asia Coal Energy Ventures Limited and Ashurst provides guidance on the application of legal advice privilege in a transaction context, confirming that confidential client instructions can be privileged even if the legal adviser has been instructed to provide a third party with confirmations based on those instructions.

This case offers a useful overview of the application of privilege to communications between lawyers and clients during transactions. The decision sets out a number of useful principles regarding privilege and client instructions:

  • For lawyer-client communications to benefit from privilege they must take place in a legal context.
  • Confidentiality is necessary for privilege to apply to communications, but it is not determinative.
  • Communications that do not contain legal advice can still be covered by legal advice privilege provided they form part of a continuum of communications between lawyer and client.
  • When instructing a legal adviser to disclose confidential information to third parties, clients must take care to ensure that underlying communications remain privileged.


The law firm Ashurst represented PT Sinar Mas Multiartha TBK (SM Multiartha), which was providing loan financing to Asia Coal Energy Ventures Limited (ACE) to purchase both shares in Asia Resource Minerals plc (ARM) and loans made to ARM by Raiffeisen Bank International AG (RBI).

The Share Purchase Agreement required Ashurst to provide confirmations that (a) it held US$85 million in its client account pending transfer to an escrow agent and that (b) it had instructions to transfer that amount to the escrow agent upon signing of an escrow agreement. Ashurst duly provided the confirmations.

In fact, ACE only transferred US$50 million of US$70 million purchase price, and RBI did not transfer certain loans and ancillary rights intended to be sold as part of the deal. RBI commenced proceedings against ACE for breach of contract and against Ashurst for misrepresentation.

RBI applied for specific disclosure of Ashurst’s underlying instructions from SM Multiartha. Ashurst contested the application arguing that it could not do so because the instructions were privileged.

The Decision

Justice Moulder reviewed general legal principles governing legal advice privilege, noting that the confidential character of a communication or document was a necessary but not a sufficient element of legal advice privilege. Furthermore, legal advice privilege is not limited to telling the client the law but includes advice as to what should prudently and sensibly be done in the relevant legal context. The parties agreed that privilege could attach to a continuum of communication in a transaction whereby advice may be sought and given as required.

Justice Moulder asked two primary questions when assessing whether the instructions and associated documents RBI sought were privileged:

Were the documents confidential?

Justice Moulder held that the documents were confidential. Ashurst was not acting as the agent of SM Multiartha in giving the confirmation to RBI, because the firm was giving independent legally binding representations. Properly analysed, SM Multiartha instructed Ashurst to give an independent confirmation, for which Ashurst was solely liable, regarding the holding of the funds and their subsequent payment by Ashurst.

The essence of the instructions was that Ashurst should be in a position to provide independent and legally binding representations on its own behalf to RBI. That did not mean that SM Multiartha had given authority to Ashurst to disclose the underlying communications. Following that same reasoning, Justice Moulder held that SM Multiartha had also not waived privilege by instructing Ashurst to provide the confirmations.

Were the communications made in a legal context?

Turning to the legal context, the role and duty of Ashurst was to provide SM Multiartha with legal advice in relation to the provision of finance for the ARM purchase. Ashurst’s duty was to reduce the risk to its client of transferring the money without receiving the assets in return, or of a condition remaining unsatisfied leaving its client exposed to financial loss or legal liabilities unreflective of the commercial deal. This role distinguished Ashurst from the scenario in which a bank is instructed to receive and hold monies and to give a confirmation. The context was inherently legal. Furthermore, while the documents containing irrevocable instructions may not themselves contain advice on matters of law, they would be part of the continuum of communication. Therefore, the documents were covered by legal advice privilege.