Traditionally, it had been assumed that legal advice privilege (not to be confused with litigation privilege) extended to all communications between solicitor and client on matters within the ordinary business of the solicitor and referable to that relationship. This was thought to be so even if the communications did not actually contain legal advice on the basis that communications are privileged if they form part of the continuum of communications and meetings between the solicitor and client (Balabel v Air India [1988] Ch 317).

In Three Rivers, the court held that, contrary to the traditional view, legal advice privilege does not automatically attach to most communications between a client and his solicitor. The court explained that the fact that work is done within what may be the ordinary business of a solicitor does not necessarily mean that it attracts privilege.

The court indicated that the test for the application of legal advice privilege is that, where a solicitor-client relationship is formed for the purpose of obtaining advice or assistance in relation to "rights and liabilities", broad protection will be given to communications passing between solicitor and client in the course of that relationship. No guidance was given as to what that broad protection might be. The court went on to say that privilege will only apply when the dominant purpose of the communication is the obtaining of advice and assistance in relation to legal rights and obligations.

It appears, therefore, that it is necessary to examine both the nature of the particular solicitor-client relationship on the one hand and the content of particular communications on the other. The court drew a clear distinction between situations where communications are in respect of advice about legal rights and liabilities, which are covered by legal advice privilege, and communications where the advice provided by the solicitor is primarily in relation to presentational matters, which are not. No guidance was offered as to how to determine what presentational advice is nor whether it would ever be privileged in the context of a solicitor-client relationship that does meet the test.

While some documents will clearly fall on one or other side of the line, the position in relation to many others will be uncertain. The most important message from the case is that the client must be aware that communications with their solicitors may not be subject to legal advice privilege unless the rights and liabilities test is satisfied. The obvious area of exposure is that of public inquiries, statutory or non-statutory, but this decision also affects the application of legal advice privilege to any non-contentious business a solicitor advises on.

The decision has raised, but not answered, a number of difficult questions:

The court concluded that legal advice privilege was a difficult and unsatisfactory area of law and invited the Law Reform Committee to review it. Although the court refused permission to appeal to the House of Lords, the indications are that an application for permission will be made directly to the House ofLords.

Finally, there has already been a practical application of an earlier Three Rivers decision in United States of America v Philip Morris & Others [2003] EWHC 3028 (Comm). It was held that the courts must take a more critical approach to assertions of privilege and a solicitor's own assertion as to privilege was not conclusive. Whether, generally, there will be a marked increase in disclosure applications remains to be seen.

Philip Morris was determined before the latest Three Rivers appeal and the judge held that the courts must remain careful not to allow incursions into a continuous sequence of communications made for the dominant purpose of obtaining legal advice (following Balabel). It is currently the subject of an appeal. Lawyers and their clients will be interested to see how this latest Court of Appeal decision in Three Rivers will be applied in the Philip Morris appeal, particularly with regard to the application of Balabel.