Legal advice privilege applies to communications made between a lawyer and a client for the purpose of giving or obtaining legal advice. In contrast to litigation privilege, which applies where documents are prepared for the dominant purpose of litigation that is in reasonable prospect, it does not apply to communications with third parties (for background see feature article “Legal professional privilege: practical tips for in-house lawyers”).

Until Three Rivers No 5, it was generally assumed that the client for the purposes of privilege was the same as the client for other purposes, that is, the individual or corporate entity that had engaged the lawyer to provide advice. Three Rivers No 5 challenged that assumption, introducing the possibility that the client might be restricted to some limited group within a corporate entity; in that case, a committee of three Bank of England officials who had been given responsibility for co-ordinating communications with the bank’s solicitors. If so, it followed that communications or documents prepared by anyone else in the organisation would not be privileged, unless litigation privilege applied.

Following Three Rivers No 5, the anticipated flood of cases applying a similarly narrow view of the client did not materialise. Until recently, there was not (to our knowledge) any reported English decision applying Three Rivers No 5 on this point. But that changed in the final months of 2016, with two judgments in quick succession: first Astex Therapeutics Ltd v Astrazeneca AB, which contained only brief analysis on the point, and shortly afterwards RBS, which considers the question in much greater detail ([2016] EWHC 2759 (Ch)) (see box “Astex Therapeutics”).

The decision in RBS arose in the context of group litigation brought against Royal Bank of Scotland (RBS) relating to a rights issue of shares in the bank. RBS claimed privilege in notes of interviews with its employees and former employees which were conducted as part of the bank’s internal investigations. RBS contended that:

RBS also argued that, if the court concluded that the notes were not privileged under English law, it should apply US law to the question of privilege because of the close connection of the notes to the US. The court rejected this argument.

RBS argued that Three Rivers No 5 was an unusual case which should be confined to situations where a special unit had been established as the exclusive conduit for communications between the client organisation and its lawyers, and internal documents were prepared by other employees to assist that unit in the preparation of communications with the lawyers.

In what the court referred to as the fundamental and most powerful part of RBS’s case, RBS submitted that it was not contrary to Three Rivers No 5 that an individual who was authorised by the client organisation to communicate either instructions or factual information to its lawyers, to enable it to seek legal advice, should be treated as part of the client and protected by legal advice privilege.

Although the court could see force in the criticisms of Three Rivers No 5, it concluded that the effect of the decision is to limit the meaning of “the client” to those who are authorised to seek and receive legal advice on behalf of a client organisation, and that authority to provide information to the lawyers is not sufficient for these purposes.

The court said that it did not think it necessary to determine whether Three Rivers No 5 requires the court to restrict the meaning of “the client” to those who are the directing mind and will of the organisation. It did, however, suggest that it was inclined to that view.

There was no dispute regarding the principle that lawyers’ working papers are privileged on the basis that their disclosure may betray, or at least give a clue to, the trend of the advice being given to the client. Here, the court concluded that RBS had not satisfied the burden of establishing that the interview notes would betray the trend of legal advice. The court said that it was not sufficient that the notes revealed the lawyers’ train of enquiry.

Throughout the 13 years since Three Rivers No 5, there has been a risk that the English courts could apply a similarly narrow view of client in any given case, so that legal advice privilege would be restricted to some limited group of employees within the client organisation. If a corporate client wanted to be able to assert legal advice privilege, therefore, the safe course was always to ensure that any written information for the lawyer was prepared by those who were likely to form part of the client on a narrow interpretation.

Astex Therapeutics and RBS show that this risk is not merely theoretical; it seems that the courts are prepared, and in some cases may feel constrained, to apply Three Rivers No 5 to restrict privilege to a limited group of employees within the client organisation. Indeed, privilege may potentially be restricted to a very small group, given the court’s comments in RBS about the directing mind and will of the relevant organisation. The need for corporate clients to take care in structuring communications to obtain maximum privilege protection is therefore thrown into sharp relief.

A further implication of RBS is that, where an interview or other oral communication is not privileged, it may be more difficult than previously thought to establish privilege over a lawyer’s note of the communication on the basis that it forms part of the lawyer’s working papers. On the other hand, RBS does not disturb the established position that a lawyer’s letter or email to the client summarising that communication will be privileged if it forms part of the continuum of communications to seek or obtain legal advice.

Pending authoritative guidance on these issues, one thing is clear: there are significant challenges for corporate clients wishing to ensure the protection of privilege over the preparation and flow of information to their lawyers at a stage where litigation is not in prospect.