In Astex Therapeutics Limited v AstraZeneca AB(1) the High Court held that a defendant's claim to privilege in respect of communications between employees and in-house counsel went too far. It ordered the defendant to provide a full list of each document over which the defendant asserted a claim to privilege, together with an explanation of the nature of the privilege claimed. As well as a reminder of the limited application of legal advice privilege in a corporate context, this case is another warning to litigants (and their lawyers) that errors in disclosure can have costly consequences.
The claim arose out of an agreement made between the parties in 2003 under which they agreed to participate in a collaborative research programme to discover and develop novel chemical leads for the treatment of Alzheimer's disease. The object of the agreement was to produce candidate drugs. No candidate drugs had been nominated by the end of the agreement term in mid-2005.
After the end of the agreement term, defendant AstraZeneca continued its work and until February 2014 provided claimant Astex with regular updates on the project. By September 2010, AstraZeneca had nominated CD1 as a candidate drug and in September 2010 and July 2011 it made payments to Astex of $1 million under the agreement. However, CD1 failed to meet certain safety criteria and was not pursued further. AstraZeneca nominated CD2 as a candidate drug by April 2012. CD2 proved to be more promising than CD1 and in 2014 AstraZeneca entered into an alliance with another pharmaceutical company, Eli Lilly, to develop and commercialise it.
There was a common assumption by both parties over a period of several years that both CD1 and CD2 met the relevant criteria to be candidate drugs under the terms of the agreement. However, in February 2015 AstraZeneca adopted a different approach following an internal review, which included discussions with both current and former scientists and employees. Astex was informed that the review had taken place, and that AstraZeneca no longer considered either CD1 or CD2 to be within the scope of the agreement. The core issue in the claim was therefore whether CD1 or CD2, on a true construction of the agreement between the parties, was a candidate drug.
There was a considerable divergence of view between the parties as to which documents fell to be disclosed (or 'discovered' in US parlance) and after a March 14 2016 hearing, the parties found themselves back before the court on five separate occasions on the topic of disclosure. The most recent hearing before the court, on September 26 2016, concerned Astex's application for an order that AstraZeneca provide a full list of each document over which it asserted a claim to privilege, together with an explanation of the nature of the privilege claimed.
Astex argued that such an order was justified because:
- the limited information and reasons provided by AstraZeneca to date for withholding certain documents on account of privilege raised concerns about the integrity of the privilege review undertaken by AstraZeneca; and
- AstraZeneca had failed to provide adequate information to justify its claim to privilege over certain documents from the internal review that it carried out in February 2015, shortly before AstraZeneca notified Astex that it no longer considered either CD1 or CD2 to be within the scope of the agreement.
Under standard disclosure principles, a party to which a document has been disclosed has a right to inspect that document, except where the party disclosing it has a right or duty to withhold inspection of it, either wholly or in part. Civil Procedure Rule 31.9 provides that where a person wishes to claim such a right, that party must state in writing:
- that it has a right or a duty; and
- the grounds on which it claims that right or duty.
The burden of proof is therefore on the party claiming privilege to establish it. AstraZeneca claimed privilege in respect of documents identified in or arising out of its internal review as follows:
- documents subject to legal advice privilege – for example, confidential letters and other communications passing between AstraZeneca and its external legal advisers and in-house counsel and its employees for the purposes of giving or obtaining legal advice and assistance; and
- documents subject to litigation privilege – for example, confidential communications and documents passing between its external legal advisers and third parties and its in-house counsel and third parties (including current and former employees of AstraZeneca) which came into existence after litigation was contemplated or commenced and which were made for the dominant (if not exclusive) purposes of such contemplated or actual litigation to enable advice to be sought or given or to be used in or in connection with such litigation, together with drafts and internal memoranda and notes thereof prepared for the purposes of such contemplated or actual litigation.
Was AstraZeneca entitled to claim privilege over communications with employees?
Legal advice privilege
The first issue determined by the court was whether AstraZeneca had validly claimed legal advice privilege over attendance notes taken by in-house and external lawyers concerning conversations with employees and former employees.
The essence of legal advice privilege is the protection of confidential communications between lawyers and their clients for the purpose of giving and obtaining legal advice. The class of documents which is protected is slightly wider than communications and depends on whether the documents "are part of that necessary exchange of information of which the object is the giving of legal advice as and when appropriate".(2) Three Rivers No 5(3) – which remains the accepted principal modern authority on legal advice privilege – established that where the 'client' is the corporation seeking legal advice, only those communications involving the individuals expressly or implicitly authorised by or on behalf of the client entity to give instructions to the lawyers and the individuals expressly or implicitly authorised to receive the legal advice will attract legal advice privilege.
In this case, AstraZeneca did not suggest that that any employees or former employees could be regarded as forming part of a class of persons authorised to give instructions to its lawyers. Its claim to privilege was instead founded on the mere involvement of lawyers in the process of gathering information from persons who, the court commented, must be treated as being third parties for these purposes (whether existing or former employees).
The court therefore held that these documents did not fall within the generally understood confines of legal advice privilege, because it is not apt to cover an information-gathering exercise of the type which would normally be conducted in relation to litigation, but which is undertaken before a dispute is in reasonable contemplation. Chief Master Marsh commented that the mere involvement of lawyers in the review process will not "clothe the review in privilege" – a common misconception, especially if the lawyers are obtaining information from persons who are employees of the corporate client, but are not the 'client' for these purposes.
The second issue considered by the court was whether a claim for litigation privilege had been made out in relation to the same attendance notes taken by in-house and external lawyers concerning conversations with employees and former employees.
The first limb of the test for litigation privilege is that a dispute must reasonably be in contemplation. AstraZeneca could not simply self-certify that this part of the test was satisfied; the court held that unless the situation were obvious (ie, on receipt of a letter of claim), further information would likely be required to determine whether litigation was in contemplation.
In the second limb of the test for litigation privilege, the dominant purpose of the communication must concern the conduct of the actual or contemplated litigation. In the case of a legal review, the position may not be obvious before the outcome of the review, because the purpose of the review is to establish whether there is any possibility of a dispute. However, in this case the court commented that it was clear that AstraZeneca's internal review had not been concluded prior to it notifying Astex that the review had taken place, and that AstraZeneca no longer considered either CD1 or CD2 to be within the scope of the agreement. Interviews with AstraZeneca's scientists took place, or at least continued after that notification, and it was unclear from the evidence before the court to what extent any interviews or attendance notes of those interviews had been created prior to that notification. The court was unable to accept AstraZeneca's unattested assertion that it contemplated a dispute or potential litigation prior to the notification being made. In the absence of any other evidence as to the dominant purpose of the interviews, it was held that the attendance notes also were not covered by litigation privilege.
Was it appropriate to make the order sought by Astex or any order in more limited terms?
The final issue determined by the court was whether it was appropriate to make the order sought by Astex. The format of AstraZeneca's list of documents to be disclosed did not precisely follow the layout of Practice Form N265, which requires the party objecting to inspection to list the documents which are withheld and then explain the basis for refusing to permit inspection. Instead, AstraZeneca had completed the form in what it described as a "conventional" way, arguing that it was "obvious" that privilege had been properly claimed and that it had complied with its disclosure obligations. Repeated requests from Astex to provide an itemised list of documents (including explanations) over which privilege was claimed were, AstraZeneca contended, an "obvious fishing expedition". The court commented that:
"[A]lthough it may have been conventional at one time to state that other documents are 'by their nature privileged', such a statement has no place in modern litigation, let alone litigation of very real complexity. It is clearly unhelpful, without describing the documents said to be privileged, to say that 'their nature' explains why they are privileged because the recipient of the list of documents has no way of knowing which documents, or classes of documents, are being referred to."(4)
In summary, the court considered this to be an "exceptional" case in which further evidence about the claim to privilege was essential, in large part because AstraZeneca's approach to claiming privilege to date had been unsatisfactory and left issues still requiring further explanation. As the volume of documents over which privilege was claimed was "not particularly large", the court held that an order to provide further details was not disproportionate in the context of the claim. The court therefore ordered that AstraZeneca provide a further witness statement from an appropriate officer which supported and explained in more detail its claim to privilege.
Since the decision of the Court of Appeal in Three Rivers No 5 and its narrow delineation of the 'client' in a corporate context, practitioners have wrestled with the problem of how to protect sensitive communications with employees without whose information the company cannot make decisions and lawyers cannot advise. As AstraZeneca found, this becomes particularly acute in the context of internal reviews or investigations, where no litigation is in contemplation, but may become so as a result of the review or investigation and the comments so elicited may be particularly damaging if disclosed in the litigation. Unless and until the definition of 'client' (or, less likely, the dominant purpose test) is taken to the Supreme Court, the problem will persist.
From a procedural perspective, although this case was described by the court as "exceptional", it is important to note that an order requesting a party to provide an itemised list of all documents (including explanations) over which that party asserts privilege is available to the court should it be deemed necessary. However, the court will not make such an order routinely; there must be a firm evidential basis for justifying it. The degree to which a claim to privilege must be specified will depend on the particular facts of the case.
For further information on this topic please contact Davina Given or Alexis Armitage at RPC by telephone (+44 20 3060 6000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.
(1)  EWHC 2759 (Ch).
(2) Balabel v Air India  1 Ch 317.
(3) Three Rivers District Council v Governor and Company of the Bank of England (No 5)  QB 1556.
(4) Supra note 1, at paragraph 15.