A disclosing party redacted certain documents on the basis that they were covered by legal advice privilege. The documents related to the party's attempts over a 5 year period to obtain litigation funding. It was accepted that references to the party's legal advice as to the merits and/or strategy of its case were privileged. However, the respondents disputed whether discussions between the party and funders relating to the terms of the funding were privileged as well.

The parties disputed the correct test to be applied. The respondents argued that only communications which reveal the content of legal advice are privileged, whereas the disclosing party argued that a document from which the substance of the legal advice can be inferred is also privileged.

There is conflicting prior caselaw on this point and the respondents sought to rely on FSCS v Abbey National (see Weekly Update 47/07), in which Richards J said that privilege does not attach to a document which does not state the substance of the advice. However, the judge in this case, Morgan J, preferred the decisions in Lyell v Kennedy (No. 3) [1884] and Ventouris v Mountain [1991] (as well as Australian caselaw on the point) in which documents which betrayed the trend of legal advice were held to be privileged: "I would adopt the distinction drawn in AWB v Terence Cole between a case where there is a definite and reasonable foundation in the contents of the document for the suggested inference as to the substance of the legal advice given and merely something which would allow one to wonder or speculate whether legal advice had been obtained and as to the substance of that advice". Accordingly, the discussions with the funders were privileged.

Furthermore, although the judge said that he harboured doubts as to whether the disclosing party's solicitor had applied this test correctly, he could not conclude that it was "reasonably certain" that that was the case. In any event, the court would not, on the ground of proportionality, require him to carry out the exercise again.

A further issue in the case was that the disclosing party had not asked the court to limit standard disclosure (under CPR r31.5). The judge held that "I consider that a court should be cautious before exercising its discretion under CPR r 31.12 in order to withhold proportionate inspection of relevant non-privileged documents on a ground which does not come within rule 31.3 but on account of an assertion that inspection would give the inspecting party a tactical advantage in the litigation".

COMMENT: There are now conflicting High Court judgments on the scope of legal advice privilege and whether (as the judge thought in this case) it extends to include documents from which the substance of legal advice received by a party could be inferred. It is not yet known whether this case will be appealed to the Court of Appeal.