In Re Edwardian Group Limited ([2017] EWHC 2805 (Ch)) the High Court considered the extent to which legal advice privilege could attach to documents which were not communications of legal advice between lawyer and client, but from which privileged legal advice could be inferred, and held that privilege could indeed apply to such documents. The test is whether there is a "definite and reasonable foundation" for such an inference to be made as opposed to material that would merely make the reader speculate what the legal advice was.


Two minority shareholders in Edwardian Group Ltd, the holding company of a group which owns and manages hotels, brought unfair prejudice proceedings pursuant to Section 994 of the Companies Act 2006 against the other principal shareholders and the company (the respondents).

The first of the respondents applied for an order for inspection of certain classes of documents, which included documents documenting the attempts of the minority shareholders to obtain funding to commence the litigation. These documents had either been withheld or had been heavily redacted by the minority shareholders on the basis that they were subject to legal advice privilege because they tended to reveal the legal advice that had been received in relation to the merits of the case, its strategy and tactics, and the funding sought.

The litigation funding documents were relevant to the proceedings because, although there is no formal limitation period in unfair prejudice petitions, courts have declined to grant relief in situations where there has been an excessive delay between the prejudicial acts and the presentation of the petition. In this case the respondents contended that the six-year and four-month delay between the alleged prejudicial acts – which included the removal of one of the minority shareholders as a director of the company in July 2009 – and the presentation of the minority shareholders' petition in November 2015 constituted an improper delay. One of the minority shareholders' justifications for the delay was that before November 2015 they had not had sufficient funds to litigate and had been actively but unsuccessfully seeking funding in the intervening period.


The court considered whether the minority shareholders were entitled to assert legal professional privilege over the litigation funding documents to the extent claimed, considering in detail the relevant case law.

The court began its analysis by referring to the well-known case of Three Rivers DC v Bank of England (No 5) ([2003] QB 1556), which held that communications between clients and their lawyers for the purpose of obtaining legal advice are privileged from disclosure and that this protection extends to other material which "evidences" the substance of such communications, although the court did not then consider what was meant by this term.

The first respondent relied on the decision in Financial Services Compensation Scheme Ltd v Abbey National Treasury Services plc ([2007] EWHC 2868 (Ch)), where the court had concluded that privilege should not extend to documents from which privileged advice could be inferred (with the possible exception of documents from which that inference was obvious and inevitable so as to be in effect a statement of the underlying advice). The court had based this view on two considerations:

  • that a document which does not contain the original advice communication in any form contains nothing to which privilege attaches; and
  • that drawing an inference is usually a matter of subjective judgement and a claim to privilege should not depend on such subjectivity.

However, the minority shareholders submitted that the decision in Financial Services Compensation Scheme was inconsistent with a number of other authorities that were binding on the court, in particular Lyell v Kennedy (No 3) ([1884] 27 Ch D 1) and Ventouris v Mountain ([1991] 1 WLR 607).

In Lyell the Court of Appeal refused to order the disclosure of documents which had been collected for the purpose of instructing counsel and preparing a defence in those proceedings on the basis that the documents would give the other party "a clue to the advice given by the solicitor" and accordingly were privileged. The court noted that the ratio of Lyell was summarised in the more recent case of Ventouris in the following passage: "where the selection of documents which a solicitor has copied or assembled betrays the trend of the advice which he is giving the client the documents are privileged".

The court noted that Lyell had been applied expressly in recent cases including Re RBS Rights Issue Litigation ([2017] 1 WLR 1999) (which also references Ventouris) and its principle appeared to have been applied in other cases, albeit not specifically citing the case. For example, in Excalibur Ventures LLC v Texas Keystone Inc ([2012] EWHC 2176 (QB)) the court held that:

"insofar as the disclosure of the funding agreements would or might give the other side an indication of the advice which was being sought or the advice which was being given, it would be covered by legal advice privilege."

The court also referred to a number of Australian authorities. Of particular note are:

  • Dalleagles Pty Ltd v Australian Securities Commission ([1991] 4 WAR 325), which stated that privilege extended to documents which would, if disclosed, "reveal, or tend to reveal the content of the privileged communications"; and
  • AWB v Terence Cole, which commented on the relevant threshold at which such an inference could be drawn – that is, that the inference "must have a definite and reasonable foundation in the contents of the document" and it was insufficient if the document would merely cause the reader "to wonder or speculate whether legal advice had been obtained and what was the substance of that advice".

The court chose to follow Lyell, although noting that there were considerable arguments in favour of the approach set out in Financial Services Compensation Scheme. The court was persuaded by the fact that the test in Lyell had been adopted (or at least appeared to have been adopted) in a number of English cases and the fact that the judge in Financial Services Compensation Scheme had not been referred to it or Ventouris. The court also noted that it had been assisted by the analysis set out in the Australian cases and adopted the 'definite and reasonable foundation' test set out in AWB v Terence Cole for determining the threshold at which legal advice could be inferred from a document.

Application of AWB v Terence Cole test

Having settled on the appropriate test, the court considered whether it had been correctly applied to the litigation funding documents. The court accepted that the explanation provided by the solicitors of the minority shareholders that the withheld and/or redacted sections of the litigation funding documents "tend to reveal the advice which the [minority shareholders] received in relation to the merits of the case, in relation to strategy and tactics, and in relation to the funding itself" would fall within the test. Certain submissions of the first respondent had prompted the court to consider whether the explanation put forward accurately reflected the exercise carried out by the solicitors for the minority shareholders. However, the threshold for such a challenge is high – namely, that it must be "reasonably certain" from the solicitor's affidavit that the privilege test has been misapplied or the evidence before the court demonstrates that the affidavit is incorrect or incomplete. In this case the court did not consider that this condition was satisfied. The minority shareholders could therefore leave the redactions in place.


This case provides a useful clarification of the extent to which legal advice privilege can be claimed over documents which are not legal advice communications between lawyer and client, but from which such advice can be inferred. Lyell and Financial Services Compensation Scheme illustrate the difficult balance between adopting an approach to privilege that is clear and minimises the scope for subjective assessments of what can be inferred from a document and acknowledging that too restrictive an approach can undermine the value of protection offered by legal advice privilege, since legal advice is rarely received in a vacuum. This case clarifies that the court's approach leans towards the latter consideration and resolves the inconsistency created by Financial Services Compensation Scheme.

Although the minority shareholders were successful in resisting the first respondent's application, the decision to withhold or redact the litigation funding documents to the extent that was done represents a tactical trade-off. The court questioned whether, given the extent of the redactions, the minority shareholders would be able to establish that they had actively sought funding and that there had been no improper delay, but concluded that this was a decision for the trial judge. It will be interesting to see whether this calculated risk pays off.

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