In a widely publicised decision last December arising out of the RBS Rights Issue Litigation (reported here), the High Court found that interviews conducted by a bank's solicitors with its employees were not covered by legal advice privilege as the employees in question did not form part of the "client" for privilege purposes. The judge took the view that he was bound to reach this conclusion, applying the narrow interpretation of "client" from the notorious Court of Appeal decision in Three Rivers No 5.

It was anticipated that RBS would appeal the decision directly to the Supreme Court, the judge having granted a "leapfrog" certificate to allow that to happen (subject to the Supreme Court granting permission). However, we can now confirm that the appeal will not take place, as recent amendments to the claimants' case mean the disputed documents are no longer relevant to the issues in the action.

It is regrettable that the Supreme Court will not be considering this issue, as the current position causes significant practical problems for corporates wishing to take legal advice with the benefit of privilege. As Three Rivers No 5 has been interpreted in the RBS decision, legal advice privilege is restricted to communications between a lawyer and those individuals who are authorised to seek and obtain legal advice on behalf of the organisation. Importantly, it does not extend to those who are authorised only to provide information to the lawyers, even if the lawyers need that information to be able to advise the organisation.

If this approach is followed in other cases, it may significantly restrict the number of communications that are likely to benefit from legal advice privilege in the corporate context. In some cases, the group of individuals authorised to instruct the lawyers and obtain their advice, as opposed to providing factual information to the lawyers, may be quite small. And the problem will become even more stark if other judges take the view that a further implication of Three Rivers No 5 is to restrict this group to those who are the "directing mind and will" of the organisation; the judge in the RBS case did not think it was necessary to determine this point, but suggested that he inclined to that view.

The current position will be seen as unhelpful and unworkable by many corporates, and arguably risks undermining the policy rationale underlying legal advice privilege – to allow clients (including corporate clients) to take legal advice based on complete and accurate information, without fear that they will prejudice their position by creating material that can be used against them in subsequent legal proceedings.

Had the appeal proceeded, it is likely that two principal arguments would have been put forward against the position taken in the judgment:

  • Legal advice privilege should apply to all communications between a lawyer and those who are authorised to communicate with the lawyer on behalf of the client organisation. It should not matter whether that authority is to communicate factual information or instructions, which should not be distinguished for these purposes. This conclusion is arguably not inconsistent with Three Rivers No 5 or, if it is, that decision should be confined to its particular facts or alternatively overruled.
  • In any event, there are compelling reasons for adopting a "dominant purpose test" in the context of legal advice privilege (similar to that recently approved in some other jurisdictions, including Hong Kong), so that it is no longer limited to lawyer-client communications, but instead covers all documents created for the dominant purpose of obtaining legal advice. This would avoid arbitrary distinctions, provide greater certainty, and better enable the underlying purpose of the privilege to be fulfilled.

Given the difficulties highlighted by the RBS decision, which as a first instance decision is not binding on other High Court judges, contested applications relating to privilege may become increasingly common, and it may not be long before these issues arrive at the door of the Supreme Court via some other route. Corporate clients will no doubt hope that, when that day comes, a clearer and more workable test for legal advice privilege will emerge.