The High Court has clarified the circumstances in which a company director or officer is entitled to assert joint interest privilege in legal advice received by the company where the individual was not an express party to the solicitor’s retainer. The court held that the individual must in fact have been the solicitor’s client at the time the advice was received, even if there was no express retainer: R (on the application of Ford) v Financial Services Authority (defendant) and Johnson and another (interested parties) [2011] EWHC 2583 (Admin).

The existence of joint interest privilege has important practical implications: none of those entitled to the privilege can waive the privilege without the others’ consent; nor can they assert privilege against the others if a dispute arises in future.

It has long been established that joint interest privilege will arise where (i) a solicitor is jointly retained by more than one person or (ii) there is no joint retainer but the parties have a joint interest in the subject matter of the advice (eg. company and shareholder). It has generally been accepted that such an interest may arise between a company and its directors or officers, but the criteria against which this should be judged has been a matter of some uncertainty. This decision gives welcome clarity on the point, albeit only at High Court level.

Background

Solicitors were retained to advise a company in connection with an investigation by the Financial Services Authority (“FSA”). Some nine months later the FSA widened the investigation to encompass various executives of the company (two directors and the compliance officer). At that point the solicitors obtained instructions that the executives wished to be represented by them in the investigation; the executives had not previously been express parties to the retainer.

The company subsequently went into administration and the administrators waived the company’s privilege in certain e-mails containing advice received from the solicitors in the period before the executives were subject to investigation. The FSA relied on the content of those e-mails in their investigation report against the executives.

The executives argued that they were entitled to assert legal professional privilege in the e-mails. They said that in the relevant period the solicitors were advising them as individuals and not simply as directors and officers of the company, since it was explicitly contemplated by both them and the solicitors that in time the executives would also be vulnerable to investigation by the FSA. They were granted permission to apply for judicial review of the FSA’s decision to use the e-mails in their investigation.

Test for joint interest privilege

The judge (Burnett J) held that in the absence of a formal joint retainer or a clear contemporary record of the scope of the advice given, a dispute about whether there was joint privilege required a factual inquiry to determine the true position at the material time. The key question was whether the advice was given to the executives as clients. This had to be distinguished from a situation where the advice was given to the company but the executives were interested in the advice because it impacted on their personal position. Only the former case would give rise to joint privilege.

The judge rejected alternative tests put forward by each party. At one extreme, he did not accept the FSA’s submission that he should adopt the US approach that once lawyers have been retained by a corporation, its officers cannot prevent it waiving privilege in advice concerning its affairs or those of its officers even if the personal affairs of the officers are inextricably intertwined with those of the company and they were in fact being given advice at the same time. The US approach was based in part on public policy considerations, including facilitating the investigation of insider fraud and officer misconduct. Such considerations formed no part of English law, the House of Lords in R v Derby Magistrates Court ex parte B [1996] 1 AC 487 having expressly rejected an appeal to public policy to circumscribe the absolute right to assert legal privilege.

At the other end of the spectrum, the judge rejected the executives’ submission that to establish joint interest privilege it would be sufficient to show that they “reasonably believed” they were being advised on their personal position. The judge commented that where joint privilege exists it affects the rights of all those who share the privilege as well as the professional obligations of the lawyers. It therefore “should not arise casually or accidentally”.

Evidential requirements

The judge held that, apart from cases where there was in fact no legal distinction between those claiming joint privilege (eg. a partnership and its individual partners), an individual claiming joint privilege in the absence of a joint retainer would need to establish the following facts:

  1. that he communicated with the lawyer for the purpose of seeking advice in an individual capacity;
  2. that he made clear to the lawyer that he was seeking legal advice in that capacity, rather than only as a representative of a corporate body;
  3. that those with whom the joint privilege was claimed knew or ought to have appreciated the legal position;
  4. that the lawyer knew or ought to have appreciated that he was communicating with the individual in that capacity; and
  5. that the communication with the lawyer was confidential.

On the facts of this case, the judge was satisfied that the above criteria were satisfied, and so the executives had the benefit of joint interest privilege. This privilege had not been (and could not have been) waived by the administrators on their behalf. It followed that the FSA could not rely on the content of the communications in the regulatory proceedings against the company or the executives.