In a decision of the High Court recently handed down in connection with The RBS Rights Issue Litigation, the Court considered a claim of legal advice privilege by the Bank over direct communications between employees of the Bank and its in-house and external lawyers. The Court concluded that legal advice privilege did not apply. In doing so, the High Court found that the decision in Three Rivers (No 5) was not “confined to its own facts but is based on principles of general application, which … remain binding law in England.”
In reaching this decision, the Court also decided that the correct law to apply in determining issues of privilege was the lex fori (the law of the forum).
The Bank claimed legal advice privilege over “Interview Notes” which included transcripts, notes and other records of interviews conducted by or on behalf of the Bank with employees and ex-employees as part of an investigation. The Interview Notes were mainly prepared by the Bank’s solicitors (including in-house lawyers and external lawyers). The Bank claimed privilege on the basis that the Interview Notes comprised communications by an employee (or ex-employee) authorised to communicate with a legal adviser for the purpose of his or her employer seeking legal advice.
The Bank did not assert that the Interview Notes were part of a communication between the Bank and its lawyers in which advice was sought or given.
The Claimants countered that:
- legal advice privilege only covers communications between a client and his lawyer for the purpose of the lawyer giving, and that client seeking or receiving, legal advice; and
- gathering and communication of information by a person who is not the client is not protected by privilege, even if that information is gathered and communicated by that person to his employer’s lawyer with the authority / at the request of the client and/or its lawyers.
Three Rivers (No 5) – a recap
The leading authority on the points in issue is the Court of Appeal's decision in Three Rivers (No 5). In that case, the Applicants sought disclosure of certain documents from the Bank of England (the BoE) which had been produced for a private non-statutory inquiry by BoE employees, in some cases for the purpose of sending to the BoE's external lawyers. The BoE established a special unit known as the BIU, comprising three BoE officials who had been appointed by the Governor of the BoE, to deal with all communications between the BoE and the inquiry and to obtain relevant legal advice in that regard.
The disclosure application did not seek disclosure of documents passing between the BIU and the BoE’s external lawyers, or vice versa.
BoE argued that the documents for which disclosure was sought were privileged because they were prepared for the dominant purpose of obtaining legal advice. The Court of Appeal decided that the BoE was not entitled to privilege in any of the categories concerned. The Court decided that it was the BIU (established to deal with inquiries and to seek and receive advice from the Bank’s lawyers) who was the ‘client’ for the purpose of seeking and receiving legal advice, and that communications from employees of the BoE (other than members of the BIU) to the BoE’s external lawyers did not attract legal advice privilege as they were not lawyer/client communications.
Application of Three Rivers (No 5) to the present case
In this latest case, although the Bank acknowledged that Three Rivers (No 5) was binding on the Court, it sought to demonstrate that the Court of Appeal decision did not apply to the facts of the present case. It was the Bank’s case that:
- Confidential communications between a client and a lawyer for the purpose of giving or obtaining legal advice are protected by legal advice privilege;
Where the client is a corporation, statements made to the corporation’s lawyers by employees authorised by the corporation to make such statements constitute lawyer-client communications for the purpose of legal advice privilege (rather than preparatory information gathering). This is so whether or not the employee was authorised to seek or receive legal advice.
The Bank submitted that (a) the Interview Notes were confidential and their purpose was to enable the Bank to obtain legal advice in this case; (b) each of the interviewees was authorised by the Bank to participate in the interviews, and the Interview Notes comprised authorised ‘communications’; and (c) each Interview Note comprised or recorded confidential communications by the employee directly to the Bank’s lawyers. The Bank argued that it was this direct communication which distinguished the case from Three Rivers (No 5), where such statements were channelled through the BIU.
The Court concluded that although the Interview Notes recorded direct communications with the Bank’s lawyers, they comprised information gathered from employees or former employees to and for the purpose of enabling the Bank, through its directors or other persons, to seek and receive legal advice. Mr Justice Hildyard went on to say that there can be no real doubt as to the present state of law in this context in England: “Three Rivers (No 5) confines legal advice privilege to communications between lawyer and client, and the fact that an employee may be authorised to communicate with the corporation's lawyer does not constitute that employee the client or a recognised emanation of the client.” The ‘client’ for the purposes of privilege consists only of those employees authorised to seek and receive legal advice from the lawyer.
In reaching its decision, the Court acknowledged that the Three Rivers (No 5) decision was controversial. Although the Court concluded that the Court of Appeal decision was based on principles of general application “which remain binding law in England”, Mr Justice Hildyard said that “t[h]ere is, to my mind, force in these criticisms and attempts to confine the application of the decision in Three Rivers (No 5). It may be that in a suitable case the Supreme Court will have to revisit the decision, and perhaps the fundamental question as to whether and to what extent the distinction between legal advice and litigation privilege on which Three Rivers (No 5) ultimately rests is really justified and appropriate …”.
Lawyers’ working papers privilege
The Bank also sought to claim privilege over the Interview Notes on the basis that they were “lawyers’ working papers”. Under English law, such papers are privileged under the legal professional privilege doctrine. The justification for holding such documents privileged is that disclosure may ‘give a clue’ as to the advice which had been given by the solicitor.
The Bank submitted that the Interview Notes were not simply verbatim recitals of the interviews, but “evidence of the impressions of the lawyers with a view to advising the client” which in broad terms, revealed the lawyers’ ‘train of inquiry’. The Claimants argued that to the extent that the Interview Notes revealed the lawyers’ train of inquiry, this did not meet the threshold test of ‘giving a clue’ as to the advice given. The Claimants also submitted that the mere selection of material for inclusion in the Interview Notes did not ‘cloak’ the selected information with privilege.
As is common with respect to claims of privilege (where contested), the Bank relied upon witness evidence put forward by their external solicitors, explaining the claim for privilege. On the basis of the evidence submitted, the Court decided that the claim for privilege was not made out.
Lex Fori – the law of the forum
The Bank also resisted disclosure on the basis that the Court ought to apply US law rather than English law to the question of whether the Interview Notes were protected by privilege, as there were strong US connections, including the use of US lawyers in the creation of the Interview Notes. Under US law, the Interview Notes were said to be privileged.
Under the conflict of law rules, the principle of lex fori (the law of the forum) is applied to determine whether a communication is privileged. As the Court noted, this principle is well established. However, the Bank submitted that the modern concept of legal professional privilege is a fundamental human right (rather than an aspect of the law of evidence) rendering obsolete the old established rule that lex fori applies. Instead, the Bank proposed that the Court “should apply the law of the jurisdiction with which the engagement or instructions, pursuant to which the documents came into existence or the communications arose, are most closely connected” (save where to do so would be contrary to English public policy).
The Court disagreed with the Bank and declined to depart from the well-settled rule that the law of the forum governs issues of privilege (even taking account of the frequency with which multi-jurisdiction litigation now occurs).
Given that Three Rivers (No 5) remains good law, for corporations who must act through their officers and employees, this decision appears unsatisfactory and means that the question of privilege protection remains a concern. Care must always be taken with preparatory or fact gathering exercises carried out with a view to seeking legal advice by individuals that are not the ‘client’, since the work product of such exercises is unlikely to attract legal advice privilege. This is particularly so where litigation privilege (which protects the assembly and content of evidence produced for the dominant purpose of litigation) does not apply.
We understand that the Bank may be appealing the decision.