Financial Services Compensation Scheme Ltd v Abbey National Treasury Services Plc – internal dissemination of legal advice from in-house lawyers [2007]EWHC 2868 (Ch)

This decision addresses an important and confusing issue concerning the internal dissemination of legal advice provided by in-house lawyers. In English law the fact that the advice is given by an in-house lawyer rather than an external lawyer does not affect this issue, although as the recent decision in Akzo Nobel Chemicals Ltd v Commission of the European Communities has confirmed, legal advice given by an in-house lawyer is not privileged in EC investigations.

Where an organisation obtains legal advice from its own legal department, it may forward the advice unchanged, or a summary or paraphrase of the advice, within the organisation without affecting the privileged status of the advice. The documents in which the advice is dissemination, or merely kept as a record, are also privileged – see The Good Luck (1992).

FSCS created checklists for its staff to use when assessing whether an investor was eligible for compensation following misselling of a financial product. FSCS voluntarily disclosed some examples of these checklists pre-action, having redacted the questions and answers which contained a distillation of legal advice given by the FSCS’s in-house legal team or would enable the substance of the legal advice to be inferred. The redactions were challenged by the defendants who face a claim for damages for breach of statutory duty, negligence and misrepresentation.

The judge held that unless the inference is obvious and inevitable, in which case the document is in substance a statement of the legal advice, privilege should not attach to documents merely because legal advice could be inferred from them. Views may differ as to whether the inference can be made and a claim to privilege should not depend on a subjective assessment of this sort. In this case, however, reading the various redacted questions and answers as a whole, it was clear that they were privileged.

Comment: it is vital when considering legal advice privilege to distinguish between the creation of privilege in the first instance and whether or not it is subsequently lost. So, for example, the original advice given by FSCS’s legal team was privileged under English law but was not privileged under EC law. When it was distilled and passed on to FSCS’s employees in the form of the checklists and the answers to the questions posed, the advice did not lose its privileged status under English law and to the extent that the checklists contained a summary of that advice, they were also privileged. However, where the document in question does not summarise or paraphrase the advice but could be read inferentially as disclosing the substance of the advice, the document will not be privileged. The judge gave as an example of such a document the minute of a board meeting which records the directors’ decision on a particular matter. The line between paraphrase and inference will not always be an easy one to draw – for this reason, it is, perhaps counterintuitively, important to make clear the substance of the legal advice within the document if privilege is to be claimed.