- Legal advice privilege applies to legal advice given from solicitor to client;
- In the age of large corporates, determining who the “client” is can prove difficult;
- The recent RBS Rights Issue Litigation gave some clarity on the application of legal advice privilege, but corporates should be careful to ensure they fall within the requirements.
At a Glance:
Organisations exposed to the potential of regulatory investigations are particularly likely to conduct their own investigations before proceedings are brought. Corporates and in house legal advisors should therefore be aware of the steps that can be taken to give clarity on who constitutes the “client” for the purposes of legal advice privilege, so here are some key points:
Legal advice privilege stems from the age old principle that a man should be able to obtain legal advice without having to disclose the advice to others. As the name suggests, it attaches to documents produced between a client and a lawyer for the purposes of obtaining legal advice and protects documents from having to be shown to anyone. While this seems simple enough, the application of the principle in the current day with disputes and regulatory investigations often spanning layers of management (if not also different jurisdictions) is unsurprisingly challenging.
If corporates want to keep documents arising through internal investigations from being disclosed to the opponent in a dispute, then taking steps early on in the investigation to clarify which individuals are the face of the “client” for the purposes of the legal advice to the corporate, is key. The challenges in doing so were highlighted in the RBS Rights Issue litigation.
RBS Rights Issue Litigation
The case concerned the opportunity for existing shareholders to invest in RBS shares that was shortly followed by the government’s bail out of RBS. It centred on the (not so remote) argument that the investment losses that followed the Government’s bail out were foreseeable.
Before litigation started RBS conducted its own internal investigations. Once litigation had started the claimants sought disclosure of the notes taken during interviews with employees on the basis that they were relevant to the dispute and not subject to legal advice privilege. RBS disagreed and argued that the notes were created for the purposes of seeking legal advice and were therefore subject to legal advice privilege. As an alternative RBS argued that the court should apply US law under which the interview notes would fall in as privileged.
The notes were transcripts and records of interviews between RBS’s lawyers (in the US and the UK) and employees of RBS taken for the purposes of putting RBS in a position whereby it could receive legal advice. The claimants sought disclosure of these notes on the basis that this was the communication of factual information by employees to RBS so that it may better understand its position and therefore not within the scope of legal advice privilege.
Legal advice privilege
Legal advice privilege applies to communications between a client and his lawyer for the purpose of the client receiving legal advice.
The subtle distinction drawn out by the claimants and recognised in the judgement is that whilst the employees were representatives of RBS it was not their role to communicate with the solicitors for the purpose of obtaining legal advice. In reality the employees were communicating factual information, gathered so that RBS was put in a position to then seek legal advice. To put it another way, the employees being interviewed were not the “client” or the “directing mind and will” of the corporate.
The key issue therefore in applying legal advice privilege to documents, is identification of what individuals within a corporate, comprise the “client” and are able to seek legal advice on behalf of the corporate
Criticised Court of Appeal Decision
The issue of who constitutes the client for legal advice privilege was considered in 2003 by the Court of Appeal in a case commonly called Three Rivers (No 5). Whilst the leading authority on the point, the decision has been much criticised for being narrow and leaving corporates with little certainty over which of its employees fall within the group of people that could be said to constitute the corporate’s “client”. This is because Three Rivers (No 5) determined that information gathered from an employee is the same (for privileged purposes) as information gained from third parties – even where that information is collected for the purpose of being shown to a solicitor so that the corporate client may receive legal advice.
A higher level of analysis in which a reading of the RBS Rights Issue judgement could be said to point towards is that the “client” should consist of those who are the “directing mind and will” of the corporate, which in most circumstances is likely to point towards the board of directors. Of course in reality the board would often receive legal advice from internal advisors so this can be very restrictive in practice.
While the High Court in the RBS Rights Issue litigation granted permission to appeal directly to the UK Supreme Court, it appears that due to changes in the way the case is pleaded this opportunity has not been taken up. This is particularly disappointing given that in March 2016 Lord Neuberger of the UK Supreme Court gave a talk on legal advice privilege pointing out its need for updating, particularly in the context of corporates, regulatory and cross-border issues.
- At the outset consider if the issue being investigated could end up in the Courts of England and Wales, if it might then considering the points below at an early stage will make arguments to prevent disclosure concise and strong.
- Consider what individuals will be authorised to seek and receive legal advice, these individuals will constitute the “client” under the principles of Three Rivers (No 5). Time spent identifying and confirming this will be well invested as in absence of this a court could determine the “client” with reference to the directors as being the “directing mind of the company”.
- Lawyers’ working papers are privileged because to disclose them would give the opponent an insight into the legal advice given. To fall within this category documents will need to be more than a factual relay or path of the investigation, they will have to be indicative of legal advice.
Assistant Solicitor, London
00 44 (0) 207 240 0521
00 44 (0) 207 240 9457