Where next for corporate legal advice privilege?

A recent report challenges the accepted view about the unfairness of the rules regarding legal advice privilege when it comes to companies and other large organisations. We discuss its proposals for change and some immediate practical implications for those dealing with disclosure.

For more than twenty years, corporations and their lawyers have battled with the uncertainties about the scope of legal advice privilege created by the Court of Appeal’s decision in Three Rivers (No 5). More recently the Court of Appeal itself has acknowledged the problems caused by that decision. 

So we continue to wait for a case to reach the Supreme Court where Three Rivers (No 5) can be reviewed or reversed and the problems removed. Or do we? A recent report Reforms to Privilege Laws by Professors Richard Moorhead and Andrew Higgins, Working Paper 9 of the Post Office Project, suggests otherwise.

In short, the report concludes that the tightly restricted approach taken to companies and legal advice privilege in Three Rivers (No 5) is desirable, even if it also needs some clarification. The authors argue that the Post Office scandal has revealed the need for a different attitude to legal advice privilege from the courts and a greater readiness to question claims to privilege.

Before looking at the implications of this particular aspect of the report, we look briefly at the present position and how we got here. 

The present position

Legal advice privilege – a refresher

• Legal advice privilege is the fundamental right to consult a lawyer in confidence. There is no requirement to disclose privileged documents in proceedings, nor when responding to a document subject access request (DSAR). There is a qualified exemption for privileged information when responding to a freedom of information (FOI) request. 
• Unless the lawyer/client relationship is being used to further crime, fraud or another iniquity, a lawyer is under a duty to assert privilege on behalf of their client.
• A document will only be protected by legal advice privilege where it's a confidential communication between a lawyer (including an in-house lawyer) and their client with the dominant purpose of giving or receiving legal advice. A “document” in this context includes any form of communication.
• Legal advice privilege (in contrast to litigation privilege) doesn't apply to communications with, or documents created by, a third party, even where the third party is providing information to help the lawyer advise the client.

The rules about legal advice privilege were created centuries ago with individuals (both lawyer and client) and physical documents in mind. It isn't surprising, therefore, that they don't work perfectly in the context of large organisations with in-house legal teams and electronic communications. This problem has been compounded by the uncertainty created by Three Rivers (No 5).

Three Rivers (No 5) and the corporate client identity issue

The Court of Appeal in Three Rivers (No 5) adopted a narrow definition of those who can be identified as the corporate client. Only employees who are authorised to instruct the lawyer on behalf of the company constitute “the client” for the purpose of legal advice privilege. 

Documents created by, and communications with, other employees are treated in the same way as those emanating from third parties. Legal advice privilege won't apply to those documents even if they were brought into existence for the purpose of obtaining legal advice from, or indeed at the request of, the lawyer.

The unusual facts in Three Rivers (No 5) meant that the court didn't need to identify which employees were tasked with seeking and receiving legal advice on behalf of the client. For this reason, the judgment doesn't address how this restriction would work in other circumstances, and in particular where the lawyer in question is in-house. 

The consequence is a huge grey area for organisations and their lawyers when it comes to working out which internal documents have to be disclosed and which are protected by legal advice privilege. We explored some of these issues in privilege and disclosure of internal communications.

Subsequent Court of Appeal decisions

The Court of Appeal has acknowledged two significant problems created by Three Rivers (No 5) and the corporate client identity issue – see Serious Fraud Office v Eurasian Natural Resources Corporation Ltd and R (Jet2.Com Ltd) v Civil Aviation Authority. 

The first problem is about fairness. Legal advice privilege should be equally applicable to all clients. The restricted definition of “the client” generally presents no problem for individuals and many small businesses (the 19th century model). In contrast, a multi-national corporation asking its lawyers to obtain the information needed to provide advice from its employees will find that information isn't protected by legal advice privilege. It will therefore be in a less advantageous position than a smaller entity seeking advice.  

The second problem concerns alignment with other common law jurisdictions. The Three Rivers (No 5) approach hasn't been adopted in other countries. This causes difficulties for multinational companies operating across several jurisdictions.  

A case study

The RBS Rights Issue Litigation illustrated this problem. US lawyers had interviewed RBS employees in the US in the expectation that the notes of the interviews were protected by privilege under the US qualified attorney work product doctrine. In the English proceedings that followed, Hildyard J held that, following Three Rivers (No 5), the notes weren't protected by legal advice privilege. The interviews themselves weren't privileged occasions because of the corporate client identity issue. Under English law, the notes could only be protected by legal advice privilege as lawyers’ working papers if they revealed the trend of legal advice to the client. That wasn't the case with the lawyers’ verbatim interview notes which had, therefore, to be disclosed.

What does the report recommend? 

A qualified corporate privilege

The report favours retaining and clarifying the Three Rivers (No 5) narrow definition of the corporate client. It also advocates adopting a qualified privilege for corporations. This draws inspiration from the US qualified work product doctrine but appears to be broader in scope. The draft proposal places the burden on the party seeking production of privileged documents to show they have a genuine need for the materials and that their substantial equivalent can't be obtained by other means without undue hardship.

The Supreme Court isn’t the solution

The report argues convincingly that waiting for a (potentially mythical) case to reach the Supreme Court isn't the right course. As we saw in Three Rivers (No 6), the Supreme Court will, and should, only deal with the issues in the case before it and can't undertake the required breadth of review.

Richard Moorhead raised concerns about so-called “synthetic” claims to privilege during the Post Office Horizon IT Inquiry (see his 2024 Hamlyn Lectures). The Solicitors Regulation Authority (SRA) has said that disclosure obligations and the improper application of privilege to protect communications from disclosure will form part of its post-inquiry review.

The report focuses primarily on the position of large corporations like the Post Office but it also raises a concern that privilege is used by government to avoid disclosure of sensitive information which the public would otherwise legitimately be entitled to access under freedom of information laws.  

Against this backdrop, it’s hard not to agree that a full reappraisal of the role of legal professional privilege in the 21st century would be desirable. In the meantime, all we're likely to receive will be guidance from the SRA that will follow after the Inquiry’s final report is published. 

Practical consequences of the report

Large organisations and their lawyers should be concerned about privilege and disclosure in the aftermath of the Post Office scandal. 

These are some of the immediate lessons to draw from the report.

• Make sure you understand the rules. Privilege is in the spotlight and claims to privilege are going to be scrutinised by opponent lawyers, concerned citizens and the courts. Labelling everything “privileged and confidential” isn’t helpful and may provoke scepticism about valid claims to privilege.
• Don’t try to manipulate the rules. For example, routing documents via a legal adviser where legal advice isn't really required.
• Make sure you can justify each assertion of privilege. There's a rule of practice that privileged documents can be identified by class when giving disclosure. However, this is subject to the court’s discretion and the report favours requiring parties to list privileged documents individually.
• Be careful about redactions. Challenges to redactions for privilege and confidentiality, including personal data, are going to be more frequent – see Bates v The Post Office (No 3). This a focus of current concern and judges may interrogate attempts to keep relevant evidence from the court and the public.

You can read the report here.

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