The narrow interpretation of "client" continues…The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch)


Last week (8 December 2016), the High Court confirmed the controversial Three Rivers District Council and Others v The Governor and Company of the Bank of England [2003] EWCA Civ 474 (Three Rivers No 5) decision in relation to legal advice privilege. In Three Rivers (No 5) the Court of Appeal restricted the definition of "client" for the purposes of legal advice privilege, between solicitor and client, to those charged with seeking or receiving legal advice on behalf of a company, and not employees of the company more generally.

Background

The application was in respect of group litigation brought against RBS. RBS was claiming legal advice privilege over "transcripts, notes [and] other records of interviews conducted by or on behalf of RBS with employees and ex-employees…". These notes were prepared by RBS' in-house legal team, as well as the law firms Wilmer Hale, Travers Smith, and non-lawyers within the RBS Group Secretariat. RBS resisted disclosing them on the basis they were subject to legal advice privilege and/or (excluding those prepared by RBS' Group Secretariat) that they were lawyers' privileged working papers.

Decision

The court dismissed RBS' application and claim for privilege. Hildyard J based his decision on the Three Rivers (No. 5) Court of Appeal judgment. RBS attempted to distinguish that decision, submitting that the documentation in question in that case was concerned primarily with fact-gathering, undertaken only for the purpose of internal inquiry. The court dismissed this submission, noting that "the decision in Three Rivers (No. 5) is not confined to its own facts but is based on principles of general application which (despite considerable criticism in some quarters) remain binding law in England."

In delivering his judgment, Hildyard J noted that the position left by Three Rivers (No. 5) was subject to legitimate criticism and that there may be attempts to confine the decision to the facts as they were. Despite noting that it may be suitable for the Supreme Court to revisit it in time, he confirmed that "there can be no real doubt as to the present state of the 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 [as] the client or a recognised emanation of the client."

Comment

The decision affirms the strict definition of "client" in respect of a legal advice privilege claim. It is a clear indication that the courts will continue, for now, to limit the definition of "client" to those seeking or receiving legal advice on behalf of a company. Although the court declined to make a ruling limiting the definition to individuals who constitute the "directing mind and will" of a corporate, Hildyard J held that those merely authorised to pass information back to the legal team could not in this case be said to be part of the client group.

In theory the "client group" may be constituted differently in each case. Accordingly, defining that team at an early stage, for example in engagement letters, may in some circumstances be helpful, although such a definition could be subject to challenge if it is too broad. In any event, defining the team could also tie down a group which may necessarily change over time, so would need to be reviewed regularly.

Both in house and external lawyers need to take care to ensure that legal advice to corporate clients will be privileged, and, importantly, to warn clients that, unless adversarial proceedings are in reasonable contemplation, so as to permit a claim to litigation privilege, pure evidence gathering, involving those outside the immediate "client group", whether by the client or its lawyers, may not be privileged, unless it can be shown that the resulting documentation contains or betrays legal advice. In this case, notes of interviews, even where they revealed the lawyers' train of enquiry, were held not to be privileged, as they did not betray legal advice.

We understand that RBS intends to apply for permission to appeal.

Key contacts

Bill Gilliam

Bill Gilliam

Partner, Dispute Resolution
Leeds

View profile
Fiona Walker

Fiona Walker

Managing Associate, Commercial Litigation
United Kingdom

View profile