After several years of deceptive quiet, two recent cases have again raised the spectre of
Three Rivers (No 5) and the issue about who can be said to be the client where legal advice privilege is claimed by a corporate body. Both cases,
Astex Therapeutics Ltd v Astrazeneca AB and
The RBS Rights Issue Litigation, concern claims to privilege over lawyers’ notes of interviews with the party’s employees and ex-employees in the context of internal investigations. In both, the court held that legal advice privilege could not apply to the notes because of Three Rivers (No 5). RBS is appealing the second decision and it is likely to be leapfrogged to the Supreme Court.
Three Rivers
The contentious decision of the Court of Appeal in
Three Rivers (No 5) in 2005 arose in the context of the litigation brought against the Bank of England (the Bank) after the collapse of the bank BCCI. The claimants sought disclosure of documents prepared by the Bank’s employees for its lawyers Freshfields at the public inquiry into BCCI’s collapse. Since the Bank had appointed three employees to communicate with Freshfields, the Court of Appeal held that they were “the client” for the purpose of legal advice privilege (litigation privilege does not apply to inquiries). Documents prepared by other employees, classed as third parties in these circumstances, were not privileged.
The House of Lords reviewed the ambit of legal advice privilege later on in the same litigation in
Three Rivers (No 6). They approved a generous interpretation: all communications between a solicitor and his client relating to the transaction in which the solicitor has been instructed to provide legal advice will be privileged, even if they do not contain advice on matters of law, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser. Despite requests from the legal profession that they should do so, the House of Lords refused to consider the client identity issue in
Three Rivers (No 5).
Working papers
Three Rivers (No 5) did not discuss the status of notes taken by lawyers when interviewing the client’s employees, its focus being on documents created by the employees themselves to be passed on to the lawyers. In
The RBS Rights Issue Litigation RBS argued that the notes of the interviews with its employees came within the category of lawyers’ working papers which are usually protected by legal advice privilege.
The problem with this is that the interviews themselves were not privileged because of the client identity issue. A record of a conversation, whether in the form of a recording, a verbatim note or a transcript, cannot be privileged if the underlying conversation was not privileged (see
Property Alliance Group Ltd v RBS (No 3)). To constitute lawyers’ working papers, the notes needed to be more than a note of each interview. Hildyard J said that the mere fact that a note is not verbatim and therefore may betray some selection or line of enquiry is not good enough – it must show some evidence of legal input sufficient to justify the claim to privilege. RBS failed to adduce cogent evidence to this effect.
Property Alliance Group v RBS
RBS has also been challenged over its claims to privilege in connection with its internal investigations in
Property Alliance Group Ltd v Royal Bank of Scotland Plc, the interest rate swaps litigation alleging LIBOR manipulation by the bank. (Judgment dismissing the claims was given on 21 December 2016). RBS claimed legal advice privilege over various categories of documents prepared by its lawyers relating to meetings of the bank’s Executive Steering Group (ESG), a high level committee of senior RBS employees set up in 2011 to investigate the extent of its own LIBOR misconduct.
The documents were held to be privileged in the very particular circumstances of the case. RBS’s lawyers had been fully engaged as legal advisors in all meetings of the ESG and created all documents related to the meetings. Neither the client identity nor the working papers issues arose. The court held that all documents created by the party’s lawyers in that context attracted legal advice privilege and it was not appropriate to sift through evidence in order to separate fact from legal advice.
Litigation privilege
These cases all focus on legal advice privilege in part because in recent years the courts have been slow to allow a party to litigation to refuse to disclose a relevant contemporaneous report on the ground that it is protected by litigation privilege. The client identity problem doesn’t arise because litigation privilege can apply to communications with third parties but the dominant purpose test is a high hurdle to surmount at the early stages of an investigation: the document must have been created for the dominant purpose of conducting or aiding the conduct of actual litigation or litigation which is reasonably in prospect.
Where a document has been prepared with two purposes of equal weight, the anticipated litigation will not be the dominant purpose (
Waugh v British Railways Board). A simple way of approaching the dominant purpose test is to ask whether the facts in the document need to be established whether or not litigation ensues. If they do, the document is unlikely to be privileged.
Policy considerations for the Supreme Court
In
Waugh the House of Lords held that the due administration of justice strongly required disclosure of an internal contemporaneous report into an accident containing statements by witnesses on the spot since it was almost certainly the best evidence as to the cause of the accident. However, while it is desirable that all relevant evidence should be before the court, the court acknowledged the important principle that a defendant must be able to prepare his case properly. The dominant purpose test was seen to strike a fair balance between these two competing policy concerns.
The same competing policy concerns apply to legal advice privilege in the context of corporate investigations, whether financial as in the litigation brought against RBS, or contractual as in
Astex v Astrazeneca. Claimant interests and regulators will argue that the interests of justice lie in favour of disclosure of contemporaneous notes of interviews and there will be strong support for these decisions to be upheld. On the other hand,
Three Rivers (No 5) creates unfair practical problems for corporations which are not faced by individuals. It has not been followed in other jurisdictions such as Australia and Hong Kong so it is possible that the Supreme Court will find a way to limit its application.
What can potential defendants do in the meantime?
Property Alliance Group shows that it is possible to claim legal advice privilege over notes of internal investigations but the process has to be set up very carefully with lawyers involved at every stage. The client identity problem will still arise where there are a significant number of employees to be interviewed as they cannot reasonably all be designated as the client with authority to give instructions to the company’s lawyers, whether in-house or external. One option is to prepare separate reports for different purposes - for example, one containing potentially privileged details and the other containing a non-contentious review of the facts - accepting that the latter will be disclosable in subsequent litigation. The other is for lawyers to prepare notes that can pass the lawyers’ working papers test.
If the lawyer’s note includes their thoughts and comments on the interview with a view to advising the client, there is a reasonable chance of the note being privileged. This would be in line with the decision in
Property Alliance Group and also with that in
In re Sarah C. Getty Trust (not referred to in
Three Rivers No 5 and
No 6) where an oral report by a solicitor to his client which included advice but also included information received by the solicitor from third parties was held to be privileged.
A party may be able to increase its chances of claiming litigation privilege by involving litigation lawyers at an early stage. They will be able to ensure that the party implements a litigation hold “as soon as litigation is contemplated” as required by the practice direction to CPR 31B. A failure to implement a litigation hold is likely to scupper a party’s chances of claiming litigation privilege from the relevant date as Interbrew discovered to its cost in
Starbev GP Ltd v Interbrew Central European Holding BV. But the courts are wise to the fact that appointing a litigation lawyer may do no more than indicate a desire to generate a claim for privilege (
Axa Seguros SA v Allianz Insurance Plc).
We will no doubt be reporting back on this important issue in the course of 2017.