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21 September 2010
Legal professional privilege is a perennial issue for lawyers and their clients. This update is a reminder of the key rules which apply in the United Kingdom, with a particular focus on the role of in-house counsel and the steps that clients can take to minimise any potential issues.
It comprises both legal advice privilege and litigation privilege. It is an essential protection for clients, who need to be free to obtain full and frank legal advice and to bring or defend legal proceedings, without the fear that communications with their lawyers could be disclosable to third parties or the court. Without the protection which privilege confers, a client may not be completely open with its lawyers (which will have a knock-on effect on the quality of legal advice it receives), or may be less thorough in its preparation for trial.
Legal advice privilege applies to confidential communications which pass between a client and its lawyer and which have come into existence for the purpose of giving or receiving legal advice about what should prudently and sensibly be done in a relevant legal context.
This privilege cannot be claimed unless the document in question is confidential. Where documents have been widely circulated or are in the public domain, such confidentiality will be lost. However, confidentiality (and hence privilege) can be still be preserved where a document has been disclosed to a limited number of parties on the express terms that it is confidential and not to be made more widely available.
Legal advice privilege applies to 'communications'. Therefore, it is usually necessary for documents, particularly those generated by the client, to be subject to a client/lawyer communication. This can be an issue in practice where, for example, an employee who discovers a potential legal issue creates a preparatory internal note or report (such report often explaining why that individual is not involved in a problem) and sends this document to others within the organisation. Such documents are unlikely to be covered by legal advice privilege. Generally, where a lawyer creates a record of material which he or she has only as a result of the client professional relationship, privilege will attach, even if there is no communication to the client of that record.
Who is the 'client'?
The definition of the 'client' for the purposes of legal advice privilege is important. Essentially, not all employees of an organisation will be deemed to be the 'client' and legal advice privilege will generally only attach to the lawyer's communications with those employees who have authority to instruct lawyers. On receiving instructions, it is always worth establishing who the 'client' is: too wide a definition may be seen as artificial by a court should a problem arise; too narrow a definition may be unworkable in practice.
Who is the 'lawyer'?
Legal advice privilege covers advice from solicitors, barristers, in-house lawyers and foreign lawyers. With regard to paralegals, trainees and legal executives, as long as they are properly supervised in accordance with Law Society requirements, it is likely that their work will also attract legal professional privilege.
The scope of who is regarded as a lawyer for the purposes of giving legal advice was considered in the 2009 case Prudential Plc, R (on the application of) v Special Commissioner of Income Tax.(1) It was proposed that legal advice privilege should extend to legal advice given by an accountant. However, the proposition was rejected by the court on the grounds that:
On a practical note, to avoid losing privilege as a result of the rule in Prudential, procedures could be adopted so that legal advice, from accountants or otherwise, is at least channelled through legal professionals.
Recent case law - in-house lawyers
As noted above, legal advice privilege extends to advice from in-house lawyers. However, where there is a potential competition element to the issue at hand, the position is different, as recently confirmed in Akzo Nobel.(3) In this case, the European Court of Justice held that legal professional privilege did not cover exchanges between a company and its in-house lawyers, in the context of a competition investigation by the European Commission. Although the court's decision does not affect the English law position on privilege, in-house lawyers need to be aware that the privilege which they enjoy before the English courts would not survive such an investigation by the European Commission.
The decision in Akzo Nobel is controversial and the court's failure to reverse previous case law comes as a disappointment to many; it undermines the important role played by in-house counsel in assessing and promoting their employers' compliance with the law. In-house lawyers should therefore continue to adopt an extremely cautious approach to recording any advice on competition-related matters.
Relevant legal context
Legal advice privilege extends to advice as to what should be prudently and sensibly done in the relevant legal context.(4)
Advice from a lawyer on general business may lack a relevant legal context. This is particularly worth noting for in-house lawyers whose role may well go beyond giving legal advice and might include various executive or regulatory responsibilities. Documents prepared by in-house lawyers acting in such other capacities are unlikely to attract legal advice privilege.
Where there is doubt as to whether advice is given in a relevant legal context, a useful test to adopt is the one suggested in Three Rivers,(5) which asked whether a lawyer would need to wear his "legal spectacles" to advise on the matter in question.
Wider dissemination of legal advice
One final practical point to note on legal advice privilege is that although, as a general rule, communication of privileged advice from the recipient within the client to the board of directors should not cause any loss of privilege, subsequent actions relating to that advice may cause privilege to be lost. For example, where legal advice is the subject of discussion at board meetings and the minutes extend beyond a note of the advice itself (eg, they record discussion on the implications of the advice), those minutes are unlikely to be privileged.
Litigation privilege attaches to confidential communications between either a lawyer and his or her client or a lawyer or client and a third party, which are made for the dominant purpose of litigation which is reasonably in prospect.
Litigation privilege differs from legal advice privilege in two fundamental respects. First, litigation privilege applies only when litigation is current or pending/contemplated, whereas legal advice privilege is not subject to this requirement. Second, litigation privilege can apply to communications by a client or his or her lawyer to a third party; in contrast, legal advice privilege applies only to communications between a client and his or her lawyer. In practice, the fact that litigation privilege allows for communication with third parties means that the difficulties in identifying the client and the lawyer (particularly whether an in-house lawyer is acting in a legal capacity) for the purposes of legal advice privilege do not arise: as long as litigation is reasonably in prospect and it is the dominant purpose of the communication, litigation privilege will apply.
Litigation privilege cannot be claimed unless a document is confidential. For this reason, legal advice privilege will not attach to communications between opposing parties or transcripts of proceedings.
Litigation privilege will apply only to documents or communications of which the dominant purpose is litigation. In determining the dominant purpose of a document, a court will look to the substance of a document rather than its form. Consequently, statements within a document that it was prepared for litigation will not automatically make that document privileged. External evidence may be presented to a court that a document was prepared for a particular purpose.
Litigation that is reasonably in prospect
Litigation that is 'reasonably in prospect' means that the litigation in question must be pending, reasonably contemplated or existing. This requirement has caused some uncertainty. It is insufficient to have a general apprehension of litigation (such a rule would permit particularly cautious clients to attract greater levels of protection): there must be a real prospect of litigation. The prospect of litigation does not, however, need to be greater than 50%;(6) although it must be more than a mere possibility. One helpful piece of judicial clarification can be found in the Court of Appeal's decision in Westminster International BV v Dornoch Limited,(7) where a situation that "could well give rise to litigation" was said to be a good description of something that would satisfy the test.
Legal professional privilege looks set to be a hot topic as Prudential was heard by the Court of Appeal in July 2010 and judgment is expected to be given in October. Both the Law Society and the Institute of Chartered Accountants of England and Wales (ICAEW) were granted leave to intervene in this case. The ICAEW submitted that legal professional privilege should be extended to the clients of chartered accountants who receive tax advice. However, the Law Society argued that extending the boundaries of legal professional privilege risked creating uncertainty over what fell within its ambit, and that any extension should be the subject of consideration by parliament and, if necessary, legislation. The Law Society also pointed to the fact that the concept of legal professional privilege has been and remains closely tied to the administration of justice and the duty of a solicitor of the court.
For these reasons, the Court of Appeal's judgment has the scope to change radically the concept of legal professional privilege from one historically associated with the legal profession to a rule which attaches because of the purpose and nature of a piece of advice.
(1)  EWHC 2494 (Admin).
(2) Charles J at paragraph 72.
(3) Akzo Nobel Chemicals v Commission, Case C-550/07 P.
(4) Three Rivers District Council v Governor and Company of the Bank of England (No 6)  1 AC 610, para 38, Lord Scott quoting Taylor LJ in Balabel v Air India  Ch 31.
(5) Para 60, Lord Rodger.
(6) USA v Philip Morris Inc, EWCA Civ 330.
(7)  EWCA Civ 1323.
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