Following recent Court of Appeal decisions, how important is the status of parties when claiming legal professional privilege?


Legal professional privilege (LPP) is once again in the headlines, following a series of recent high profile decisions. In January 2020, the Court of Appeal in Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd rejected an attempt to circumvent LPP by a party that alleged LPP had been waived. Then in February, the Court of Appeal in Sports Direct International Plc v Financial Reporting Council rejected an attempt to extend an exception to LPP and reaffirmed that where LPP applies, it can only be overridden in very limited circumstances where there is express statutory authority demonstrating Parliament’s intention to do so. More recently, in March, the High Court in Addlesee v Dentons Europe LLP reaffirmed that fraud is one of the very limited number of exceptions that permit the court to order disclosure of materials that would otherwise have been protected by LPP.

These decisions have made it clear that the protection from disclosure provided by LPP is absolute, and can only be overridden where one of the very limited established exceptions apply.

As these recent decisions reaffirm that the courts do not have judicial discretion to override LPP if it applies, it is therefore vital to understand when LPP will apply (and when it will not). One of the key determinative factors regarding the applicability of LPP is the status of the parties who are sending and receiving the relevant confidential communications.

Is the communication from/to the client?

The leading decision on who is considered the client for the purposes of LPP is still the 2003 Court of Appeal decision in Three Rivers (No.5). That decision confirmed that an employee of a company would only be considered the “client” for LPP purposes if they were part of the small group of employees who had been authorised to seek and receive legal advice on the company’s behalf from the company’s lawyers.

That narrow definition of client remains binding, despite having subsequently been the subject of significant judicial criticism. For example, in 2018, the Court of Appeal in Director of the Serious Fraud Office v Eurasian Natural Resources Corp Ltd expressly confirmed that it would have reached a different conclusion had it not been bound by Three Rivers (No.5). In the recent January 2020 Court of Appeal case of Civil Aviation Authority v R on the application of Ltd, Hickinbottom LJ went even further saying:

“… I respectfully doubt both the analysis and conclusion of this court in Three Rivers (No 5) on this issue; and, had it been in this court’s power, I too would be disinclined to follow it.”

Nevertheless, until such time as Three Rivers (No.5) is overruled by the Supreme Court or an Act of Parliament, the definition of who is considered the client for LPP purposes remains frustratingly narrow and is likely to continue to cause problems, especially for large corporate organisations.

Who is providing the advice?

The leading authority on who can provide advice which will be protected by LPP remains the 2013 Prudential plc case. In that case, the Supreme Court refused to extend legal advice privilege (LAP) to cover communications between chartered accountants and their clients which contained expert tax advice, despite the fact that identical communications would have been protected by LAP had they taken place between a lawyer and their client.

Although the Supreme Court refused to extend the availability of LAP beyond the legal profession, the two dissenting judges suggested that restricting LAP to advice from members of the legal profession is illogical in today’s society, especially when it relates to the same advice from other professional advisors. Lord Sumption said in his dissenting judgment:

“The privilege is a substantive right of the client, whose availability depends on the character of the advice which he is seeking and the circumstances in which it is given. It does not depend on the adviser’s status, provided that the advice is given in a professional context.”

However, because Parliament has legislated in a way which made it plain that LAP was intended to be limited to advice given by professional lawyers only, the Supreme Court held by a majority of five to two that any extension to who can provide the protected advice would have to be made by Parliament. Therefore, the legal status of the party providing the advice is critical to assessing whether or not those communications will be protected by LPP.

However, consideration doesn’t just need to be given to who is providing the advice, but also to the precise nature of the advice. This was shown in the 2018 Court of Appeal case WH Holding Ltd v E20 Stadium LLP. That case involved West Ham challenging E20’s claims of litigation privilege (LP) over six emails passing between board members and stake holders, which contained internal discussions regarding potential settlement of the dispute. The High Court originally held that these emails were protected by LP, but this was appealed to the Court of Appeal.

The Court of Appeal rejected E20’s argument that the term “conducting litigation” encompassed discussions relating to formulating, finalising and setting out a “purely commercial” settlement proposal. Instead, it was held that although the “conduct of litigation” included discussions regarding its avoidance or compromise, privilege only extends to such communications insofar as they include advice or information going to the “merits” of the contemplated litigation (not just “purely commercial” discussions).

The Court of Appeal also rejected E20’s assertion that all internal corporate communications should be covered by LP, confirming that there is no reason why corporations should have greater protection than other organisations with different structures, for example partnerships.

Behind the times?

There have been calls for an overhaul of the law relating to LPP to more realistically reflect modern business practices, but it remains to be seen, for example, whether Parliament will consider extending LAP to legal advice given by other professionals, so that the character and circumstances of the advice are more determinative than the adviser’s status. Equally, many corporate entities are hoping that the Supreme Court or Parliament find an opportunity to widen the definition of who the client is for LPP purposes.

However, unless and until the law is updated, there remain many pitfalls for corporate entities and their advisors to avoid, and therefore careful consideration should be given to the statuses of the parties giving and receiving the advice, the type of advice given, and whether or not litigation is imminently on the horizon.

Read this feature on Practical Law’s Dispute Resolution blog here.

Michael Axe

Senior Associate
Commercial Disputes

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