Re RBS (Rights Issue Litigation) [2016] EWHC 3161 (Ch) In an interlocutory judgment Mr Justice Hildyard provided important clarity on the parameters of legal advice privilege and lawyers' working papers privilege which is likely to be of substantial assistance to lawyers and to their clients, particularly in relation to investigations and potential litigation.
Background
This case relates to an action brought by RBS shareholders to recover losses following the collapse of its share value. Previously, interviews were undertaken as part of RBS investigations (1) relating to its sub-prime exposures, from which notes were prepared by RBS's external solicitors or non-lawyers within RBS Group Secretariat as agents for the external solicitors; and (2) into allegations made by an individual arising from his employment at RBS, from which notes were prepared by RBS's in-house lawyers or by RBS's external counsel. RBS authorised the interviewees to participate in the interviews and the interviewees were told that the interview notes would be kept confidential, attracting 'attorney-client privilege'.
RBS sought to assert privilege in the Rights Issue Litigation in respect of transcripts, notes and records of interviews conducted by or on behalf of RBS with 124 employees and ex-employees of various levels of seniority, on the grounds of both legal advice privilege and lawyers' working papers' privilege. Hildyard J rejected this.
Legal advice privilege
In general terms, legal advice privilege applies to confidential communications which pass between a client and the client's lawyer which have come into existence for the purpose of giving or receiving legal advice. In the key case of Three Rivers District Council (No.3) [2003] EWCA Civ 474the Court of Appeal held that 'client' should be construed narrowly as 'the small group of employees responsible for instructing the company's lawyers.'
RBS claimed legal advice privilege on the basis that the notes recorded a communication between a lawyer and (ex-) employees who were authorised by RBS to give instructions to its lawyers and should be treated as an emanation of 'the client'. The purpose of the notes, containing factual information, was to enable RBS to seek legal advice from external counsel. RBS alleged that where interviews were conducted by non-lawyers, they were agents or 'channels of communication' through which interviewees provided instructions to lawyers.
The Claimants submitted that the communication of factual information by an employee to a legal adviser could not be privileged as only communications strictly for the purpose of giving or receiving legal advice are privileged. Further, they submitted that the employees were outside the confines of 'the client'.
The issues before the court were inter alia whether the notes amounted to an eligible 'communication' and whether the interviewees could be deemed to properly fall within the definition of 'the client'. Hildyard J's starting point, per Three Rivers, was that for legal advice privilege to apply, the purpose of the communication must be obtaining legal advice. Although the interview notes recorded direct communication with lawyers, they comprised information gathering from employees preparatory to and for purpose of enabling RBS through directors or others authorised on its behalf to seek and receive legal advice. This preparatory work did not fulfil the test.
On the second issue, per Three Rivers, Hildyard J noted that information gathered from employees is no different from information obtained from third parties. In this case, the fact that employees were authorised to communicate with lawyers did not make them 'the client' or a recognised emanation thereof.
This clarification is of particular importance for in-house counsel who may wish to consider whether other employees should be restricted from communicating with external counsel. To ensure that documents can be protected by legal advice privilege, communication with a lawyer should be made by an individual capable in law of seeking and receiving legal advice as a duly authorised organ of the corporation.
Lawyers' working papers privilege
The principle that lawyers' working papers may be privileged was established in Lyell v Kennedy (No 3) (1884) 27 Ch D 1. It was held that papers may be privileged where they would give the other side 'a clue to the advice which had been given by the solicitor'.
RBS submitted that if RBS were not entitled to claim legal advice privilege, the interview notes should be protected by 'lawyers' working papers' privilege. In response, the Claimants argued that if legal advice privilege did not apply, the interviews themselves cannot have been privileged and verbatim transcripts would not attract privilege.
The court held that for RBS's argument to succeed, RBS must show that the documentation had some attribute to betray or give a clue to the trend of advice being given to the client by its lawyer. RBS made submissions seeking to demonstrate that the lawyers' notes showed a process of selection which offered a sufficient clue as to their train of inquiry.
Hildyard J held this to be an evidential issue: could the notes be taken to reflect the note-maker's 'mental impressions'? The mere fact that the notes were not verbatim records did not mean they contained legal input justifying the claim to privilege. In this case, even if the notes indicated a 'train of enquiry' pursued by lawyers, he held that the notes could not properly be deemed to contain a clue as to their legal advice. This distinction was fatal to RBS's argument.
This is particularly important for those responsible for internal investigations. Litigation privilege may apply to prevent disclosure of some classes of documents where their sole or dominant purpose is for use in potential litigation. Outside of these circumstances, practitioners must be mindful of the nuanced circumstances in which documents will attract privilege. Even interviews conducted by external solicitors will attract privilege only in particular circumstances.
If you would like us to review your internal guidance on privilege or work with you on a workshop on these issues please do not hesitate to contact us.