Male and female having conversation on bridge.

3 Rivers (No5) floods back to potentially drown legal advice privilege?

19 December 2016. Published by Emma Griffiths, Senior Associate

A crisp and narrow focus, of particular relevance to US and financial services companies, has just been placed on the terms client, legal advice and lawyers' working papers by two recent first instance cases that have applied the decisions made in Three Rivers (No5).

It is over a decade since the series of Three Rivers cases shook the in house legal world by putting very narrow constraints around what counted as legal advice privileged interaction and documentation in England and Wales.


As memories have faded, many in house lawyers have instinctively reached for the "comfort blanket" of citing "legal advice privilege" (because no litigation is actively in contemplation) to try to put a cloak of confidentiality over many aspects of their work.


However, two recent first instance cases have brought the topic back into crisp and narrow focus.


The judgment in the first case Astex Therapeutic was handed down just as the second case, RBS Rights was starting, and "Astex" was cited regularly in the second case.


I have quoted the key points below (there is also a discussion about applicable law and jurisdiction in the case); but, in summary, the court's very clear explanation about:


            - the limited class of people who can be the client,


            - the very limited set of contexts and documents where advice might be privilegable;


            - the extent to which notes created by a lawyer need to show explicit legal thinking (a "legal train of inquiry") in order to be privileged


are much narrower and harder to apply than many in-house lawyers whom I meet seem to realise.


These explanations drown out any practical possibility of regarding legal interactions with the business as being privileged (as opposed to being simply commercially confidential) in many of the situations which in-house lawyers encounter day to day.


So please read the summary below (and the full case on Bailii – this is essential to get the proper context) and make sure that you and your team are not at risk of a nasty surprise in future – it is not good for an in-house lawyer to be sunk in a case by the law relating to their own role!


This is particularly important as the judge expressly recognised that privilege would be likely to be applied differently and more widely under US law so, if you have operations in both countries you may need to reflect on how this works with your internal documents, processes and policies.


If you are in a UK Financial Services regulated company then you may also wish to consider this case in the context of the FCA's current discussion paper on bringing the heads of legal functions within the Senior Managers Regime (the consultation closes on 5/1/17).


The tone of the FCA's discussion paper indicates that it believes that the head of a legal function should be directly and personally regulated (and accountable) to the regulator under the senior managers regime.


The only exclusion from this direct FS regulation is proposed to be for legal professional privilege – which, given this judgment, is likely, to be a much more limited and tightly constrained exclusion than many of the lawyers who have commented to the FCA so far have assumed.


Being first instance cases Hildyard J, in RBS Rights was obliged to apply the earlier decision from the Court Of Appeal in Three Rivers (No5).


He concluded, expressly recognising that US law was likely to take a different view that (my emphasis):


- "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 the client or a recognised emanation of the client."


-  "where a corporation is the client, the communication must be to or from a person who on behalf of the corporation is authorised to seek and receive legal advice, and the communication must be for the purposes or in the course of that person giving or receiving legal advice."


- "Such a communication is to be distinguished from the preparatory work of compiling information undertaken by persons with no authority to seek or receive legal advice for the purposes of enabling the client to seek and receive such advice: … that communication of information, even at the request and with the authority of the corporation, by a person who is not the client and who has no authority (actual or implicit) to seek or obtain legal advice for the company, cannot be privileged"


- "a corporation is unlikely to authorise an individual to seek and receive legal advice on its behalf to an individual or body which is not its directing mind and will. Further, in my view, there are good reasons for it not doing so, and for the law not extending privilege if it does. So I do incline to the view that only communications with an individual capable in law of seeking and receiving legal advice as a duly authorised organ of the corporation should be given the protection of legal advice privilege."


- "where there is no dispute, the review of a contract by seeking information from employees, and former employees, is unlikely, in most circumstances, to be protected by legal advice privilege…if the lawyers are obtaining information from persons who are, for these purposes, third parties because they are not the client."


- "a record of a non-privileged conversation, whether in the form of a verbatim note or a transcript, cannot itself be privileged if the underlying conversation was not privileged (quoting Property Alliance Group  v RBS (No 3 ) 2015)."


- "lawyers' notes, including mark ups of other documents will not be privileged even if they reflect a train of inquiry but only if they give a clue as to the trend of legal advice."


- "I accept that the Court has discretion to prevent disclosure and inspection, or impose conditions, in an exceptional case where (in effect) it considers that there are such special features as to require a different striking of the balance, as a matter of overall justice and to prevent its process itself being the cause of real and serious harm."


These quotations provide a very clear and restrictive reinforcement of the Three Rivers (No 5) decision and leave little scope for legal advice privilege to be claimed in respect of the majority of in-house legal work product and advice – especially in larger corporations where the majority of the in-house legal team's interactions are with people who are not "duly authorised organs of the cooperation". Although RBS was originally granted a "leapfrog" certificate allowing it to appeal straight to the Supreme Court, it has since dropped its planned appeal.  Accordingly the wait goes on for Three Rivers (No 5) to be revisited by the Supreme Court.