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In Aabar Holdings S.à.r.l. and others v Glencore plc and others, the High Court decided otherwise.
It held that:
- LAP can attach to “intra-client” documents (i.e., documents between members of the defined “client group”, or created by a member of that group).
- LAP can attach even where no lawyer is a party to the communication, provided the document/communication was created or sent for the dominant purpose of seeking legal advice.
Background
This decision is part of the ongoing FSMA claims against Glencore by its shareholders. It is Picken J’s second important decision on privilege following his earlier judgment. Picken J’s earlier judgment overturned the “Shareholder Rule”, meaning that companies can assert privilege against their shareholders.
The law previously established by the Court of Appeal in Three Rivers (No. 5) was restrictive in that intra-client documents between the client group and the organisation’s lawyers were privileged but intra-client documents between lawyers and employees outside of the client group were not.
In Glencore, the Claimants argued that “intra-client documents” (that is, any communication sent between, or document created by, members of a client group) fell outside the scope of LAP. On their case, LAP attached only to communications between lawyer and client, subject to two narrow exceptions:
- documents evidencing the substance of a privileged lawyer/client communication, and
- documents intended to be sent to a lawyer but never in fact communicated (“inchoate communications”)
Glencore, on the other hand, argued that LAP should apply to any intra-client document created or sent between members of the client group provided they were for the dominant purpose of seeking legal advice. It asserted that this question had not been determined by Three Rivers (No 5), as that case involved non-client group material.
In any event, Glencore argued that intra-client documents should be privileged in principle as they are the mirror image of lawyers’ working papers, which are privileged.
The decision
The High Court rejected the claimants’ argument and held that there was no justification for prohibiting the application of LAP to intra-client documents.
The High Court concluded that the earlier authorities relied on by the Court of Appeal in Three Rivers (No 5) failed to address intra-group communications. References to “lawyer-client” communications in the authorities should not be taken as justification for treating intra-client communications as not attracting LAP where all other aspects of the test are met.
Why is the decision important?
The decision is welcomed news for corporate clients. It provides further reassurance to companies where multiple employees or directors form part of a defined “client” group for the purposes of obtaining legal advice.
It acknowledges the commercial reality that decision-making and preparatory processes within organisations are often complex, and that seeking legal advice frequently involves contributions from a number of individuals. Where those individuals fall within an identified client group and their confidential communications are made for the dominant purpose of obtaining legal advice, they should be able to communicate amongst themselves — without the direct involvement of a lawyer — and still maintain the protection of LAP.
Practical guidance for corporate clients and their advisors
1) Treat “dominant purpose” as the organising principle for internal privilege
- Where teams circulate internal summaries, drafts, issue-spotting notes or briefing packs, record (contemporaneously) why they are being prepared. For example, that they are to prepare instructions and/or seek legal advice
- Where the purpose is mixed (legal and commercial/strategic), expect privilege challenge risk, unless the legal advice purpose is dominant
2) Drafts and internal working documents can be privileged
- Drafts and internal preparatory materials (even where not sent to lawyers) may be privileged where they are created for the dominant purpose of obtaining legal advice
3) Be disciplined about the “client group”
- Companies should continue to define and control the client group for each dispute/investigation. Be careful about wider circulation beyond that defined group
- The decision is about intra-client privilege within that group, not blanket privilege for internal communications generally. The wider the client group, expect privilege challenge and potential disclosure of confidential information
4) Manage multi-addressee emails (lawyers and business) carefully
- Avoid “all-staff” or broad business distribution on emails intended to instruct counsel
- Where possible, split legal instruction requests from commercial discussion. This way, legal instruction threads can be defended as having a clear dominant purpose
Conclusion
From a risk perspective, the key message for corporate clients and their advisors is that privilege protection for internal material is achievable but not automatic. It depends on: (1) maintaining a clear client group; and (2) being able to evidence a dominant legal-advice purpose for each internal document/communication relied upon.
For more information about any of the issues covered in this update, please get in touch with one of our Commercial Litigation Solicitors.
