As every accountancy firm which has faced a regulatory investigation or a civil claims knows, they produce volumes of internal communications from the internal investigations that are part and parcel of dealing with their fallout.
The High Court's decision in Aabar Holdings SARL and others v Glencore Plc and others (Aabar Holdings SARL) clarifies legal advice privilege can apply to these internal communications and related documents. Mr Justice Picken has taken a pragmatic and welcome stance to reflect real world exigencies. However, certain key conditions must be met for privilege to apply and we list these below.
Identifying the "client" group
In the 2003 case of Three Rivers (No.5) the Court of Appeal held that the client, for the purposes of applying legal advice privilege, is the group of employees and agents authorised to seek and receive legal advice on behalf of the company (i.e. the "Client Group"). This meant that communications between this Client Group and its lawyers benefit from legal advice privilege whilst communications between the Client Group and other employees and agents of the company are not generally privileged. The question that arose in Aabar was about whether legal advice privilege could apply to communications between members of the Client Group.
Aabar Holdings SARL
The judgment in Aabar Holdings SARL (which arose from litigation against Glencore Plc) looked at the extent to which legal advice privilege applies to “internal communications between members of the client group and/or documents created by a member of the client group”. In particular, it addressed whether Glencore was entitled to withhold documents from disclosure on the basis that legal advice privilege applied to such intra-client communications, provided they were produced for the dominant purpose of seeking legal advice. The claimant disagreed and argued that legal advice privilege only applied to intra-client communications if they disclosed the nature of the legal advice.
The court agreed with Glencore. Mr Justice Picken commented that Three Rivers (No.5) was concerned with the application of legal advice privilege outside the Client Group as opposed to intra-Client Group communications; it did not restrict legal advice privilege to documents/correspondence between the client and its lawyer. Neither did the subsequent authorities.
The judge found that it did not make sense for legal advice privilege to not be available in respect of intra-Client Group documents whose dominant purpose is to identify an issue or facts on which the client proposes to obtain legal advice. For example, a client might compose notes ahead of a meeting with a lawyer or following a meeting or make a note setting out next steps or information to send to the lawyer. Given that a lawyer's working papers are privileged, the judge found it difficult to see why the client's working papers, would not be.
Commentary
This decision means that those within the firm who form part of the identified Client Group will be able to argue that confidential internal documents/communications exchanged between them may be protected from disclosure in any subsequent civil or regulatory proceedings if those communications were produced for the dominant purpose of obtaining legal advice. Significantly, Mr Justice Picken has confirmed that those communications do not require the lawyers to be a party to them to be privileged (although doing so may improve a claim for privilege).
Overall, this takes legal advice privilege further than had previously been articulated. Parties which may be exposed to future litigation or regulatory action should still exercise caution in ensuring the Client Group meets the Three Rivers requirements (and in particular is not too large a cohort risking the claim for privilege) and when generating or sharing documents. Establishing the dominant purpose is to seek legal advice is the relevant test.
Practical take aways for clients and in-house legal teams
Aabar broadens privilege to cover internal documents but only when they are demonstrably for the genuine and dominant purpose of obtaining legal advice led by lawyers. The following should help ensure such internal documents and communications are privileged.
- Early involvement of external/internal lawyers means fact-finding exercises can more readily be characterised as being for the purpose of seeking legal advice privilege. Ensure lawyers clearly define the scope of any "fact-finding" exercise and its dominant purpose.
- Clearly identify and control the "client group". Define who is authorised to seek and receive legal advice from external and/or in-house counsel and limit circulation of legally sensitive communications to this group.
- Internal communications should:
- only be addressed to those within the "client group".
- be titled: "Privileged and Confidential – Prepared for the Purpose of Obtaining Legal Advice". The courts will look at substance over form when determining privilege but a title may put the matter beyond argument.
- avoid mixing commercial or business communications with those related to seeking legal advice since mixed-purpose documents risk losing privilege.
