Quentin Bargate examines litigation privilege in the FT Adviser
Privilege: The fightback continues
When you speak to your lawyer, you probably expect that your conversation, along with any advice provided, will always be treated as confidential. Such advice is, surely, strictly confidential and not available for subsequent scrutiny or disclosure.
Well, in some situations, you may be wrong.
As a litigation and commercial lawyer for some 37 years, your understanding would also be my expectation. Anyone consulting their legal advisors should be able to do so without fear of their dirty laundry being washed in public. And generally speaking, you would be right.
Or at least prior to a Supreme Court decision dating from 2004, Three Rivers District Council and Others v The Governor and Company of the Bank of England  UKHL 4) (“Three Rivers”), you would have been right. With Three Rivers, the ground shifted and as a consequence the confidentiality of communications between lawyer and client has been seriously undermined.
In legal jargon, discussions between a lawyer and his or her client are protected by something called ‘Legal Advice Privilege’. This term, rather like the concept itself, is rather archaic and not much used outside of legal circles. Broadly speaking, communications between a lawyer and his or her client, are protected Legal Advice Privilege (but let’s avoid jargon and call it “legal confidentiality”). Another important category are exchanges between a lawyer, a client, and a third party where the dominant purpose is in advice given in anticipation of an expected dispute. This is called “litigation privilege”. Again, in simpler terms, let’s call this “dispute confidentiality”.
In Three Rivers, the Supreme Court decided that, in order for exchanges between you and your lawyer to attract legal confidentiality, the individual who you were in communication with would need to have been expressly authorised to do so. Put simply, if the individual receiving or giving advice has not been expressly authorised, then that advice might not be confidential, and might have to be disclosed.
Seem unreasonable? I can only agree.
This is not merely a theoretical problem; I have personally seen situations where the legal qualifications, professional standing and authority of the individual concerned have been rigorously examined in order to determine whether relevant documents are entitled to the protection of confidentiality. The real issue is whether such an outdated concept is relevant and applicable to modern businesses which may not be organised along traditional lines, but operate across borders and in multiple jurisdictions, where different rules and expectations apply.
Take for example a situation where directors of a Special Purpose Vehicle (“SPV”) based in Panama take instructions from a family office based in Switzerland, and then the in-house lawyer of the family office takes instructions from an ultimate beneficial owner (UBO). In that example, the board of directors of the SPV are taking instructions from, and not giving instructions to, the lawyer. Moreover, where the lawyer is not legally qualified and they share their advice with a number of other colleagues who are similarly not qualified, to whom does confidentiality attach? When is it lost?
Advice has certainly been given, but is not being directed towards, or given at the behest of, the board of directors, nor is it necessarily being given by someone who clearly fulfils a clear definition of a “lawyer” expressly charged with giving advice.
A further problem occurs when litigation is contemplated. If internal investigations are conducted by, and on behalf of a company, at what point are those investigations protected by dispute confidentiality, and therefore protected from any subsequent obligation to disclose?
You, as a consumer of legal services, need to know when discussions with your lawyer (or someone you think of as a lawyer) are treated as confidential and when they are not; either as a private individual or as a representative of the company you work for. Both legal confidentiality and dispute confidentiality are, after all, protections afforded to the client and not the lawyer. They are your rights, not privileges afforded to legal professionals.
In a recent court decision, Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd  EWCA Civ 2006 (“SFO v ENRC”), the Court of Appeal opined that dispute confidentiality will apply to internal investigations that are undertaken in contemplation of litigation. Therefore, if a company conducts an internal investigation, in which potentially sensitive information is freely disclosed, it is now less likely those investigations will need to be disclosed in the event that the matter proceeds to court.
My suggestion is clear: in order for dispute confidentiality to bite, it is essential that it is made very clear at the outset that any investigations are being conducted in contemplation of litigation and should always be under the supervision of a qualified lawyer. A clear record of litigation being contemplated should be kept on file and be recorded in each material note or communication; this can easily be evidenced in minutes of a meeting, an attendance note, etc.
With regard to commercial confidentiality, the best advice is to make sure that documents are not circulated to a wide audience, but only to those on a strictly need-to-know basis. Always make sure that you are aware of who within your company is communicating with lawyers (either in-house or externally), and ensure that all individuals have the appropriate authority.
The following are a few of my suggested steps that you might take:
- It is advisable to restrict the distribution of information and to mark all sensitive documents as ‘Confidential and Privileged’.
- Restrict circulation to those who have been expressly authorised to give and receive communications from a lawyer.
- Ensure that any in-house (or external) lawyer has been expressly instructed and authorised in writing by the board of directors to discharge their functions (such as conducting investigations or giving legal advice). Even simple steps, such as making sure business cards of the in-house lawyer accurately record their job function (i.e. Head of Legal) may be of some help.
- Ensure that all communications relating to any investigation or advice in connection with an anticipated dispute clearly state that the dominant purpose is anticipated or ongoing litigation. Ideally, have an external lawyer provide advice to that effect.
- If in doubt, always seek the advice of an experienced external lawyer.
Finally, let’s hope that Three Rivers is reviewed by the Supreme Court at the earliest opportunity, because the present uncertainty is not acceptable and frankly causes difficulties we can do without.
Senior Partner, Quentin Bargate
This article was published in FT Adviser and can be accessed here.