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In a decision handed down today, the High Court has applied the much-criticised Court of Appeal decision in Three Rivers No 5 to find that interviews conducted by a bank's solicitors with its employees were not covered by legal advice privilege, as the employees in question did not form part of the "client" for privilege purposes: The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch).

The Three Rivers No 5 decision has caused difficulties for corporates since it was handed down in 2003. It has led to a risk that in any given case the "client" might be restricted to some limited group of employees, so that communications or documents prepared by anyone else in the organisation would not be privileged, unless they were prepared for the purposes of contemplated litigation. That is because, as is well-established, legal advice privilege (unlike litigation privilege) does not apply to communications with third parties; it only covers lawyer / client communications.

Significantly, however, in the 13 years since the Three Rivers No 5 decision was handed down, there has not (to our knowledge) been any reported English case in which the decision was applied to restrict the identity of the "client" for privilege purposes. Not, that is, until the past month, when we have seen two judgments in quick succession, the first being Astex Therapeutics Ltd v Astrazeneca AB [2016] EWHC 2759 (Ch) in which Chief Master Marsh held that certain employees were not part of the "client" for privilege purposes, but with only brief analysis on the point.

In the present decision, Mr Justice Hildyard considers the question in much greater detail. In doing so, he reaches a conclusion which narrowly interprets the definition of "client" and which will require careful consideration by corporates seeking legal advice. In essence, although the judge could see force in the criticisms of Three Rivers No 5, and recognised that these may need to be considered by the Supreme Court in due course, he concluded that the effect of the decision (which is of course binding on him) is to limit the "client" to those who are authorised to seek and receive legal advice on behalf of a client corporation. Importantly, he concluded that authority to provide information to the lawyers is not sufficient for these purposes.

The judge did not think it was necessary to determine whether the effect of Three Rivers No 5 goes further, so that the "client" comprises only those who are the "directing mind and will" of the organisation – which RBS argued would impose an undesirable restriction on the scope of legal advice privilege available to corporates, go beyond the findings in Three Rivers No 5 and undermine the policy underlying legal advice privilege. The judge did suggest, however, that he inclined to that view.

The decision also contains interesting discussion of when a lawyer's notes of a non-privileged discussion will be subject to privilege, the law the English courts will apply to determine questions of privilege, and when the court will exercise its discretion to allow a party to withhold disclosure or inspection.

RBS has indicated an intention to seek permission to appeal.

Click here to read more about the decision on our Litigation Notes blog.

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