Legal professional privilege entitles a client to refuse to disclose some of their confidential communications to another party including the courts, tribunals, regulatory bodies and enforcement agencies. It is an absolute right and, once it has been established, can only be overridden in very limited circumstances such as fraud. However, privilege will be lost if the communication loses its confidentiality.
There are two main types of privilege:
- legal advice privilege – this protects confidential communications, and evidence of those communications, between a lawyer and his client, but not communications with third parties. This is provided that the communications are for the purpose of seeking and receiving legal advice in a relevant legal context.
- litigation privilege – this protects confidential communications, and evidence of those communications, between a lawyer and his client and a third party, or between a client and a third party, provided that such communications have been created for the sole or dominant purpose of conducting existing or reasonably contemplated litigation, including avoiding or settling as well as defending or resisting litigation.
This guide provides a summary of the law on privilege and sets out some practical steps that clients can take to maximise and ensure the protection afforded to confidential legal communications by privilege.
Who is the lawyer?
Privilege applies to advice given by external lawyers and also to in-house lawyers provided that they act in their capacity as a lawyer and not in an executive or compliance capacity, and are qualified to practise under the Solicitors Regulation Authority or Bar Council rules in England and Wales, or their equivalents in other UK jurisdictions. Privilege extends to employees such as legal executives, trainee solicitors and paralegals provided that they are properly supervised by qualified lawyers.
Privilege will also extend to the advice given by foreign lawyers based abroad, provided that they are qualified to practise under their own regulatory body, and to foreign lawyers based in England and Wales who are qualified to practise under the Solicitors Regulation Authority. Similar rules apply to foreign lawyers based in other jurisdictions in the UK.
There is an important exception: all advice given by in-house lawyers to their employers will be disclosable in an EU Competition Commission investigation as such advice will not be protected by privilege.
Privilege does not usually apply to other professionals who give legal advice, such as accountants.
Legal advice privilege
Who is the client?
For legal advice privilege to apply it is important to establish who 'the client' is. The current law is that the client will only include those individuals specifically tasked with seeking and obtaining legal advice either from in-house or external lawyers. The definition of 'the client' does not extend to everyone within the organisation, or even the whole department or division seeking legal advice. For example, communications between a lawyer and employees outside the designated client team or between the client team and employees outside the team will generally not be privileged, and sending privileged documents outside this team can result in privilege being lost.
Communications within the client team may not be privileged if they are not for the purpose of seeking and receiving legal advice – for example, communications between the client team commenting on the merits of a particular matter may not be privileged.
What advice is covered?
Legal advice privilege is not confined to advice on the law, but also covers advice about what a client should do in a particular set of circumstances. This will cover presentational, commercial or strategic advice provided that it relates to a client's legal rights, liabilities, obligations and remedies. It will not apply to advice of a purely strategic or commercial nature which is not provided in a legal context. Equally, it will not apply to the results of any legal advice - for example, an agreement or conveyance drawn up as a result of that advice. Lawyers' working papers are only privileged if they would betray the tenor of the legal advice.
What does litigation mean?
Litigation in this context has to relate to adversarial legal proceedings and will therefore exclude internal grievance and disciplinary proceedings. It also excludes purely fact-finding inquiries and investigations.
In addition, litigation has to be actual or 'reasonably in prospect', meaning more than a mere possibility. It is not sufficient that there is a distinct possibility that sooner or later someone might make a claim, nor is the general fear of future litigation enough.
What is the dominant purpose?
Documents are often created for more than one purpose – for example, a company may commission an investigatory report looking into the reasons why an accident happened or fraud had occurred, but at the same time anticipating quite reasonably that litigation will be likely and that such a report is necessary for this purpose. However, if the report is not prepared for the dominant purpose of litigation then litigation privilege will not apply.
The law regarding the privileged status of documentation produced as part of internal investigations has been the subject of intense debate and scrutinty in recent cases. Recent Court of Appeal authority suggests that the application of privilege in this area is likely to be highly fact-specific: courts will look closely at the evidence to consider, for example, whether litigation really was reasonably in prospect at the time of the investigation and whether this was the dominant purpose of the investigation. Following the most recent case law, however, the courts should take a realistic, commercial view of the facts of each case.
For example, it appears to be recognised that documents may be created for multiple purposes, but that where it is clear that the dominant or overarching purpose was their use in litigation, privilege should apply. The highly fact-specific nature of a claim for litigation privilege in the context of internal investigations, however, makes the outcome of any such claim difficult to predict, so it is vital that specialist legal advice is sought before any investigation is undertaken if the chances of successfully securing litigation privilege are to be maximised. The practical steps listed below should also be followed.
Common interest privilege
Often there is a need to voluntarily share privileged documents with a third party. Common interest privilege may preserve privilege in documents that are disclosed in repect of both legal advice and litigation privilege.
The disclosing party and the receiving party must both share a common interest in the subject matter of the privileged document or in litigation in connection with which the document was brought into existence. The document remains privileged in the hands of the receiving party who can also assert the disclosing party’s privilege as against the world.
The common interest must exist at the time of disclosure to the recipient.
- If legal advice is required or an internal investigation is to be carried out get specialist lawyers, whether internal or external, on board as soon as possible to maximise the protection afforded by privilege. Internal structures need to be set up to minimise the creation of unnecessary non-privileged records.
- Instructions to lawyers or letters of engagement should clearly set out the advice sought and give as much detail as possible on any anticipated litigation, criminal or civil; this should be reviewed and updated regularly.
- Instruct colleagues/employees to mark all communications in relation to obtaining legal advice or an investigation undertaken in contemplation of litigation as ‘privileged and confidential – created for the purpose of obtaining legal advice/ in contemplation of litigation’. While labelling communications in this way is not conclusive, it is certainly helpful and reinforces a key condition which must be satisfied if privilege is to be established.
- Lawyers should direct the process of collecting the information necessary to produce the legal advice and to deal with the proceedings.
- Be careful about investigating the circumstances surrounding a possible dispute or collecting evidence yourself, for example, by interviewing staff or producing reports, unless advised to so by lawyers.
- Ensure as far as possible that privileged documents are easily identifiable as such and stored separately from non-privileged documents.
- Even if the original advice is privileged, a copy taken of it may not be if it is created for a non-privileged purpose, and care should be taken when copying legal advice.
- Emails often result in widespread distribution of documents. Review emails before forwarding them on or copying them. If they may contain legal advice, send a separate email.
- Circulate privileged documents on a ‘need to know’ basis only. If privileged documents need to be shared, such as between parent and subsidiary, insured and insurer, do so under a confidentiality agreement.
- Avoid creating unnecessary documents. If it is necessary to discuss privileged advice with third parties, consider holding a meeting or a telecon to discuss the advice, rather than disclosing it, and avoid documenting the discussions where possible. If there is a need to document the discussions, mark any notes or minutes ‘privileged & confidential’.
- Discourage any analysis or discussion of legal advice in written memoranda or minutes of meetings. Warn of the dangers of making manuscript notes on privileged documentation. Such documentation is unlikely to be privileged. Do not create ‘new’ documents summarising legal advice unless it is for the dominant purpose of litigation.
- Unless communicating with lawyers, make all communications as factual as possible. Try not to record views on whether something was done well or badly or on potential weaknesses. If, as sometimes happens, the business requires documents to be created which are unlikely to be privileged, they should be factual and accurate; always consider how they might be deployed in the hands of opposing lawyers if they have to be produced.
- Where legal advice is discussed internally, such as by the board, and minutes of those discussions are created, it is advisable to produce two sets of minutes, one dealing with legal issues and their ramifications and the other with commercial issues arising from that legal advice.
- If it becomes necessary to disclose privileged material to a third party, ensure it is always provided on confidential terms, subject to a confidentiality agreement. Where lawyers are advising you as members of a multi-disciplinary team such as in a corporate transaction, it will frequently be necessary for the legal advice to be copied to other members of the team. This should not amount to a waiver of privilege so long as the disclosure is made on confidential terms.
- Privilege cannot be attached to an investigation retrospectively. Failure to consider this issue from day one may mean a claim of privilege cannot be successfully sustained against hostile third parties, including regulators and the relevant documentation may have to be handed over.
Legal Advice Privilege – additional steps
Before seeking and receiving legal advice from internal or external lawyers establish who the ‘client’ is, for example:
- if you have a commercial manager seeking legal advice in respect of a specific contract on a one-to-one basis, they will usually be the client.
- in more complex transactions with larger teams, focus on the individuals’ roles, distinguishing between key decision-makers and information gatherers. The former group are more likely to be included in your client group seeking and receiving legal advice. Documents generated by information gatherers and communications with information gatherers will not generally be protected by legal advice privilege.
- where there is an in-house legal team or lawyer instructing external lawyers, they will usually be the client.
Define and document who 'the client' is, preferably in the engagement letter if external solicitors are instructed. The list can be revised as the matter progresses. Only 'the client' should deal with lawyers, whether in-house or external.
Only 'the client' should prepare briefing notes, letters of instruction, meeting agendas or minutes for the purposes of seeking and obtaining legal advice; employees who are not part of 'the client' should not take on this task.
Ensure that any advice sought or given on presentational, strategic or commercial issues is given in the context of the client’s rights and obligations and not as stand-alone advice.
Make it clear to other employees that no documents containing information relevant to the seeking of legal advice should be created without express clearance from the client first being obtained.
If written communications do have to be produced by non-client employees for the purposes of seeking legal advice, ensure that supporting reasons are recorded as this may help to reduce the risk of the status of the document being misconstrued in future by some hostile third party.
Discourage non-client employees from reporting to the client on the subject on which legal advice is being sought or from copying in anyone to these communications.
Litigation Privilege – additional steps in a litigious or potentially litigious situation
If an internal investigation into an incident, issue or allegation is needed, instruct lawyers to commission the investigation and report for the dominant purpose of anticipated litigation and on the basis that legal advice is needed; the report should principally look at the causes of the incident and any possible exposures as a result and then, as subsidiary issues, consider any other matters such as what improvements could be made for the future.
If an investigation is carried out with a view to proceedings which are not already afoot, it would be preferable to be as specific as possible when recording the purpose of the investigation and any document produced in the course of it, for example by specifying the proposed claimants or defendants to the anticipated litigation and the expected issues in that litigation; this should be in terms which you would be willing to deploy in support of a claim to privilege.