Avoiding A Privilege Own Goal

Year Published: 2016

As you would expect the law is designed to protect clients’ communications with their solicitor. This is known as ‘privilege’. In essence any communication which is privileged does not have to be disclosed to a third party. Even if this forms part of disclosure during a dispute. It is always a matter for the client to waive privilege, not the solicitor.

The two main types of privilege are called ‘legal privilege’ and ‘litigation privilege’.

What is legal privilege?

Legal privilege relates to communications between a client and their solicitor which is for the purpose of giving legal advice.

It is also important to note that for the purposes of a corporate client, following the case of Three Rivers District Council v Governor and Company of the Bank of England (No 5) [2003] QB 1556, only communications between employees with express or implicit authority to give instructions or receive advice from the solicitors can be viewed as legally privileged.

To turn this on its head, if an employee does not have this express or implied authority then the communication will not be classed as legal privilege.

What is litigation privilege?

Litigation privilege relates to communications between a client and their solicitor or a third party when a dispute is in contemplation and for which the dominant purpose relates to that dispute.

However businesses continue to miss the importance of privileged documents, particularly for documents which could end up being harmful to the success of bringing or defending a claim.

Once again the courts have highlighted in the case of Astex Therapeutics Limited v AstraZeneca AB [2016] EWHC 2759 (Ch) that this is not straightforward law and that documents businesses may believe to have a privileged status may not.

Astex V Astra Zeneca

In this case a dispute arose between Astex and AstraZeneca in relation to a commercial contract. During the course of the proceedings AstraZeneca claimed that certain internal documents were privileged. Astex disputed this. Astex made an application to court for an order that AstraZeneca list every document they claimed to be privileged together with an explanation as to why they considered the document to be privileged.

It is important to note that parties have a right to inspect documents which are or have been in the possession of the other party and are relevant to the issues in the case. Privilege is an exception to this rule. Therefore the burden of proof is on the party which claims a document is privileged, in this case AstraZeneca.

The documents in question centered on communications between AstraZeneca’s employees and its in-house counsel and external lawyers. This communication related to the gathering of information for an internal review of the contract between Astex and AstraZeneca.

AstraZeneca was unable to convince the court that the documents were privileged. The company was ordered to provide a list of all the documents they claimed to be privileged with an explanation of why they made such a claim.

Chief Master Marsh said in his judgment:

“Where there is a dispute, or a dispute is in reasonable contemplation, it is necessary for the purposes of obtaining legal advice to establish the version of events which will be relied upon in relation to the dispute. Even then, the gathering of information must be for the dominant purpose of giving or obtaining advice. By contrast, where there is no dispute, the review of a contract by seeking information from employees, and former employees, is unlikely, in most circumstances, to be protected by legal advice privilege. In one sense this conclusion is a surprising one because it might be though[t] that the involvement of lawyers in the review clothes the review in privilege. But that is not the legal position if the lawyers are obtaining information from persons who are, for these purposes, third parties because they are not ‘the client’.”

In other words, because the employees were not expressly or implicitly authorised to instruct or receive advice from the lawyers i.e. they were not the client, the communication could not be classed as legally privileged.

Effectively the employees were ‘third parties’ which ordinarily would have been caught by litigation privilege but the court ruled there was no litigation afoot or in contemplation at the time that the communications took place. Therefore, the communications could not be for the dominant purpose of actual or contemplated litigation.

What can businesses do to avoid similar disputes?

In some respects this is a ‘chicken and egg’ scenario. It may be difficult to prove that litigation is contemplated before any internal review or investigation is carried out. Indeed it may be as a result of this internal process that the potential litigation is uncovered.

Sadly there are no easy answers to this predicament. However, it is important to be at least alive to the issue. You should get advice from your solicitor as soon as possible. Particularly if you are about to embark on an internal investigation or review. Further it may sometimes be appropriate to seek the advice of external solicitors rather than using your in-house counsel where the advice did not attract litigation privilege.

For more information on privilege or advice on any disputes, please contact our Dispute Resolution team on 0161 475 7658.

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