UK: (Re)insurance Weekly Update 44-2016

Last Updated: 19 December 2016
Article by Nigel Brook
Most Read Contributor in UK, December 2017

This Week's Caselaw

The RBS Rights Issue Litigation: High Court again considers who is the "client" for legal advice privilege and whether Three Rivers can be distinguished/choice of law governing privilege issues

The defendant sought to claim legal advice privilege over transcripts and records of interviews which took place between its in-house lawyers and its employees (and ex-employees) before litigation was in contemplation. Privilege was claimed on the basis that the employees had been authorised to communicate with the lawyers for the purpose of his or her employer seeking legal advice.

This issue required an examination of the Court of Appeal's decision in Three Rivers (No.5) [2003] and the meaning of who is the "client" for the purpose of legal advice privilege. This case is the second High Court decision in three weeks to consider this question.

In Three Rivers (No. 5) [2003], the Court of Appeal ruled that not all officers and employees within a company should be treated as the "client" for the purposes of legal advice privilege. Only those employees within the organisation who are dealing with the matter on which the lawyer is giving advice will be the "client". No privilege will attach to communications passing between the lawyers and anyone else within the organisation outside the nominated group. This is of particular practical importance where in-house or external lawyers are seeking factual information about a problem from employees within the client organisation before litigation is in reasonable prospect.

In Astex Therapeutics v Astrazeneca (see Weekly Update 41/16), Chief Master Marsh reaffirmed the position in Three Rivers (No 5), holding that only interviews which took place with employees who could be said to be the "client" for the purposes of giving instructions (eg board members) would be covered by the privilege. However, no reference was made to the 2014 High Court decision of AB v Ministry of Justice (see Weekly Update 22/14), in which Baker J sought to distinguish Three Rivers (No.5) on the basis that in that case the client organisation itself had chosen to arrange its affairs so that only a separate group was specifically responsible for seeking legal advice. Baker J suggested that the position would be different where no separate entity had been established but instead an individual within the client organisation was authorised to seek and receive legal advice.

No reference was made to AB v Ministry of Justice in this case either, but Hildyard J noted that there has been academic criticism and disapproval in other jurisdictions of Three Rivers (No.5), in particular in the Court of Appeal in Singapore. He saw "force in these criticisms and attempts to confine the application of the decision in Three Rivers (No 5)" to its particular facts. He also said that "It may be that in a suitable case the Supreme Court will have to revisit the decision".

Nevertheless, he was bound by Three Rivers (No 5) and pointed out that the House of Lords in Three Rivers (No 6) had declined the invitation to express a view on this fundamental issue, when the argument was put to it: "There can be no real doubt as to the present state of the law in this context in England: Three Rivers (No 5) confines legal advice privilege to communications between lawyer and client, and the fact that an employee may be authorised to communicate with the corporation's lawyer does not constitute that employee the client or a recognised emanation of the client". Only those employees who are authorised to communicate with the company's lawyers in order to seek or receive legal advice will be the "client" for the purpose of claiming legal advice privilege.

The judge further suggested that "It may also be that in a corporate context only individuals singly or together constituting part of the directing mind and will of the corporation can be treated for the purpose of legal advice privilege as being, or being a qualifying emanation of, the 'client'". However, given his conclusion that legal advice privilege could not be claimed in this case, it was unnecessary for him to rule on this question.

A further argument raised by the defendant was that the interview notes were privileged lawyers' working papers. It was common ground that in English law, lawyers' working papers are privileged on the basis that they might give a clue to the advice which had been given by the solicitor.

However, verbatim transcripts of unprivileged interviews (and the interviews here were not privileged) would themselves not be privileged. The factual issue here, therefore, was whether the notes had "some attribute or addition such as to betray or at least give a clue as to the trend of advice being given to the client by its lawyer". The judge held that they did not.

The defendant's argument "does not address the objection that it cannot be that the mere fact that a note is not verbatim, and therefore may betray some selection or line of enquiry ...., suffices. Something more is required to distinguish the case from the norm.....My conclusion is reinforced by the consideration that there is a real difference between reflecting "a train of inquiry" and reflecting or giving a clue as to the trend of legal advice" (emphasis added).

A further issue which had been raised by the defendant was which law governed the issue of privilege here. That was because the position in the US would possibly have been more favourable for its claim to privilege. The defendant suggested that the court was not bound by authority to apply the law of the forum (ie England) and instead proposed a new choice of law rule, which would apply the law of the place with which the engagement or instructions, pursuant to which the documents came into existence or the communications arose, have their closest connection (which would, in this case, have resulted in the application of US law).

Although the judge saw some force in the defendant's argument, nevertheless, the conventional understanding that the law of the forum applies had not been displaced.

Accordingly, the defendant was not entitled to claim legal advice privilege over the interview notes.

Bellman v Northampton Recruitment: Judge rejects finding of vicarious liability following altercation at a post-works event

In order to succeed in a claim for vicarious liability against a company, there must be (1) the necessary relationship between the company and the wrongdoer and (2) the necessary connection between that relationship and the wrongdoer's conduct. In the recent Supreme Court decision of Muhamud v VM Morrison Supermarkets (see Weekly Update 9/16), the Supreme Court held that two matters should be considered: (a) what functions or "field of activities" have been entrusted by the employer to the employee (and this question should be addressed broadly); and (b) was there a sufficient connection between the position in which he was employed and his wrongful conduct to make it right for the employer to be held liable for reasons of social justice.

In Muhamud, the Supreme Court found that the attack by the employee was within the "field of activities" assigned to him, because he had been dealing with customers at the time, and the attack resulted from an "unbroken sequence of events" (even though he performed those activities in an inexcusable manner). By contrast, there was no finding of vicarious liability where the employee in Warren v Henlys [1948] attacked a customer who had left the premises and later returned to make a complaint.

In this case, the employee attacked another employee at a spontaneous post-Christmas party drinks at a hotel near the Christmas party venue. HHJ Cotter QC held that:

(1) It couldn't be said that the employee was "on duty" just because he was in the company of other employees at the time.

(2) The assault was not committed during the organised work social event. There was a substantive difference between the Christmas party and the later impromptu drinks and the latter was not a "seamless extension" of the former: "In substance what remained were hotel guests, some being employees of the Defendant some not, having a very late drink with some visitors".

(3) Although the words spoken by the wrongdoer and claimant were important, there was no support for the proposition that "merely raising something that relates to duties at work has the effect of itself of changing a conversation or interaction between fellow workers into something in the course of employment, regardless of the surrounding circumstances".

(4) Nor did social justice require a finding of vicarious liability here: "The rule must have proper boundaries; it is not find its application here would be to foist the Defendant, in reality its insurer, with an undue burden and would effectively make it what as McLachlin J described as "an involuntary insurer".

COMMENT: This case, one of the first to comment on Muhamud, has emphasised the importance of timing when considering if a defendant is vicariously liable for the wrongdoing of its employee. Had the assault taken place at the Christmas party, rather than after it, the defendant would most probably have been found liable. As the judge put it: "the organised event at the Golf Club had ended and as a result the expectation or obligation on any employee to participate had ended. .. There was not only a temporal but a substantive difference between the Christmas party at the Golf Club and the drinks at the Hilton Hotel".

Bank of Baroda v Nawany Marine: Court cures defective service where insufficient copies of the claim form were served

The claimant purported to serve proceedings on the UAE and Indian defendants by serving process agents appointed by the defendants as agents for service. It was common ground that each defendant should have been served with a separate original claim form and response pack. However, here, only one copy of the claim form was served. The claimant accepted that service had therefore been defective.

The judge rejected an argument that a Part 11 jurisdiction challenge cannot be used to challenge service: "any challenge to jurisdiction (including service) should proceed by way of Part 11 challenge". Furthermore, it could not be said that a challenge had been waived because the defendants had filed an Acknowledgment of Service: this was not a case like "The Conti Cartagena" [2014], where the acknowledgment of service was made before service had ever been effected (and there therefore could be no dispute as to the effectiveness of service).

However, the judge held that this was a case where CPR r3.10 (which provides that the court may make an order to remedy an error of procedure) operated. The defect had no prejudicial effect here, since the defendants had been effectively informed that proceedings had been commenced against them. Nor was there any limitation issue, and so another claim form could just be issued and served, which would be "a triumph of form over substance". Furthermore, "this is a case where a procedural step was taken defectively rather than omitted or performed directly contrary to a rule. So although on one analysis one might say that service on some of the Defendants was omitted in the absence of sufficient Claim Forms, the covering letter makes clear that service was being attempted to be effected against all the Defendants. Effectively some of the procedural boxes were ticked, but others were not".

Fehily v Atkinson: Judge clarifies the test for mental capacity

The judge in this case was required to confirm the correct test for whether someone has the mental capacity to enter into a transaction. It was suggested that the following test laid down in Chitty is wrong: "At common law, the understanding and competence required to uphold the validity of a transaction depend on the nature of the transaction. There is no fixed standard of mental capacity which is requisite for all transactions. What is required in relation to each particular matter or piece of business transacted, is that the party in question should have an understanding of the general nature of what he is doing".

It was suggested that "understanding of the general nature of what he is doing" understates the degree of comprehension required.

The judge summarised the general principles relevant to ascertaining mental capacity. He confirmed that what is important is whether the person had the ability to understand the transaction, not whether he/she actually understood it. Furthermore, "in a case where a person needs advice and assistance to enable them to understand the transaction, the question of capacity is to be assessed by reference to the complexity of the transaction proposed, and the advice and assistance that they need to understand it, not the advice and assistance that they actually received". Accordingly, the test in Chitty was wrong insofar as it directs attention to the understanding that the person actually has, rather than the understanding which he/she would be capable of having if given the advice and assistance that they need.

The judge went on to find that the summary in Chitty was otherwise accurate: "although it would be possible to misinterpret it as only requiring the capacity to form a general impression of the nature of a contract, rather than the capacity to absorb, retain, understand, process and weigh information about the key features and effects of the contract, and the alternatives to it, if explained in broad terms and simple language" (the latter being the correct test). It was therefore not necessary for the person to have capacity to understand every detail of the proposed transaction.

(Re)insurance Weekly Update 44-2016

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Nigel Brook
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions