UK: Legal Advice Privilege And Inspection Of Contentious Documents By The Court

A recent decision in the High Court has confirmed the scope of legal advice privilege, and the limited circumstances in which a court will inspect documents when their privileged status is disputed.

The proceedings arose out of an agreement in 1997, by which, as part of a re-financing, National Westminster Bank plc ("NWB") sold to Rabobank Nederland ("Rabobank") its share in a syndicated loan to a group called Yorkshire Food Group ("YFG"). The re-financing failed and receivers were appointed over YFG in December 1997. Subsequently, Rabobank alleged that NWB had failed to disclose information to it which, if disclosed, would have caused it not to advance further monies to YFG or purchase NWB’s lending.

NWB denied these allegations and, in the proceedings, challenged Rabobank’s claim to legal advice and litigation privilege over certain documents, which had been created during Rabobank’s internal investigation of the refinancing of YFG. NWB considered that these documents contained evidence of various mistakes which Rabobank had made during the purchase of the debt.

The court confirmed that the current state of law in relation to legal advice privilege is as set out by the Court of Appeal in Three Rivers: legal advice privilege can only be claimed over documents passing between the client and its legal advisers, and does not attach to preparatory materials, even if they are created for the purpose of enabling lawyers to advise. Therefore, legal advice privilege did not apply to these documents, because they represented preparatory work by Rabobank, and did not constitute communications between lawyer and client.

In light of this, NWB asked the Judge to examine the documents to establish whether they were protected by litigation privilege, as Rabobank claimed (that is, whether Rabobank’s dominant purpose in creating the documents was to use them in the conduct of litigation which was reasonably in prospect).

The Judge declined, stating that he was concerned that he would not have time to digest the material properly, and the documents might be taken out of context. He stated that generally, the court should not inspect documents unless there is evidence that the lawyers have either misunderstood their duty or are not to be trusted, and there is no practical alternative. In this case, Rabobank’s solicitors were ordered to make an affidavit verifying the claims of privilege in relation to all the documents withheld.

The case highlights the limited extent to which litigants can rely on legal advice privilege in relation to preparatory work by the client, and the court’s reluctance to review documents itself: where possible, it will rely on the evidence of the parties and their solicitors.

Further reading: National Westminster Bank plc v Rabobank Nederland [2006] EWHC 2332 (Comm), Three Rivers District Council v the Governor and Company of the Bank of England (No. 6) [2005] 1 AC 610

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 17/10/2006.