In Aabar Holdings SARL v Glencore plc EWHC 877 (Comm) the High Court found that legal advice privilege can apply to communications between internal members of the ‘client’ group where they are sent or created for the dominant purpose of seeking legal advice.

How does legal advice privilege work, and what is the ‘client’ group?

Legal advice privilege applies to communications between client and their lawyer which are made for the dominant purpose of receiving legal advice.

Under the landmark Court of Appeal case of Three Rivers District Council v Bank of England (No 5) EWCA Civ 474 (Three Rivers), a narrow definition applies to the term ‘client’ in this context. The ‘client’ group for the purpose of legal advice privilege only includes those individuals within the client entity who are specifically tasked with seeking and receiving legal advice. Communications or documents from anyone outside this group, such as other employees in the broader company, will generally not attract privilege.

This decision placed significant limitations on the scope of legal advice privilege and causes practical difficulties for large corporate entities when seeking to obtain confidential advice and make internal decisions. This is most important where the context is non-contentious, meaning separate litigation privilege is unlikely to apply.

What happened in this case?

The pertinent facts in Aabar concerned a dispute between the first defendant (Glencore plc (Glencore)) and the claimant (Aabar Holdings SARL (Aabar)) over the scope of legal advice privilege that Glencore had sought to assert during a disclosure process.

When giving their final tranche of disclosure, Glencore’s lawyers, Clifford Chance LLP, had asserted that they had approached the determination of privilege on the basis that the decision in Three Rivers had been wrong. Specifically, they had treated legal advice privilege as applying more widely to all communications made for the dominant purpose of seeking or receiving legal advice.

Aabar’s lawyers, Quinn Emanuel Urquhart & Sullivan UK LLP, responded that this approach was not consistent with Three Rivers as it treated every employee as being part of the ‘client’ and had not confined the privilege to communications between the lawyer and ‘client’ (or those that disclosed legal advice). Glencore responded to confirm that they maintained their position but would reconsider relevant documents and make an application for any that they decided to withhold.

Glencore subsequently wrote to Aabar conceding that they would no longer approach privilege on the basis that Three Rivers had been wrongly decided, and therefore they no longer contended that every employee should be treated as part of the ‘client’. As a result, Glencore produced 885 documents that had previously been withheld, as well as re-producing 290 documents.

However, Glencore maintained that legal advice privilege could apply to documents which were not communications between the client and lawyer but were instead communications or documents made within the ‘client’ group. This was the question that the High Court was asked to determine.

What was decided?

Counsel for Aabar considered that it was a basic tenet of legal advice privilege that it applied to communications between the lawyer and the client, and the evidence of such communications. It could therefore only apply to limited communications within the client group (and not with the lawyers), namely, where they either: (i) evidenced the content of communications with the lawyer; or (ii) were “inchoate communications” as described in Three Rivers (i.e. documents which were intended to be communicated to the lawyers by the client but were never sent).

Nevertheless, Picken J agreed with counsel for Glencore, and found that privilege “applies to any intra-client document which is sent between or created by members of the “client group” for the dominant purpose of seeking legal advice”.

The reasons given for the decision were as follows, which largely reflected the submissions of Glencore’s counsel:

• Three Rivers had concerned communications between three officials of a Bank, who were found to be the ‘client’ unit for the purposes of privilege, and an external inquiry. It had not been relevant on the facts of the case to look at whether communications within that ‘client’ group were protected by privilege; the question had been whether documents prepared by other employees and sent to the ‘client’ group (and/or the lawyers acting for the company) could attract privilege. 

• Three Rivers was therefore not concerned with the issue in this case, namely whether privilege could apply to communications between members of the ‘client’ group or documents created by a member of that group; it was solely authority for the position that privilege could not apply to non-client documents. The other authorities and commentary quoted by counsel for Aabar also did not address this point. There was therefore no binding authority on the question, leaving it open for the High Court to determine as a matter of principle.

• Picken J agreed that whilst legal advice privilege is usually described as applying to ‘communications’ passing between client and lawyer, it was well-recognised that it could apply to documents that do not actually pass to the lawyer where they are part of the process of seeking or giving legal advice. Key examples of this would be the categories noted by counsel for Aabar above, namely a document that discloses the substance of communication between the client group and the lawyer, or a document that is intended to be communicated to the lawyer but is never sent.

• On this basis, legal advice privilege should also be available in respect of documents or communications within the client group whose “dominant purpose is to identify an issue on which the client proposes to seek advice from a lawyer but at a time at which advice has not yet been sought from the lawyer in relation to the issue identified”. It would be illogical to try and distinguish such documents from, for instance, engagement or instruction letters to the lawyers (which were well-established as being privileged). This category should also include intra-client documents whose purpose was to identify facts that they intended to communicate to the lawyer for the purpose of the advice, even if the document itself was never intended to be sent. In any event, such documents would inevitably evidence the substance of any later privileged communications where the client eventually sought the advice from the lawyer.

• Picken J concluded that such documents would in effect be the equivalent of a lawyer’s working papers, which were clearly subject to privilege. If such working papers were privileged on the side of the lawyer, there was no reason to not attach privilege to the working papers of the client which were, in effect, the “mirror image”.

• This result was considered to be consistent with the earlier case of R (on the application of Jet2.com Limited v Civil Aviation Authority  EWCA Civ 35, which had considered drafts of a letter prepared by the client group to be privileged where the document was prepared for the seeking of legal advice.

Following these findings, Picken J concluded that Glencore was entitled to assert legal advice privilege in respect of intra-client documents, provided that those documents were created for the dominant purpose of seeking legal advice.

What does this mean for employers?

This decision helpfully confirms for employers that communications within a group designated as the ‘client’ for the purposes of receiving legal advice can be subject to privilege, so long as they meet the dominant purpose test.  

Three Rivers remains strong authority that this ‘client’ group are the only individuals whose communications with the lawyers can attract privilege, and as a result employers would be wise to clearly define this group when seeking any advice. Designating this group clearly will be of even greater importance following the Aabar decision, as communications or documents shared within that group may also be able to benefit from privilege. This could include documents recording concerns, fact patterns and timelines of events, as well as questions designated for legal advice, and can apply before legal advice has formally been instructed. The risks when sharing information outside of this group will nevertheless remain.  

BDBF is a leading employment law firm based at Bank in the City of London. If you would like to discuss any issues relating to the content of this article, please contact Rose Lim (RoseLim@bdbf.co.uk), Amanda Steadman (AmandaSteadman@bdbf.co.uk) or your usual BDBF contact.