The recent decisions in Astex Therapeutics Limited v AstraZeneca AB and The RBS Rights Issue Litigation serve as a timely reminder and warning to legal practitioners and clients alike of the limitations on legal advice privilege, and that the Court retains ultimate discretion to delve behind the self-certified cloak of legal advice privilege to satisfy itself that privilege is being exercised in the correct manner. Further, consideration should be given by large organisations as to which employees are "the client" to ensure that communications with in-house legal advisers are protected under legal advice privilege.
Astex Therapeutics Limited v AstraZeneca AB
This case concerned a Collaboration Agreement between Astex Therapeutics and AstraZeneca dated February 2003 under which they agreed to participate in a collaborative research programme with a view to discovering chemical leads to produce Candidate Drugs ("CDs") for the treatment of Alzheimer's Disease. By September 2010 AstraZeneca had nominated "CD1" as a Candidate Drug and made payments to Astex totalling USD $1 million under the Collaboration Agreement. CD1 failed to meet certain safety criteria and was not pursued. CD2 was nominated in April 2012 and looked to be more promising than CD1. In 2014, AstraZeneca entered into an alliance with Eli Lilly to jointly develop and commercialise CD2.
The common assumption by both parties that both CD1 and CD2 were Candidate Drugs remained until February 2015 when, following an internal review, AstraZeneca concluded that it no longer considered either CD1 or CD2 to be within the remit of the Collaboration Agreement. This was communicated to Astex and the central issue of Astex's claim against AstraZeneca was whether CD1 and/or CD2, on a true construction of the Collaboration Agreement, were Candidate Drugs. During the litigation, the parties failed to agree on issues regarding disclosure and appeared before the Court on six separate occasions between March and September 2016. The principal issues concerned AstraZeneca's claim to:
- legal advice privilege over letters and other communic ations passing between (i) AstraZeneca and its external lawyers; and (ii) AstraZeneca's in-house counsel and its employees purportedly for the purpose of giving or obtaining legal advice and assistance; and
- litigation privilege over communications and documents passing between (i) AstraZeneca's external lawyers and third parties (including current and former employees); and (ii) AstraZeneca's in-house counsel and third parties (as above) which came into existence after the litigation was contemplated or commenced and which were purportedly made for the dominant purpose of the actual or contemplated litigation to enable advice to be sought or given and/or used in connection with such litigation,
and inadequacies in AstraZeneca's list of documents, which referred to privilege being asserted over "documents which are by their nature privileged and excluded from inspection".
Decision by Chief Master Marsh
Astex sought an order that AstraZeneca provide a list of every document over which it claimed privilege and an explanation of the nature of the privilege claimed. In considering Astex's application, Chief Master Marsh noted that "…although it may have been conventional at one time to state that other documents are "by their nature privileged", such a statement has no place in modern litigation, let alone litigation of very real complexity". He went on to say that "it is clearly unhelpful, without describing the documents said to be privileged, to say that "their nature" explains why they are privileged because the recipient of the list of documents has no way of knowing which documents, or classes of documents, are being referred to".
The Master reviewed the gamut of case law on such matters including, Three Rivers District Council and Ors v Governor and Company of the Bank of England (No.5), Balabel and Anor v Air India, and West London Pipeline and Storage Ltd and Anor v Total UK Ltd and Ors and agreed with the earlier judgments of Taylor J in Balabel and Longmore LJ in Three Rivers (No.5) to conclude that "the essence of legal advice privilege is the protection of confidential communications between lawyers and their clients for the purpose of giving and obtaining legal advice" and, consequently, that legal advice privilege does not have a "…wider application to memoranda supplied by employees for the purpose of being sent to the client's solicitor" (Longmore J).
Accordingly, he concluded that the attendance notes of conversations and meetings with AstraZeneca's current and former employees would not attract legal advice privilege, since they "do not fall within the generally understood confines of legal advice privilege…", save for those employees who were identified as "the client". With regard to AstraZeneca's claim for litigation privilege, he reached the view that there was insufficient evidence with regard to the date from which and the type of work over which litigation privilege was claimed and requested further information from AstraZeneca.
The Court emphasised that the involvement of lawyers in a review outside of any actual or contemplated litigation, which involves obtaining information from persons who are not "the client", will not clothe the review in legal advice privilege. The Court held that it required further evidence from AstraZeneca as to its claim to privilege. Accordingly, the Court ordered that an officer of AstraZeneca, and not its external lawyers, should provide a statement which explains and supports in more detail AstraZeneca's claim to privilege.
The RBS Rights Issue Litigation
In this case, the Court considered the application of legal advice privilege in relation to interview notes and transcripts conducted by or on behalf of RBS (i) with employees and ex-employees; and (ii) as part of an investigation. RBS asserted that under English law (as well as US law – RBS was seeking to rely on US law to the extent that it provided greater protection with regard to privilege) any communication by an employee authorised to communicate with a legal adviser to seek legal advice for his employer is privileged. RBS sought to distinguish Three Rivers (No.5) as a "rather unusual case" which should be confined to circumstances where a special unit had been established to be the "sole and exclusive conduit for communications between the client and the Bank" (Hildyard J). RBS also sought to distinguish Astex on the basis that the respondents did not argue that employees/ex-employees were authorised to give instructions to the lawyers.
Hildyard J dismissed RBS' claim for privilege and concluded that English law was applicable (and not US law). In reaching his decision he found that "…the nature of the authorised communications and the purpose for which they took place combine to preclude the availability of legal advice privilege in this case…"
Practical points to consider
Privilege is a particularly thorny area of the law, not least, as recent cases and Three Rivers (No.5) demonstrate, for large organisations that have to identify who "the client" is when seeking and receiving legal advice from their internal and external lawyers. Given the limitation on legal advice privilege, extending only to communications between client and lawyer (be it in-house or external lawyers), and in the absence of being able to rely on litigation privilege outside of actual or contemplated litigation, those employees who have not been expressly tasked with obtaining legal advice on behalf of the corporate entity run the risk that their communications may be discloseable in the event that a dispute arises.
The question corporate entities are grappling with is what they should do outside of actual or contemplated litigation (and therefore without the potential shield of litigation privilege to seek refuge behind) to avoid finding themselves faced with a privilege predicament. The greatest concern is determining and recording who in the corporate entity is to be charged with obtaining legal advice, and, by consequence, will be "the client" who benefits from protected communications with the organisation's legal advisers. It is unworkable to say that all communications should be dealt with solely by the in-house lawyer. It is equally impractical to say that every employee is "the client" and, in any event, such a blanket approach would most likely fall foul of the policy reasons behind Three Rivers (No.5) and, therefore, fail if challenged under Civil Procedure Rule 31.19(5).
A compromise that reflects the Court's resolve that legal advice privilege is to apply to a narrow, identifiable group of people in a corporate entity is therefore required. While it may not be appropriate to always have the same group of people acting as "the client" and dealing with every legal issue that may arise (indeed, where specialist knowledge from the business is required, it would not be sensible to be restricted to such an immovable group), consideration should be given at the outset of a transaction, a project, a review, or any other significant business task, as to who will need to communicate with the lawyers and should therefore be "the client". Once a decision has been reached, a written record detailing the decision behind those identified as "the client" may assist if a challenge is latterly raised, although consideration with a lawyer should be given as to whether such a document could in turn attract privilege and give rise to issues of waiver of privilege if latterly disclosed.
Once "the client" has been identified, further practical steps that an organisation can take are to educate all employees about the risks of document creation and the importance of appreciating that such documents and communications may end up before the Court in litigation. Further, developing a coherent document management policy to restrict the circulation of documents may help avoid issues and challenges over the right to privilege arising.
The decisions in Astex and The RBS Rights Issue Litigation reiterate the narrow remit of legal advice privilege as set down in Three Rivers (No.5), which (as Chief Master Marsh in Astex confirmed) "remains the principal modern authority on legal advice privilege", and remind practitioners and clients alike of the importance of considering who "the client" should be when communicating with lawyers. Astex demonstrates that, in appropriate circumstances, the Court will seek further information from a party to satisfy itself that the right to privilege has been properly exercised.
The RBS Rights Issue Litigation  EWHC 3161 (Ch)
Astex Therapeutics Limited v AstraZeneca AB  EWHC 2759 (Ch)
West London Pipeline and Storage Ltd and Anor v Total UK Ltd and Ors  EWHC 1729 (Comm)
Three Rivers District Council and Ors v Governor and Company of the Bank of England (No. 5)  QB 1556
Balabel and Anor v Air India  Ch 317