Privilege can apply to communications not involving a lawyer

In the second important judgment on legal professional privilege in the same case, Picken J has considered the scope of the much-criticised decision in Three Rivers No 5 (3R5). This follows his finding in November 2024 that the “Shareholder rule”, preventing a company from claiming privilege against its shareholders, did not exist – a decision the Privy Council has since agreed with (for more, see here).

Three Rivers No.5

In 2003, the Court of Appeal in 3R5 held that the definition of “client” within an organisation for the purposes of legal advice privilege did not extend to all employees of the organisation, but only those authorised to instruct solicitors. The effect of this is that communications for the purposes of establishing the factual matrix about which legal advice is needed are often not covered by privilege and are therefore disclosable in any future legal proceedings.

Tantalisingly, the defendant in Aabar Holdings SARL v Glencore Plc initially provided its disclosure on the basis that 3R5 was wrongly decided, reflecting the law as most commentators believe it should be, rather than as it is. It then resiled from that position, but asserted that communications between members of the group within Glencore who formed the “client” according to 3R5 were privileged. Aabar then argued that such communications could not be privileged because they were not communications between client and lawyer, but between those identified as the client.

Having reviewed the decision in 3R5 carefully, Picken J held that what the Court of Appeal had been concerned with there was communications with employees who were not part of the “client” group. He was also clear that none of the earlier authorities referred to in 3R5 addressed the present issue of whether communications within the client group could be privileged.

In his view, Longmore LJ in 3R5 was not seeking to set out an exhaustive statement as to the scope of legal advice privilege and limit its application to communications between client and lawyer. As a result, 3R5 was not authority for the contention that legal advice privilege cannot apply to communications between those within a company who form the client group.

What this means for you

This is a welcome judgment, though not perhaps as welcome as the opportunity for the Supreme Court to consider 3R5 and correct what most see as a wrong turn in the law of privilege. We will have to continue the wait for that, but it will be an extraordinary case where the stakes on a disclosure issue are such as to merit the cost of an appeal to the Supreme Court.

In the meantime, Picken J’s judgment at least means that those within a company tasked with seeking and processing legal advice can communicate freely with one another, safe in the knowledge that those communications will never have to be disclosed should there ever be court proceedings relating to the matters in issue.