knowledge 18 December 2017 |

Legal Advice Privilege: “Definite and Reasonable Foundation” Test Adopted to Determine Whether Documents Evidence Legal Advice

The judgment arises from the withholding and redaction of certain documents in a standard disclosure, which was completed in the context of statutory unfair prejudice proceedings taken by minority shareholders of a holding company of a group that owns and manages hotels.   A significant element of the respondents’ defence concerned delay between the date of the action and the date of the alleged acts of prejudice and an argument that this delay was undue.  Many of the documents in the period surrounding the delay were either withheld or redacted by the petitioners, who rejected the characterisation of the delay as undue and submitted that the documents concerned the funding of the litigation and tended to reveal the advice the petitioners had received on the merits, strategy and tactics of the case.  

Mr Justice Morgan took as his starting point the statement of Longmore LJ in Three Rivers DC v Bank of England (No. 5) ² that legal advice privilege is not confined to communications of legal advice but also extends to material that “evidences” the substance of such communications.  Noting that the meaning of “evidences” was not decided in Three Rivers, Mr Justice Morgan turned to examine subsequent authorities.  He identified two strands of authority on the parameters of legal advice privilege.  The first, set out in Financial Services Compensation Scheme Ltd v Abbey National Treasury Services plc ³, is that unless the inference of legal advice is obvious or inevitable then privilege does not attach to the document.  The second strand of authority, favoured by Mr Justice Morgan, is drawn from two Court of Appeal decisions: Lyell v Kennedy (No. 3) ⁴ and Ventouris v Mountain.⁵  In both cases, the Court of Appeal found that where a set of documents betrayed the trend of advice given by a solicitor to a client the documents are protected by legal advice privilege.

Mr Justice Morgan noted a series of more recent authorities of the English courts, which cited Lyell but not Financial Services Compensation Scheme Ltd., and judgments of the Australian courts, which took a similar line to Lyell and Ventouris.  Noting the weight of authority and the usefulness of the Australian authorities, Mr Justice Morgan adopted the test set out by the Federal Court of Australia in AWB v Terence Cole ⁶ that legal advice privilege may be claimed where there is a “definite and reasonable foundation in the contents of the document” for the suggested inference as to the substance of the legal advice given and not merely something which would allow one to wonder or speculate as to whether legal advice has been obtained and the substance of that advice. 

This approach is consistent with the underlying principle that advice given from lawyer to client retains privilege unless waived, either expressly or impliedly.  It confirms that substance rather than form guides judicial analysis in the application of legal advice privilege.  From a practical perspective, this decision gives judicial support to the approach adopted by lawyers in Ireland when asserting privilege on behalf of their clients.  In view of the scrutiny applied by the High Court to claims of privilege, see for example, the recent judgment in Ryanair Limited v Channel 4 Television Corporation,⁷ summarised in our briefing here, it is likely that this issue will arise in an Irish context, though it remains to be seen whether the Irish courts will adopt the test of definite and reasonable foundation.