National Westminster Bank Plc v Rabobank Nederland

Legal advice privilege protects confidential communications between lawyer and client for the purpose of giving or obtaining legal advice. It does not generally protect preparatory documents created by employees or agents merely to enable lawyers to advise, unless the documents themselves form part of the relevant communications. A sworn statement of dominant purpose does not determine privilege conclusively. The court may inspect documents where there is credible evidence that the privilege claim has been misunderstood or cannot be trusted, and no reasonably practical alternative exists. Inspection remains a solution of last resort, particularly where the documents are numerous and their context is disputed.

National Westminster Bank Plc and Rabobank Nederland were syndicated lenders to Yorkshire Food Group. Following the group’s financial difficulties and Rabobank’s acquisition of National Westminster’s lending, Rabobank brought a counterclaim alleging fraudulent misrepresentation and breach of fiduciary duty.

National Westminster sought specific disclosure of the Yorkshire Food Group investigation report and related documents. Rabobank sought recovery of two documents disclosed in error, claiming legal advice privilege. The applications concerned the scope of legal advice privilege, litigation privilege, the court’s power to inspect documents, and the appropriate procedural response to inconsistent privilege claims.

1. Legal advice privilege. The Court of Appeal’s decision in Three Rivers District Council v The Governor and Company of the Bank of England (No 5), [2003] QB (CA), represented the present law. Legal advice privilege was confined to confidential communications passing between the client and legal advisers. Preparatory material created to enable lawyers to advise was not privileged unless it constituted or evidenced such communications. The two documents disclosed in error, which involved communication through Rabobank’s audit department, were therefore not protected by legal advice privilege.
2. Inspection and evidence of purpose. The court had power to inspect documents over which privilege was claimed. That power should be exercised sparingly. The appropriate threshold was credible evidence that the lawyers had misunderstood their duty or could not be trusted, together with the absence of a reasonably practical alternative. Documents should not ordinarily be inspected out of context, especially where they were numerous and the hearing timetable made proper consideration impractical.
3. A statement, even a sworn statement, that litigation was the dominant purpose of a document was not dispositive. The court had to assess the privilege claim in the light of the surrounding evidence and circumstances.
4. The suitable course was to require Rabobank’s solicitors to provide an affidavit verifying the privilege claims over all documents then withheld. The court also declared that documents 1/200–201 were not subject to legal advice privilege. The affidavit order did not preclude later disclosure directions if the evidence or circumstances changed.

First instance decision. No earlier appellate decision is stated in the judgment.