Financial Services Compensation Scheme Ltd. v Abbey National Treasury Services Plc

Legal advice privilege extends to communications between a client and its in-house lawyers, including client communications requesting advice and internal records reproducing, summarising or paraphrasing that advice. The privilege does not generally extend to a document merely because the substance of legal advice may be inferred from it. An exception may arise where the inference is obvious and inevitable, so that the document is substantively a statement of the advice or communication. A claim to privilege should not depend on subjective assessments of what a document may reveal. Where related checklist questions and answers collectively record privileged communications, they may properly be withheld even if one question considered in isolation would not disclose the advice.

Financial Services Compensation Scheme Ltd administered compensation claims and brought proceedings against Abbey National Treasury Services Plc. During voluntary disclosure, FSCS redacted questions, answers and narrative passages in internal eligibility checklists, claiming legal advice privilege and, alternatively, irrelevance.

ANTS challenged the redactions. The court inspected the unredacted material and had to determine whether the passages communicated or evidenced legal advice, including whether privilege could attach to material from which advice might merely be inferred.

1. Application dismissed. Each redaction was protected by legal advice privilege. It was therefore unnecessary to consider irrelevance.

2. Legal advice privilege applies to communications with in-house lawyers as well as independent legal advisers. It covers communications from the client to the lawyer, communications from the lawyer to the client, and internal records which reproduce, summarise or paraphrase those communications. The fact that a record is used internally to assess compensation claims does not remove the privilege.

3. The questions and answers corresponding to questions 6 and 7 were privileged. They identified the narrow questions on which advice had been requested or the issues identified by the legal department. A client’s request for advice is privileged whether or not advice has subsequently been given. An internal record of that request is likewise privileged.

4. The narrative passages unequivocally stated advice received from FSCS’s legal department and were therefore privileged.

5. Question 5, considered alone, did not disclose legal advice and the court rejected the assertion that the advice could be inferred from it as a plain and inevitable inference. A document does not become privileged merely because a reader may draw an evidential inference about legal advice from it. Privilege protects the communication itself, in original, summarised or paraphrased form. It should not depend on subjective assessments of what may be inferred.

6. Read together, however, questions 5, 6 and 7 and their answers formed an indivisible whole and were privileged. The court encouraged clearer statements of the basis for future privilege claims.