England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Rolls Building, Fetter Lane London EC4Y 1NL
		08/11/2016

Chief Master Marsh :

1. This judgment concerns an application made by the Claimant ("Astex") inter alia seeking an order against the Defendant ("AZ") that it should provide a full list of each document over which AZ has asserted a claim to privilege in the course of disclosure.

The claim

2. This claim arises out of an agreement made between Astex and AZ in February 2003 ("the Collaboration Agreement") under which they agreed to participate in a collaborative research programme to discover novel chemical leads for the treatment of Alzheimer's Disease and to develop those leads. The leads were to be active as selective inhibitors of the Target, defined as the beta-site amyloid precursor protein cleaving enzyme or "BACE". The object of the Collaboration Agreement was to produce Candidate Drugs (also referred to as "CDs").
3. The Collaboration Term ended on 20 April 2005 (the end date was confirmed by a contractual amendment effective from 1 August 2009). No Candidate Drugs had been nominated by the end of the Collaboration Term.
4. After the end of the Collaboration Term, AZ continued its work to develop a BACE inhibitor for Alzheimer's disease and until February 2014 AZ provided Astex with regular updates on the project. By September 2010 AZ had nominated "CD1" as a Candidate Drug and in September 2010 and July 2011 AZ made payments to Astex of US$1 million under the Collaboration Agreement. However, CD1 failed to meet certain safety criteria and was not pursued further. "CD2" was nominated by AZ as a Candidate Drug by 17 April 2012. CD2 proved to be more promising than CD1 and in 2014 AZ entered an alliance with Eli Lilly jointly to develop and commercialise it.
5. The core issue in the claim is whether CD1 and/or CD2, on a true construction of the Collaboration Agreement, are Candidate Drugs. There was a common assumption by both parties over a period of several years that both CD1 and CD2 met the relevant criteria to be Candidate Drugs. However, in February 2015, as a consequence of a review undertaken by AZ, a different approach was adopted. Astex was informed that the review had taken place, and that AZ no longer considered either CD1 or CD2 to be within the scope of the agreement, by an email from Conor Johnston, Chief Counsel of AZ Neuroscience, dated 24 February 2015. The position was confirmed later in a letter dated 13 May 2015 and at an open meeting between the parties on 3 June 2015. The February email was marked "without prejudice" but there is no dispute that it is either not subject to without prejudice privilege or such privilege has been waived.
6. AZ's position was explained in the letter dated 13 May 2015, when it said:

"We have held discussions with both current and former AZ scientists both who worked on and/or are still working on the BACE project and have reviewed many internal documents and AZ's internal compound database. We have also reviewed the terms of both agreements carefully. As part of the review, we have been unable to find any basis that would support any suggestion that the two compounds in question are covered by the agreements between AZ and Astex."

7. AZ's position in relation to its change of position is pleaded in paragraph 54 of the Defence (in response to paragraph 25 of the Particulars of Claim). It was the subject of a Part 18 request made by Astex seeking the identification of each current and former AZ scientist with whom AZ had discussions and provision of a summary of such discussions. AZ's initial response was that it was unwilling to provide the information sought "… because it is either privileged or, to the extent relevant, will be the subject of AZ's fact evidence, to be exchanged later in these proceedings". Astex also asked AZ to identify the documents reviewed as a part of the exercise and the request was met with a similar response. An order was made on 14 March 2016 requiring AZ to provide a more detailed answer and on 11 April 2016 AZ provided a list of the scientists who had been spoken to as part of the review and a summary of the documents which had been reviewed. Those documents have since been disclosed.
8. One of the features of this claim is that the vast majority of the documents the subject of disclosure are under AZ's control. Issues relating to disclosure have involved substantial hearings on 14 March, 18 April, 17 May, 6 July and 1 September 2016 and, more recently, the hearing which is the subject of this judgment. The initial difficulty with disclosure arose from a lack of engagement between the parties. The order dated 14 March 2016 included a requirement that the parties must meet to seek to establish the scope of differences between them concerning the scope of disclosure so that the court might resolve any such differences which the parties could not agree. That order, and the subsequent order made on 18 April 2016, provided for AZ's disclosure to take place in two stages, with stage 1 to include documents from four scientific databases identified by AZ and the documents arising from the internal review. Stage 2 disclosure was to take place itself in stages, with searches against priority custodians having been identified as the starting point for the substantial disclosure exercise. The disclosure process has been much delayed, but the bulk of disclosure should have been completed by 14 October 2016. The trial, which has a time estimate of three weeks plus two days pre-reading is listed in a window commencing on 2 May 2017.
9. A claim to privilege was first raised by the AZ in response to the initial Part 18 request. Requests 4 and 5 relate to AZ's review and I concluded that the initial response, under which AZ declined to supply the review documents, was inadequate. On 19 April 2016 I handed down a judgment giving reasons for requiring AZ to provide answers to some of the Part 18 requests in a more detailed fashion. So far as requests 4 and 5 are concerned, I remarked:

"20. … to my mind it is plainly insufficient for the Defendant to state in bald terms that information and/or documents are privileged without condescending to give any explanation about the type of privilege which is relied upon and how it is said to arise."

This remark echoed a observation made by leading Counsel appearing for AZ on 14 March 2016:

"… if we assert privilege then we need to do so precisely and in a definite manner and it needs to be determined."

10. AZ's list of documents, comprising stage 1 disclosure, refers to a search for documents which were the subject of the AZ internal review and the disclosure statement was signed by Mr Conor Johnston on behalf of AZ. It provides confirmation that AZ's solicitors had reviewed the documents which were the subject of that search for the purposes of assessing privilege. Part B of the list of documents served by AZ, dealing with a claim to withhold inspection, is in the following form:

"Part B: The Defendant has control of the documents numbered and listed below, but objects to the Claimant inspecting them because they are by their nature privileged from production.

Confidential letters and other communications passing between the Defendant and its legal advisors and patent attorneys for the purposes of giving or obtaining legal advice and assistance, together with drafts and internal memoranda and notes thereof prepared for the purposes of giving or obtaining legal advice, and any other documents which are by their nature privileged and excluded from inspection." [my emphasis]

11. The claim to withhold inspection must be seen in the context of the relevant provisions of CPR Part 31:

i) CPR 31.3

"(1) A party to whom a document has been disclosed has a right to inspect that document except where –

…

(b) the party disclosing the document has a right or duty to withhold inspection of it; …"

(Rule 31.19 sets out the procedure for claiming a right or duty to withhold inspection.)

ii) CPR 31.19 (so far as relevant) provides:

"(3) A person who wishes to claim that he has a right or a duty to withhold inspection of a document, or part of a document, must state in writing –

(a) that he has a right or duty; and

(b) the grounds on which he claims that right or duty.

(4) The statement referred to in paragraph (3) must be made –

(a) in the list in which the document is disclosed; or

(b) if there is no list, to the person wishing to inspect the document."

(5) A party may apply to the court to decide whether a claim made under paragraph (3) should be upheld."

12. The format of AZ's list of documents does not precisely follow the layout of Practice Form N265 (the form is based upon the provisions of CPR 31.19) and requires the party objecting to inspection to list the documents which are withheld and then to explain the basis for refusing to permit inspection. Astex objected to the form of the disclosure statement, and the claim for privilege, and on 7 June 2016 asked AZ's solicitors to provide a list of all documents in which AZ claims privilege "… in order to facilitate a determination of whether these documents should be disclosed".
13. On 15 June 2016 AZ's solicitors replied saying:

"Our client has complied with its standard disclosure obligations and does not need to provide any list of privileged documents for your client's consideration. Our client understands the rules of privilege and it can assess this without your client's assistance. Our client has used standard wording to address privileged documents which is similar to the wording used by your client when generally referring to privileged documents as part of its own disclosure – see Part B of our client's respective lists of documents. Your client is suggesting that our client should now go beyond its existing stage 1 disclosure obligations, as ordered by the court. This conduct is another example of your client taking an unnecessary tactical point, which was specifically discouraged by the Chief Master, to distract our client from its focus on the burdensome stage 2 issues."

14. The issue was debated in subsequent correspondence and by 16 September 2016 AZ's solicitors maintained their position, describing the request for an itemised list of documents over which privilege was claimed as an "obvious fishing expedition". However, they also clarified that the reference in the claim to privilege to "any other documents which are by their nature privileged" obviously included, but was not limited to, documents which are subject to litigation privilege. They rejected the claim for an itemised list.
15. During the course of the hearing of Astex's application, the form in which the claim for privilege was made by AZ was described as "conventional". I accept that the claim for legal advice privilege is described adequately. However, 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. 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.
16. The obligation under CPR 31.19(3)(b) is explained in Disclosure by Paul Matthews and Hodge Malek QC (4th Ed) Chapter 6 at page 181 in the following way:

"It is not the usual practice to individually number every document covered by legal professional privilege, although in certain cases this may be the appropriate course, particularly where there is an issue as to whether privilege is being properly claimed.

Secondly, the nature of the documents must be stated and, in the case of classes of documents, the class must be clearly defined so that it is possible to identify documents which fall within the class.

Thirdly, the ground of privilege and the documents giving rise to the claim for privilege must be clearly stated. In particular, the wording must not be so wide that it is impossible to be sure it contains no description of documents which came into existence in circumstances not attracting privilege. It is not enough to state that the documents are privileged; the factual basis of the grounds giving rise to that claim must be set out."

17. The disclosure statement includes the 'by their nature' rubric not once but twice. On the first occasion it is a part of the 'headline' claim to withhold inspection and would therefore appear to apply to all the documents withheld, and it is then repeated on a second occasion following the description of legal advice privilege. The initial claim for privilege was poorly drafted and, far from it being obvious that a claim was being made to withhold documents on the basis of litigation privilege, such a claim was not properly explained. It was understandable that Astex's solicitors should have interrogated AZ's claim to privilege. Nevertheless, such observations about the claim for privilege do not of themselves justify the making of an order because AZ, in the eighth witness statement of Michael Gilbert, who is a partner in Marks & Clerk Solicitors LLP ("MCS"), provides much more detail about the basis upon which privilege is claimed. It is necessary to set out paragraph 21 of his witness statement in full:

"Contrary to Mr Reese's speculation, the quantity of privileged documents is not particularly large. All of them came into existence as part of legal advice sought by AZ in connection with this dispute and in contemplation of litigation concerning this dispute. Accordingly (and for the purposes of reconfirming the position in this witness statement we have considered the issues again and afresh), we have satisfied ourselves and I, in particular, have satisfied myself, that the claim to privilege in each of the documents is very clearly established, indeed it could not be more obvious. All of the documents the subject of privilege in this case are exactly the types of documents which are brought into existence in the lead up to litigation of a dispute of this nature. Personally, I am unable to see any doubt at all on the issue of whether privilege was properly claimed for these documents – they are obviously privileged. AZ's claim to privilege in respect of documents identified in or arising out of the internal review fall into the categories set our below.

(a) Documents that are subject to legal advice privilege. This class of privilege covers:

(i) Confidential letters and other communications passing between AZ and its external legal advisors and patent attorneys for the purposes of giving or obtaining legal advice and assistance, together with drafts and internal documents prepared by such external legal advisors including memoranda and notes thereof prepared for the purposes of giving or obtaining legal advice. Such documents include typed up and manuscript MCS attendance notes with current and former employees, advice notes from external patent attorneys together with advice given by MCS to AZ concerning the agreement; and

(ii) Confidential communications passing between AZ's in-house counsel and AZ's employees for the purposes of giving or obtaining legal advice and assistance, together with drafts and memoranda and notes thereof prepared for the purposes of giving or obtaining legal advice. Such documents include typed up and manuscript AZ's in-house counsel attendance notes with current and former AZ employees together with advice given by AZ's in-house counsel to AZ concerning the agreement.

(b) Documents that are subject to litigation privilege. This class of privilege covers:

(i) Confidential communications and documents passing between AZ's external legal advisors and third parties (including current and former AZ employees) which came into existence after this litigation was contemplated or commenced and which were made for the dominant, if not exclusive, purposes of such contemplated or actual litigation to enable advice to be sought or given and/or to be used in or in connection with such litigation, together with drafts and internal memoranda and notes thereof prepared for the purposes of such contemplated or actual litigation. Such documents include typed up and manuscript MCS attendance notes with current and former AZ employees together with advice given by MCS to AZ concerning the agreement; and

(ii) Confidential communications passing between AZ's in-house counsel and third parties (including current and former AZ employees) which came into existence after this litigation was contemplated or commenced and which were made for the dominant, if not exclusive, purposes of such contemplated or actual litigation to enable advice to be sought or given and/or to be used in or in connection with such litigation, together with drafts and internal memoranda and notes thereof prepared for the purposes of such contemplated or actual litigation. Such documents include communications with and typed up and manuscript attendance notes with (i) current and former AZ employees and (ii) other third parties, together with advice given by AZ's in-house counsel to AZ concerning the agreement."

18. Mr Béar QC, in his skeleton argument, submits that the expanded wording in paragraph 21 of Mr Gilbert's eighth statement entirely fails to justify the claim for privilege. Apart from submitting, uncontroversially, that the onus of proof is on the party claiming privilege (see West London Pipeline and Storage Ltd v Total UK Ltd and others [2008] EWHC 1729 (Comm) [86] per Beatson J), he makes five headline points about the claim for privilege:

"First, it lacks all specificity: ... Second, documents 'identified in' a review are, at least prima facie, not privileged. Third, it contains a misconception: communications with employees (who provide information) or other third parties are not covered by legal advice privilege. Fourth, such communications may or may not be covered by litigation privilege depending on whether (1) the timing is right, and (2) dominant purpose is shown: nothing in Mr Gilbert's generalities allows either limb to be assessed. Fifth, the shift from the apparent reliance on litigation privilege alone … is unexplained."

19. The third submission caused Mr Mellor QC, who appeared for AZ, to file an additional note and Mr Gilbert to file his ninth statement. In that statement Mr Gilbert provides further information about the document review and the basis upon which privilege is claimed. He says:

i) MCS was first contacted by AZ in relation to this matter "in February 2015". He does not give the date of initial contact, but he makes the point that it was prior to the date of the email sent by Mr Johnston on 24^th February 2015.

ii) By February 2015 (which I take to be by the end of January 2015) AZ's in-house counsel had created a SharePoint collection of documents to which MCS was given access. Documents were added to the SharePoint as the review progressed.

iii) The internal review was ongoing, with MCS's involvement, up to and beyond the email dated 13 May 2015 from Mr Johnston to Mr Carmichael of Astex.

iv) The scientists interviewed for the purposes of the review are listed at response four to AZ's second response to Astex's Part 18 request. Mr Gilbert confirms that the scientists were interviewed for the purposes of the contemplated litigation.

v) All documents in the SharePoint were reviewed exclusively for the purposes of considering their claim to privilege.

20. To this evidence two additional points that can be added. First, in a footnote to paragraph 21 of his eighth statement Mr Gilbert says, in relation to litigation privilege, "a dispute, or potential litigation, was contemplated by AZ by at the latest February 2015". Secondly, Mr Mellor QC told me during the course of the hearing, on instructions, that legal advice privilege is claimed in relation to communications and associated documents from 1^st January 2015.

The application

21. The application notice seeks an order requiring AZ to make a list of each document identified in, or arising from, AZ's internal review in respect of which AZ asserts privilege. The language "identified in or arising from AZ's internal review" is derived from the order for directions dated 14 March 2016. But as the application developed, and arising from observations made by Mr Béar QC in his skeleton argument, a more fundamental issue arose concerning the scope of legal advice privilege as it applies in this case. This is a vexed issue in the light of the decision of the Court of Appeal in Three Rivers District Council and others v Governor and Company of the Bank of England (No. 5) [2003] QB 1556 (I shall refer to this decision as Three Rivers No 5). The decision has been the subject of considerable comment and criticism, and the The Law of Privilege (2^nd ed.) by Mr Bankim Thanki QC (who was junior counsel for the Bank in Three Rivers No. 5), Disclosure (4^th ed.) by Matthews and Malek and Documentary Evidence (12^th ed.) by Charles Hollander QC all devote space to a discussion of the decision and where it leaves the law relating to legal advice privilege. All agree that legal advice privilege is narrower than litigation privilege. This is because litigation, whether actual or in reasonable contemplation, needs to accommodate the gathering of evidence for the purposes of giving advice and taking decisions about the conduct of the dispute. Equally, it is clear that the two types of privilege will often overlap, both temporally and conceptually, once a dispute has arisen or is in reasonable contemplation. However, just how much narrower legal advice privilege is than litigation privilege is uncertain, particularly where two matters come together. First, the party claiming privilege undertakes an exercise in gathering evidence before a dispute is in reasonable contemplation and, secondly, that party is a corporate entity. Difficulties arise in determining which real persons will be treated as representing the entity for the purposes of communications with legal advisers. Put another way, who is the client of the lawyers for the purposes of a claim to legal advice privilege?
22. Mr Gilbert considers that it is "obvious" that privilege has been correctly claimed. AZ's starting point in correspondence was that Astex was not entitled to go behind a specific assurance that privilege has been carefully considered and properly claimed – see Derby & Co Ltd v Weldon (No.7) [1990] 1 WLR 1156.
23. This question has received more recent attention both at first instance and in the Court of Appeal. In West London Pipeline and Storage Ltd and another v Total UK Ltd and others [2008] EWHC 1729 (Comm) Beatson J at [86] provided a helpful summary of the principles which apply where a challenge is made to a claim for privilege. I set out that paragraph in full (excluding the authorities he cites):

"It is possible to distil the following propositions from the authorities on challenges to claims to privilege:-

(1) The burden is on the party claiming privilege to establish it: … A claim for privilege is an unusual claim in the sense that the party claiming privilege and that party's legal advisors are, subject to the power of the court to inspect the documents, the judges in their or their own client's cause. Because of this, the court must be particularly careful to consider how the claim for privilege is made out and affidavits should be as specific as possible without making disclosure of the very matters that the claim for privilege is designed to protect: …

(2) An assertion of privilege and a statement of the purpose of the communication other which privilege is claimed in an affidavit are not determinative and are evidence of a fact which may require to be independently proved: …

(3) It is, however, difficult to go behind an affidavit of documents at an interlocutory stage of proceedings. The affidavit is conclusive unless it is reasonably certain from:

(a) the statements of the party making it that he has erroneously represented or has misconceived the character of the documents in respect of which privilege is claimed: …

(b) the evidence of the person who or entity which directed the creation of the communications or documents over which privilege is claimed that the affidavit is incorrect: …

(c) the other evidence before the court that the affidavit is incorrect or incomplete on the material points: …

(4) Where the court is not satisfied on the basis of the affidavit and the other evidence before it that the right to withhold inspection is established, there are four options open to it:

(a) It may conclude that the evidence does not establish a legal right to withhold inspection and order inspection: …

(b) It may order a further affidavit to deal with matters which the earlier affidavit does not cover or on which is it unsatisfactory: …

(c) It may inspect the documents … Inspection should be a solution of last resort, in part because of the danger of looking at documents out of context at the interlocutory stage. It should not be undertaken unless there is credible evidence that those claiming privilege have either misunderstood their duty, or are not to be trusted with the decision making, or there is no reasonably practical alternative.

(d) At an interlocutory stage the court may, in certain circumstances, order cross-examination of a person who has sworn an affidavit, for example, an affidavit sworn as a result of the order of the court that a defendant to a freezing injunction should disclose his assets: …"

24. The order sought in this case is that set out in paragraph (4)(b) above. It is not suggested that an affidavit, rather than a witness statement, is required.
25. In Rawlinson and Hunter Trustees SA and others v Akers and another [2014] EWCA Civ 136 [13] the Court of Appeal, in the context of a challenge to a claim to litigation privilege, considered the scope of the evidence required to demonstrate 'dominant purpose' and adopted the analysis provided by Eder J. at first instance:

"For a communication to be subject to litigation privilege it must have been made with the dominant purpose of being used in aid of or obtaining legal advice from a lawyer about actual or anticipated litigation: … Where litigation has not been commenced at the time of the communication, it has to be 'reasonably in prospect'; this does not require the prospect of litigation to be greater than 50% but it must be more than a mere possibility; … The burden of proof is on the party claiming privilege to establish that the dominant purpose test is satisfied: … A mere claim in evidence before the court that the document was for a particular purpose will not be decisive: … The court will look at 'purpose' from an objective standpoint, looking at all relevant evidence including evidence of subjective purpose: … The evidence in support must be specific enough to show something of the deponent's analysis of the purpose for which the documents were created, and should refer to such contemporary material as is possible without disclosing the privileged material: …". [my emphasis]

26. In the course of his submissions Mr Béar QC relied upon a decision of the court of first instance in Hong Kong by Kwan J in Re Kong Wah Holdings Ltd and another (in Liquidation) (No.4) [2007] 5 HKC 202 which is referred to in the judgment of Moylan J in Tchenguiz-Imerman v Imerman [2014] 1 FLR 232. The decision in Re Kong Wah Holdings Ltd arises in a very different context from the present case. The claim for privilege was made in response to an order for the production of documents under section 221 of the Companies Ordinance of Hong Kong. Equally, albeit that the judge was applying CPR principles in Imerman, an order for disclosure relating to a trust in respect of which the husband claimed common interest privilege, is also some considerable distance from this claim. I do not find that either of those authorities provides any real assistance as they are merely examples of the principles in operation.
27. The court has power, in an appropriate case, to make an order requiring a party claiming privilege to explain in sufficient detail the basis upon which privilege has been claimed. The court will not make such an order routinely and there must be a firm evidential basis justifying it. Furthermore, the degree to which a claim to privilege must be specified will depend on the particular case; and the court should be astute to avoid making an order which either has the effect, or risks having the effect, of rendering the privilege valueless due to the level of detail which is revealed pursuant to the order. However, to my mind, it would be unusual for the fact that advice was given on a particular date, or dates, or that enquiries were made on a date or dates as a basis for giving advice, to be revelatory.
28. I would add that the court must be careful to avoid encouraging applications challenging privilege which are purely tactical and designed to harass the opponent. Although it is not right, as AZ originally suggested, that its self-certification of a claim for privilege cannot be challenged, the court will naturally take into account assertions which appear to be made in good faith and based upon what appears to be a careful review of the documents in question, taking into account the relevant principles. Plainly, Mr Gilbert's assertion that he has considered carefully the claim to privilege must not be disregarded lightly, but it does not preclude the court from requiring further information to be provided.
29. It is helpful here to consider the sequence of events in chronological order based upon the, limited, information which has been revealed:

i) During 2014 AZ was in discussion with Eli Lilly concerning the exploitation of CD2 and in September 2014 they jointly announced an arrangement between them for the exploitation of CD2. It is almost inevitable that the scope of the Collaboration Agreement, and AZ's obligations to Astex, came under review during 2014 but there is no evidence which deals with such a review, if it took place and my surmise could be wrong.

ii) Legal advice privilege is claimed from 1 January 2015. It is unsatisfactory that this has not been stated in a witness statement, but for present purposes I accept the date as being correct.

iii) AZ, on a date which is unknown, decided to undertake the review of its obligations to Astex (that being the review which is referred to in AZs email dated 24 February 2015 and later correspondence). The decision to undertake a review is likely to have been taken shortly before the review commenced in early January 2015.

iv) On or about 1 February 2015 MCS were instructed by AZ.

v) Mr Gilbert says that by "at the latest by February 2015" a dispute or potential litigation was contemplated by AZ.

vi) On 24 February 2015 AZ notified Astex that it no longer considered either CD1 or CD2 to be Collaboration Compounds.

vii) Between 9 and 29 April 2015 discussions with four AZ scientists took place. It is not clear whether they all remained employed by AZ when the discussions took place. The identity of the scientists and the dates of the discussions are set out in AZ's answer dated 11 April 2016 to Astex's Part 18 request.

viii) A meeting took place between the parties in May 2015.

ix) AZ continued discussions with current and former scientists between 29 June and 22 December 2015.

x) Astex's application for pre-action disclosure was issued on 14 July 2015.

30. For the purposes of Astex's application it is not necessary for the court to be satisfied that the basis upon which privilege has been claimed is incorrect, but there must be some proper basis for an order to be made. Legal advice privilege (even disregarding the point arising from Three Rivers No.5) is narrower than litigation privilege, although if the appropriate conditions for each of them are fulfilled, a document may be privileged on both grounds. AZ does not claim legal advice privilege for the period prior to 1 January 2015 or litigation privilege prior to 1 February 2015. It follows that on the currently available evidence privilege is not claimed either in relation to whatever review may have been undertaken in connection with the exploitation agreement with Eli Lilly or the process of coming to a decision to undertake the review of the Astex Collaboration Agreement.
31. There are also puzzling aspects of the scope of the extended claim to privilege in paragraph 21 of Mr Gilbert's eighth statement.

i) He starts by saying that all the privileged documents came into existence "… as part of legal advice sought by AZ in connection with this dispute and in contemplation of litigation concerning this dispute." This formulation appears to conflate legal advice privilege with litigation privilege because the existence of a dispute is not necessary for the former whereas there are separate claims to each type of privilege which follow.

ii) The formulation of the classes of documents over which privilege is claimed is similar for both legal advice and litigation privilege. In both cases attendance notes were created of communications with current and former employees of AZ. It is not clear whether those attendance notes only record conversations and/or meetings with scientists who had knowledge of the collaboration project or whether the class includes other current and former employees.

iii) The class of persons described as "third parties contacted by MCS and AZs in-house counsel" includes current and former employees but it is unclear which other persons, or classes of persons, are included within the term third parties.

Legal Advice Privilege – Three Rivers No.5

32. The issue concerning the effect of the decision of the Court of Appeal in Three Rivers No.5 arises from the manner in which the claim for legal advice privilege is made in paragraph 21 of Mr Gilbert's eighth statement. The claim to legal advice privilege has two parts to it. First, there is a category of documents relating to communications between AZ and its external legal advisors and patent attorneys. Secondly, there are communications passing between AZ's in-house counsel and AZ's employees. Astex has highlighted that the claim to privilege in the first category includes attendance notes with current and former AZ employees made by MCS and in the latter category attendance notes made by AZ's in-house counsel with current and former employees. Astex's initial position was that communications with employees who provide information or other third parties are not covered by legal advice privilege. Mr Gilbert's response in his ninth statement was in the following terms:

"At no point do I state or even suggest that communications with third parties are subject to legal advice privilege. My reference to communications with third parties appears only in paragraph 21(b) which deals with claims to litigation privilege. Such documents can, if made for the dominant purposes of assisting in contemplated or actual litigation, be subject to privilege under this head. Further, as regards communications with employees, it is absolutely the case that communications between an in-house lawyer and an employee can be the subject of legal advice privilege."

33. Lord Rodger in Three Rivers No.6 provides what Mr Thanki QC describes as a "good working definition of legal advice privilege", namely a privilege which attaches to:

"…all communications made in confidence between [lawyers] and their clients for the purpose of giving or obtaining legal advice even at a stage where litigation is not in contemplation. It does not matter whether the communication is directly between the client and his legal advisor or is made through an intermediate agent of either." [50]

34. The description of legal advice privilege is given by Lord Rodger concentrates upon communications. The range of documents which may be subject to legal advice privilege is wider than those strictly confined to communications – see Balabel v Air India [1988] Ch. 317. In that case the claimants sought an order for specific performance of an agreement for an underlease. There was no note or memorandum in writing passing between the parties for the purpose of section 40 of the Law of Property Act 1925. The claimants made an application for discovery (sic) in the hope that such a memorandum could be found in three different categories of documents:

i) communications between Air India and its solicitors other than those seeking or giving legal advice;

ii) drafts, working papers and memoranda of the solicitors;

iii) internal communications of Air India other than those seeking legal advice.

35. No claim to legal advice privilege was made in respect of the third category. It is clear, however, from the judgment of Taylor LJ at page 332 that the class of documents which will be subject to legal advice privilege is wider than those forming or recording the communications:

"… whether such documents are privileged or not must depend on whether they are part of that necessary exchange of information of which the object is the giving of legal advice as and when appropriate."

Longmore LJ, in giving the judgment of the court in Three Rivers No.5, having referred to those remarks of Taylor LJ said:

"That is a perfectly appropriate test to apply to communications between the client and his solicitor but authority does not support its wider application to memoranda supplied by employees for the purpose of being sent to the client's solicitor …".

36. The review by the Court of Appeal in Three Rivers No.5 of the scope of legal advice privilege arose in unusual circumstances. A claim was made by the liquidators and creditors of BCCI against the Bank of England for misfeasance in public office in respect of the Bank's supervision of BCCI before its collapse. They sought disclosure of documents which had been produced through a private non-statutory inquiry into the Bank's supervision of BCCI conducted by Lord Bingham. No claim for litigation privilege could be made because such privilege "… is essentially a creature of adversarial proceedings and thus cannot exist in the context of non-adversarial proceedings" (per Longmore LJ in Three Rivers No.5 [2]). A summary of the relevant background facts is set out in paragraph [3] of the court's judgment in the following way:

"…Shortly after the Bingham inquiry was established, the Governor of the Bank of England appointed three Bank officials … to deal with all communications between the Bank and the inquiry. They became known as the Bingham Inquiry Unit ("BIU"). On the day on which they were appointed they met the Bank's solicitors, Freshfields. All the BIU's communications with the inquiry were therefore the subject of extensive legal advice from Freshfields and counsel instructed by them. This advice covered all aspects of the preparation and presentation of the Bank's evidence and submissions to the Bingham inquiry."

37. The claimants did not seek disclosure of documents passing between the BIU and Freshfields, or vice versa, or of any Freshfields' internal memoranda or drafts. Mr Pollock QC, who appeared for the claimants, accepted that the BIU was, for the purpose of the inquiry, the client of Freshfields and that communications passing between the BIU and Freshfields were covered by legal advice privilege. The application related to four categories of documents:

i) documents prepared by Bank employees which were intended to be sent to, and were in fact sent to, Freshfields;

ii) documents prepared by Bank employees with the dominant purpose of the Bank's obtaining legal advice but not, in fact, sent to Freshfields;

iii) documents prepared by Bank employees, without the dominant purpose of obtaining legal advice, but in fact sent to Freshfields;

iv) documents prepared by Bank employees who by the date of the application of disclosure were no longer employed by the Bank.

38. After referring at length to the judgments of the Court of Appeal in Wheeler v Le Marchant [1881] 17 Ch D 675 and after citing the judgment of Cotton LJ at 684-685, Longmore LJ said:

"This case thus makes clear that legal advice privilege does not extend to documents obtained from third parties to be shown to a solicitor for advice. Mr Stadlen, of course, accepted this but said that communications from an employee are different. The reason he gave is that a corporation can only act through its employees; while that is true, it is not a consideration that can carry Mr Stadlen home. Indeed the passage cited from Anderson's case 2 Ch D 644 shows that information from an employee stands in the same position as information from an independent agent. It may, moreover, be a mere matter of chance whether a solicitor, in a legal advice privilege case, gets his information from an employee or an agent or other third party. It may also be problematical, in some cases, to decide whether any given individual is an employee or an agent and undesirable that the presence or absence of privilege should depend upon the answer."

39. The conclusion drawn by Longmore LJ from the nineteenth century authorities was (at paragraph [19]):

"By the end of the nineteenth century it was, therefore, clear that legal advice privilege did not apply to documents communicated to a client or his solicitor for advice to be taken upon them but only to communications passing between that client and his solicitor (whether or not through any intermediary) and documents evidencing such communications."

40. Longmore LJ rejected the approach adopted by the judge at first instance concerning the distinction, or the lack of it, between legal advice and litigation privilege (at [26]):

"The judge said that he could see no rational basis on which the principles which protect the confidentiality of the process of obtaining legal advice should differ as between the two distinct situations of contemplated litigation and the absence of contemplated litigation."

He went on later in the same paragraph to say:

"But it is a privilege possessed by the client in relation to no other adviser. Lord Brougham was exercised by the difficulty of discovering why the privilege has been refused in respect of other advisers, especially medical advisers. But the law is clear that it is so refused in respect of every profession other than that of the law. In these circumstances it is important that it be confined to its proper limits. The judges of the nineteenth century thought that is should only apply to communications between client and adviser. That is the proper compass of the privilege. It is not, in our judgment, open to this court to extend the privilege, even if we thought we should."

41. The Court of Appeal concluded that the Bank is not entitled to privilege in any of the four categories summarised above and expressed the view that if the Governor himself of the Bank of England had noted down what he remembered in relation to the supervision of BCCI with the intention of giving it to the BIU for transmission to Freshfields, such a document would not be subject to legal advice privilege. Longmore LJ accepted the submission by Mr Pollock that on the evidence before the court

"… the BIU, which was established to deal with inquiries and to seek and receive Freshfields' advice, is for the purposes of this application, the client rather than any single officer however eminent he or she may be. It follows that no separate consideration need be given to the position of ex-employees who are, obviously, in no better position for the purpose of any claimed privilege."

42. Three Rivers No.5 remains the principal modern authority on legal advice privilege. The House of Lords was invited to consider it in Three Rivers No.6 but declined to do so. Mr Thanki QC in The Law of Privilege (2^nd ed.) undertakes a very detailed analysis of the decision in Three Rivers No.5 which appears to create considerable practical difficulties for corporate entities. He expresses the view at paragraph 2.05 that "… as the law currently stands – while the 'client' is obviously the corporation seeking legal advice, only those communications involving the individuals expressly or impliedly authorised by or on behalf of a client entity to give instructions to the lawyer and the individuals expressly or impliedly authorised to receive the legal advice will attract legal advice privilege".
43. He goes on to suggest that the Court of Appeal conflated two separate questions:

i) Who is the client? When a corporation seeks legal advice, it is suggested that the client is obviously the corporation.

ii) Where a corporation is concerned, there is a secondary question. Which officers or employees are authorised by the corporation to communicate with its lawyers on behalf of the corporation?

44. In my judgment there is considerable force in the analysis put forward by Mr Thanki QC that the decision of the Court of Appeal in Three Rivers No.5 is a decision which concentrates upon the second part of the test, namely which officers or employees are authorised to communicate with the corporation's lawyers rather than upon who is the client. It appears to me from the judgment of the Court of Appeal it was acknowledged that the Bank, not the BIU, instructed Freshfields, but that the Bank in giving instructions to Freshfields nominated the BIU as its exclusive conduit for communications with Freshfields. As Mr Thanki QC notes, the fact of being an employee alone cannot be sufficient to give an employee authority to seek legal advice. He instances the perhaps unlikely scenario of a cleaner employed by the Bank of England with information of interest to the inquiry communicating with Freshfields. Such a communication could not be privileged.
45. In National Westminster Bank PLC v Rabobank Nederland [2006] EWHC 2332 (Comm) Simon J. (as he then was) [28] concluded that since an internal report by the Defendant bank "…did not represent communications between lawyer and client, they were not subject to Legal Advice privilege". He went on to observe at [29] that:

"Although the decision in Three Rivers (No 5) has been criticised there can be little doubt that it represents the present state of the law."

Conclusions on Astex's application

46. The issues on Astex's application arise from the manner in which the claims to privilege have been made. In particular, both legal advice and litigation privilege is claimed for attendance notes made of conversations or meetings with AZs current and former employees. To my mind the core issues for determination are:

i) Is AZ entitled to claim legal advice privilege in respect of those attendance notes?

ii) Has a claim to litigation privilege been made out and, if so, is it possible to discern from the current evidence the date from which it applies?

iii) Is it appropriate to make the order sought by Astex or any order in more limited terms?

47. 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. The class of documents which is protected is slightly wider than communications and depends upon whether the documents "… are part of that necessary exchange of information of which the object is the giving of legal advice as and when appropriate." (per Taylor LJ in Balabel v Air India.) Longmore LJ accepted that test for the purposes of considering whether documents associated with communications between lawyer and client may be privileged but he rejected any wider application. Indeed at paragraph [19], when considering the nineteenth century authorities, Longmore LJ rejected the possibility that documents communicated to a client or his lawyer could be protected by legal advice privilege. There is nothing in the remainder of his judgment to suggest that the law has changed. Three Rivers No.5 provides a narrow view of legal advice privilege.
48. In Three Rivers No.5, none of the classes of documents held not to be privileged had been produced by a lawyer. They were all produced by Bank employees, none of whom could be classed as being the client due to the conclusion reached by the court that the BIU was the client for the purposes of the inquiry. In the case of AZ's review the position is different. Privilege is claimed over notes made by in-house and external lawyers of conversations with employees and former employees. The identity of those individuals is not known but it has not been suggested that any of them could be regarded as forming part of a class of persons authorised to give instructions to the lawyers. AZ's claim to privilege is founded upon the involvement of lawyers in the process of gathering information from persons who must be treated as being third parties for these purposes (whether they are existing or former employees).
49. In my judgment, none of these attendance notes can be the subject of legal advice privilege. They do not fall within the generally understood confines of legal advice privilege, even as extended by Balabel v Air India, because it is not apt to cover an information gathering exercise of the type which will normally be conducted in relation to litigation but undertaken before a dispute is in reasonable contemplation.
50. Where there is a dispute, or a dispute is in reasonable contemplation, it is necessary for the purposes of obtaining legal advice to establish the version of events which will be relied upon in relation to the dispute. Even then, the gathering of information must be for the dominant purpose of giving or obtaining advice. By contrast, where there is no dispute, the review of a contract by seeking information from employees, and former employees, is unlikely, in most circumstances, to be protected by legal advice privilege. In one sense this conclusion is a surprising one because it might be though that the involvement of lawyers in the review clothes the review in privilege. But that is not the legal position if the lawyers are obtaining information from persons who are, for these purposes, third parties because they are not 'the client'.
51. That leads to the second issue, namely has a claim to litigation privilege been made out and, if so, is it possible from the evidence to discern the date form which it applies? The evidence is not plentiful. Mr Gilbert says that a dispute or litigation was in contemplation at the latest by February 2015. The first limb of the test for litigation privilege imports a necessary objective element; a dispute must reasonably be in contemplation. It follows that a party cannot simply self-certify that this part of the test is satisfied. Unless the position is obvious, as it will be for example upon receipt of a letter of claim, some evidence may be needed to assist the court in making a determination. It should be possible for this to be given without revealing matters which are privileged. So, for example, there may be board minutes, or notes of other meetings, revealing discussions about the difference which has or is thought likely to arise.
52. In the case of second limb of the test, again a stage may be reached at which the dominant purpose is apparent. In the case of a legal review, the position may not be obvious at all before the outcome of the review has been communicated because the purpose of the review is to establish whether there is any possibility of there being a dispute. In this case, it is clear that the review had not been concluded before the email was sent on 24 February 2015. Interviews with AZ's scientists took place, or at least continued, after that date. The extent to which there had been any interviews, and attendance notes of those interviews created, prior to 24 February 2015 is uncertain.
53. I am unable to accept Mr Gilbert's assertion that AZ contemplated a dispute or potential litigation by February 2015. He is not in a position to give primary evidence on this issue save for his impression based upon his instructions. In any event, his evidence without further context does not suffice; and there is no evidence about dominant purpose.
54. Turning to the third issue, I consider this is a case, exceptionally, in which further evidence about the claim to privilege is essential. This is despite AZ's efforts to cure the obvious defects in its initial claim to privilege in Mr Gilbert's eighth and ninth statements. My reasons in summary are:

i) AZ's approach to claiming privilege has been unsatisfactory and its attempt to clarify the original unsatisfactory claim to privilege has not provided clarity.

ii) The basis of the claim to legal advice privilege in relation to attendance notes of conversations with employees and ex-employees was incorrect.

iii) Even on AZ's case as to legal advice privilege, the scope of the claim for the period prior to 1 February 2015 is uncertain and needs explanation. It is unclear who the employees were who were interviewed during that period by AZ's in-house counsel.

iv) On the law as to legal advice privilege as it applies in this case, AZ has no basis for claiming legal advice privilege over interviews with employees and ex-employees. There might, however, be an exception for current employees forming part of the class of persons which can be treated as being the client for the purposes of giving instructions. It is essential the persons in question are identified.

v) The date from which and the type of work undertaken over which litigation privilege can be claimed cannot be made out based upon the current evidence. Paragraph 21 of Mr Gilbert's eight statement needs to be evaluated against a description of the documents said to be privileged and the dates they were generated.

vi) The volume of documents over which privilege is claimed is "not particularly large" and so an order to provide further details is not disproportionate in the context of this claim.

vii) With regard to the date from which litigation privilege is claimed to apply, I am satisfied it is possible for AZ to provide further evidence about both limbs of the test without revealing the content of material which is said to be privileged.

viii) In the same way as a disclosure statement must be signed by the party giving disclosure, AZ's evidence about the scope of its claim to privilege, as expanded and explained, must be given by a proper officer of AZ, not by it solicitors.

55. I therefore propose to make an order, the detail of which is to be agreed between the parties, or subject to further submissions. A witness statement must be made by a proper officer of AZ which supports and explains in more detail the claim to privilege. The witness statement should include the following elements:

i) A list of the documents over which privilege is now claimed, taking account of the limited nature of legal advice privilege, and the date when each document was created. In the unlikely event that the description of a document or its date is said to reveal privileged information, in the first instance such a document may be described in general terms or included within a class of similar documents.

ii) Each employee and ex-employee must be identified and date or dates of interviews specified.

iii) Each document listed must be marked showing whether legal advice privilege, litigation privilege or both is claimed.

iv) Further evidence about how the claim to litigation privilege arises and when it is said to arise.

v) To the extent that it may be necessary, AZ must confirm that it does not claim privilege in relation to any document created before 1 January 2015.