Why you should never disclose your lawyer’s advice

8 April 2016

Commercial Manager’s Guide: why you should keep your lawyer’s advice to yourself!

Background

In a dispute before the courts, at the disclosure stage, all documents relevant to the dispute must be “disclosed” in a formal stage of the proceedings. This applies equally to embarrassing or harmful documents just as much as to documents which support your case.

“Privilege” is the legal term for a party’s right to keep certain things to itself, away from the eyes of the other side and even of the court. There are various different privileges. One of them is legal professional privilege: it means you do not have to disclose to the other side the contents of discussions with or advice from your lawyers. It only applies to lawyers, not accountants or consultants, however much “legal” advice they provide. Another is litigation privilege – documents created in contemplation of litigation (at the risk of some generalisation).

Privilege is very valuable when in a dispute, or where you are moving towards a dispute: it means you can get confidential legal advice without the fear that the other side or the court will ever know what it contains.

The case of Commodities Research v King and Wood Mallesons [2016] EWHC 63 (QB) illustrates what can go wrong and how you can lose this valuable privilege.

Commodities Research v King and Wood Mallesons

The case concerned an allegation of professional negligence against the defendant law firm. It arose out of advice given by the defendants in connection with the departure of the claimant’s chief executive. The advice related to the chief executive’s entitlement to certain payments on the sale of the company. The company settled its dispute with its former chief executive, but claimed the amount of the settlement and certain costs from the defendants.

To support their claim against the defendants, the claimant company disclosed a statement from its barrister attaching a letter of advice from him to the company concerning its settlement with its former chief executive.

The defendants applied to court for disclosure of effectively all the relevant legal advice which the claimant company had received. This was based on the well established principle that, if you waive privilege in some of your documents, you must disclose all of it relating to the same issue. You are not allowed to “cherry-pick” which bits of privileged documentation you disclose.

The result was that the claimant company had to accept that, having provided one letter of advice, they also had to provide other advice given by its barrister at the time, as well as records of any oral advice given by him at the same time, and also advice given about the merits of the settlement with the chief executive and the instructions given by the claimants to their lawyers.

Learning points

It not infrequently happens that, as a dispute looms, a solicitor is asked to provide a favourable letter of advice which its client can then brandish in the face of its opponent. If there is already some favourable advice on the file, the client may be tempted to disclose the favourable parts.

Almost certainly, these steps are mistaken: this case contains no new law but illustrates the dangers of taking this course. It is clearly established that disclosing the favourable part of your legal advice threatens to waive a very valuable privilege in all that advice and you will become embroiled in a dispute with the other side as to precisely how far that waiver goes.

The best advice is to treat your lawyer’s advice as privileged and to maintain it as precisely that. In the ordinary course, you can expect that the totality of advice will be partly positive and partly negative: it would be a mistake to disclose the positive part and then be ordered by the court to disclose the negative part in addition.

(The law is stated as at 13 February 2016 – as always, take specific advice before proceeding in any individual situation.)