Introduction
Legal professional privilege (LPP) is a fundamental right under English law: it enables a client to communicate freely with their lawyers, safe in the knowledge that those communications cannot be compelled as evidence or disclosed to third parties. Yet the world of business is not hermetically sealed. Transactions require due diligence. Litigation involves experts. Corporate groups have many operating entities. Insurers must be kept informed. The practical question that arises repeatedly for business clients is whether sharing a privileged document with a third party necessarily destroys the privilege that attaches to it — and if not, what conditions must be met to preserve it.
The general rule of English law is that voluntary disclosure of a privileged document to a third party constitutes a waiver of privilege, rendering the document disclosable to all parties, including adverse parties in litigation. Privilege is not a quality that can be selectively deployed: once the cloak of confidentiality is pierced by voluntary disclosure, it cannot, as a general matter, be partially restored. However, the law has developed a series of important exceptions and qualifications to this general rule, each of which recognises that there are circumstances in which sharing a document with a third party is consistent with, rather than destructive of, the underlying purpose of privilege. Understanding these exceptions is essential for any business that needs to share sensitive legal advice with people outside the immediate lawyer-client relationship.
This article examines the principal circumstances in which privilege is not lost upon disclosure to a third party: the agent and intermediary principle; joint or co-client privilege; common interest privilege; disclosure in the context of litigation; inadvertent disclosure; and without prejudice communications. It also addresses the particular complexities that arise in the mergers and acquisitions context and offers practical guidance for businesses seeking to manage their privilege exposure when sharing documents.
1. The General Rule: Voluntary Disclosure Destroys Privilege
The foundational principle is straightforward. Privilege belongs to the client, and the client may waive it, expressly or by conduct. Where a client voluntarily discloses the content of a privileged communication to a third party without restriction, they are taken to have consented to that disclosure and to have waived the privilege that attached to it. The consequence is that the document becomes disclosable to other parties in subsequent proceedings. As Lord Millett observed in B v Auckland District Law Society [2003] UKPC 38, the privilege is the client’s to waive, and a waiver, once made, cannot ordinarily be retrieved.
The courts have also developed the principle of implied waiver: where a party puts privileged material in issue — for example by relying on the fact of legal advice in support of a claim or defence — they may be taken to have impliedly waived privilege over the relevant communications even without expressly disclosing them. Cherry-picking is not permitted: a party cannot deploy privilege selectively in a way that gives a misleading picture of the legal advice received while concealing the rest. The doctrine of collateral waiver, recognised in Paragon Finance plc v Freshfields [1999] 1 WLR 1183, means that waiver in respect of part of a privileged transaction may extend to the whole.
Against this background of strict waiver rules, the exceptions described below take on considerable practical importance. Each represents a situation in which the law recognises that sharing a document does not amount to the kind of voluntary, unqualified disclosure that would ordinarily destroy privilege.
2. Agents and Intermediaries of the Lawyer or Client
The first and most straightforward exception is the agent or intermediary principle. Privilege is not destroyed merely because a communication passes through a third party who is acting as an agent or conduit for the lawyer or client, provided that person receives the communication in that capacity and the communication otherwise retains its confidential character. The classic examples are a solicitor’s clerk, a secretary, a paralegal, or a professional interpreter who assists in the communication between lawyer and client. The involvement of such persons does not break the chain of privilege because they are in substance part of the mechanism by which the legal advice is given or received, not independent recipients in their own right.
The same principle extends to non-lawyer professionals who are genuinely acting as agents of the lawyer for the purposes of the legal advice or litigation in question. Where a solicitor instructs an accountant, forensic expert, or other specialist to assist in understanding technical material so that the solicitor can properly advise the client, the communications with that expert may be encompassed within the privileged relationship. The expert is, in substance, enabling the lawyer to speak the language of the client’s problem. Care must be taken, however, to ensure that the engagement genuinely reflects this intermediary role: as discussed in the previous article in this series, English courts will not permit artificial structuring designed to confer privilege on communications that are, in substance, independent advisory work.
The limits of the agent principle should also be noted. An agent who receives privileged communications for the purpose of the legal matter does not thereby acquire an independent privilege of their own, and their communications with third parties about the content of the advice will not themselves be privileged. The principle preserves the original communication; it does not create a new and separate stream of privilege arising from the agent’s subsequent activities.
3. Joint Privilege: Co-Clients and Shared Legal Advice
Where two or more parties instruct the same solicitor jointly in relation to a common matter, they are treated as a single composite client for the purposes of privilege. The legal advice given to them jointly is privileged from the rest of the world, but it is not privileged as between themselves: each has an equal right to see the advice given in the course of the joint retainer. This is joint or co-client privilege, and it has important practical consequences.
The principle is well established. In Buttes Gas and Oil Co v Hammer (No 3) [1981] QB 223, the Court of Appeal confirmed that parties jointly instructing solicitors cannot assert privilege against each other in respect of the jointly obtained advice. More recently, the doctrine has been applied in a variety of commercial contexts, including joint ventures, co-defendants in litigation, and corporate group structures. Where a parent company and its subsidiary are jointly advised by the same solicitors on a transaction, neither can assert privilege against the other in respect of that advice, even though they are separate legal entities.
Joint privilege has significant implications for how business relationships are structured. Where two parties in a transaction engage the same solicitor to advise them jointly — as sometimes occurs with smaller transactions or where the parties have a close pre-existing relationship — the consequence is that each party will have access to all advice given in the course of that retainer. If the relationship subsequently sours and the parties find themselves in dispute, neither can use privilege to keep the jointly obtained advice from the other. Businesses should therefore be cautious about entering into joint retainers and should take separate legal advice where there is any prospect of divergent interests in the future.
It is equally important to distinguish joint privilege from the situation where a single solicitor advises two parties separately but on related matters. In that case, no joint privilege arises: each set of communications is independently privileged, and neither party has a right to see the advice given to the other.
4. Common Interest Privilege
Common interest privilege is the most commercially significant of the exceptions to the general waiver rule, and it is the one most frequently encountered in complex transactions and group litigation. The doctrine holds that where two or more parties share a sufficient common interest in legal advice — even though they are not jointly instructing the same solicitors — disclosure of that advice between them does not destroy the privilege that attaches to it. The disclosure is treated as taking place within a circle of confidentiality that mirrors the common legal interest shared by the parties. As a result, the advice remains privileged against third parties, including adverse parties in litigation.
The leading English authority is Buttes Gas and Oil Co v Hammer (No 3), and the doctrine has been developed and applied in a large body of subsequent case law. The requirement is that the parties must share a common legal interest in the subject matter of the advice at the time of disclosure — a mere commercial or factual interest will not suffice. The interest must be a legal interest, in the sense that the parties’ respective legal positions in relation to the matter are sufficiently aligned that it is consistent with the policy underpinning privilege to treat them as a single unit for the purpose of the disclosure. The courts have also required that the disclosure be made in confidence, and that the receiving party be aware that the material is privileged.
4.1 Application in Commercial Transactions
Common interest privilege is routinely invoked in the context of syndicated lending, where a lead bank shares legal advice with syndicate members; in group litigation, where claimants or defendants represented by different solicitors exchange advice on common legal issues; and in corporate transactions, where a parent company and its subsidiaries need to share advice about group-wide legal matters. It is also commonly relied upon by insurers and their insureds, who frequently share a common interest in the legal analysis of a claim, and by joint venture partners who receive advice on the legal framework governing the venture.
A particularly important application arises in the context of share and asset purchases. Where a buyer and its acquisition vehicle are separately advised but share an obvious common legal interest in the transaction, the exchange of privileged advice between them will generally not destroy privilege. Similarly, where a seller shares legal advice with its wholly-owned subsidiaries in the course of preparing for a sale, the common interest between group entities is typically sufficient to preserve privilege in the event of subsequent litigation.
4.2 Limits and Uncertainties
The doctrine of common interest privilege has limits that are not always clearly defined in the case law, and businesses should be cautious about assuming that any shared commercial relationship creates a sufficient common interest. In Property Alliance Group Ltd v Royal Bank of Scotland plc [2018] EWCA Civ 355, the Court of Appeal confirmed that the common interest must be a shared interest in litigation or in obtaining legal advice, not merely a shared interest in a transaction or commercial outcome. Parties on opposite sides of a negotiation, for example, do not share a common legal interest merely because they wish the transaction to proceed: their interests, though aligned in a commercial sense, are fundamentally adversarial in legal terms.
There is also a question, not definitively resolved in English law, of whether common interest privilege operates to create a form of ‘selective waiver’ — that is, whether a party who discloses privileged advice to one party pursuant to a common interest can still maintain privilege against the rest of the world. The better view, and the position most consistent with the existing authorities, is that disclosure under common interest privilege does not waive privilege against third parties, provided the conditions of the doctrine are genuinely met. However, if a party discloses advice to another party who does not in fact share the necessary common legal interest, the disclosure is an ordinary voluntary disclosure and privilege is destroyed entirely.
5. Disclosure in the Context of Litigation and Expert Evidence
Litigation privilege, as distinct from legal advice privilege, already has a broader scope in that it can extend to communications with third parties made for the dominant purpose of litigation. Where a client or their lawyers communicate with a third-party expert for the purpose of obtaining evidence or advice for use in actual or anticipated litigation, those communications may be protected by litigation privilege from the outset. The sharing of privileged material with an expert retained for litigation purposes is therefore not, in itself, a waiver of privilege: the expert is within the ambit of the litigation privilege from the time of their instruction.
Once an expert’s report is served and deployed in proceedings, however, the position changes significantly. A party who relies on expert evidence by serving an expert’s report in litigation is taken to waive privilege in respect of the instructions given to that expert and in respect of any earlier drafts of the report that are referred to in the final version. Civil Procedure Rule 35.10(4) makes explicit provision for this: where an expert’s report refers to instructions, those instructions are not privileged. The practical implication is that businesses and their lawyers must be thoughtful about what is said in instructions to experts, and about whether earlier drafts of reports should be preserved or discarded.
It is also important to note that the mere fact that an expert has been consulted does not necessarily mean that all communications with them are protected. Where an expert is subsequently identified as a potential witness who will be called at trial — what the rules describe as a ‘disclosable expert’ — the materials underlying their report become subject to disclosure obligations that override the ordinary operation of litigation privilege. The distinction between a consulting expert (whose involvement may be kept confidential) and a testifying expert (whose underlying materials must be disclosed) is therefore of considerable importance in litigation strategy.
6. Inadvertent Disclosure
A distinct and practically important scenario is that of inadvertent disclosure: the situation in which a privileged document is provided to an opposing party by mistake, typically in the course of electronic disclosure exercises where large volumes of documents are reviewed and produced. The question is whether inadvertent disclosure destroys privilege, and if not, what remedies are available.
Civil Procedure Rule 31.20 governs the position in English litigation. It provides that a party who has inspected a document and has a reasonable belief that it was disclosed inadvertently may use the document only with the court’s permission. The court then has a discretion to permit or prohibit further use of the document, having regard to all the circumstances. The key question is whether, applying the test in Al Fayed v Commissioner of Police of the Metropolis [2002] EWCA Civ 780, it would be unconscionable for the receiving party to use the document, taking into account the circumstances of the disclosure and any steps taken to remedy it.
In practice, the courts have shown a willingness to grant injunctions restraining use of inadvertently disclosed privileged documents where the error was genuine and was drawn to the receiving party’s attention promptly. Where, however, the receiving party has already made extensive use of the document or where the ‘inadvertence’ is questionable, the court may be less sympathetic. Importantly, a solicitor who receives a document which appears to be privileged and which was plainly sent inadvertently is under a professional obligation, pursuant to the SRA Code of Conduct, to notify the sending solicitor promptly and to refrain from using the document pending resolution of the issue. This professional obligation operates independently of any court order.
From a practical standpoint, the risk of inadvertent disclosure is best managed by rigorous document review processes, the use of technology-assisted review tools with appropriate quality-control workflows, and the inclusion of clawback provisions in the disclosure protocol agreed between parties at the start of litigation. A well-drafted clawback agreement — which provides that inadvertent disclosure of privileged material does not waive privilege and that the parties will promptly return or destroy any such material upon notification — can significantly reduce the litigation risk associated with large-scale electronic disclosure exercises.
7. Without Prejudice Communications
Without prejudice privilege — which is conceptually distinct from LPP though closely related — protects communications made in a genuine attempt to settle a dispute. Without prejudice material is not privileged in the full sense; rather, it is inadmissible in proceedings as a matter of public policy, to encourage frank settlement negotiations without fear that admissions or concessions made during those negotiations will be used against a party in subsequent litigation.
Without prejudice material can, in principle, be shared with certain third parties without destroying its protected character, provided those parties share a sufficient interest in the settlement process and the sharing is consistent with the purpose of the protection. For example, an insurer whose consent to a settlement is required under a policy condition may be shown without prejudice material by the insured, and this does not render the material admissible as against adverse parties. Similarly, without prejudice material may be shared within a corporate group where relevant entities have a shared interest in the outcome of the negotiations. The position of third-party funders is similar: disclosure of without prejudice communications to a litigation funder under a confidentiality agreement will generally not destroy their protected status, on the basis that the funder’s interest is aligned with that of the funded party in the litigation.
It should be noted, however, that without prejudice protection has its own exceptions: the courts have held that it does not protect communications that are themselves improper (such as those amounting to perjury or blackmail), and that it may not protect communications that are deployed for collateral purposes entirely unrelated to the dispute in which they were made. The interaction between LPP and without prejudice protection also requires care: a document may be both privileged and without prejudice, and these protections operate cumulatively rather than alternatively.
8. The Mergers and Acquisitions Context
Mergers, acquisitions, and other corporate transactions create one of the most common and commercially sensitive contexts in which privileged documents are shared with third parties. Sellers conduct vendor due diligence and share the results with prospective buyers. Bidders conduct their own due diligence and receive large volumes of commercially sensitive documents, including legal advice, from the target. Lenders receive legal opinions and transaction documents from borrowers. At each stage, the question of whether privilege is maintained is of direct commercial importance.
The general practice in England and Wales is for the parties to a transaction to agree on a specific disclosure protocol that addresses how privileged material is to be handled in the data room. Typically, sellers will expressly preserve privilege over their own legal advice (which will ordinarily be excluded from the data room entirely), while disclosing factual and commercial documents. Where the seller chooses to share legal advice with a prospective buyer — for example, a tax counsel’s opinion on a structural issue — this will ordinarily be done subject to a limited waiver or ‘clean team’ arrangement, under which the receiving party acknowledges the privileged nature of the document and agrees not to use it in any way adverse to the disclosing party.
The efficacy of such arrangements under English law is not entirely straightforward. The concept of ‘selective waiver’ — disclosure to one party while maintaining privilege against others — has not been definitively endorsed as a general doctrine by the English courts in the same way that the common interest principle has been. The safer approach is to rely on the common interest doctrine where it genuinely applies: where buyer and seller share a common legal interest in obtaining a particular regulatory approval or in analysing a particular legal risk, disclosure of advice about that issue may be made without destroying privilege as against third parties. Where the parties are genuinely adversarial — as buyer and seller almost always are to some degree — the common interest analysis will be more difficult to sustain, and the parties should give careful thought to the structure of any disclosure and the terms on which it is made.
The question of what happens to a target company’s privileged communications following a share purchase has also generated significant case law. The general rule, established in Hamlyn v John Houston & Co [1903] and developed in more recent authorities, is that upon a share acquisition the acquirer steps into the shoes of the target and takes with it the benefit of the target’s existing privilege. The pre-acquisition legal advice of the target company becomes the property of the new controlling shareholder. However, the position may be affected by specific contractual provisions, and the interaction between M&A transactions and privilege over advice obtained specifically in the context of the deal itself requires careful management.
9. Confidentiality Agreements and Their Limitations
A common commercial response to the risk of waiver upon disclosure is to require the recipient of privileged documents to sign a confidentiality agreement as a condition of receiving them. Such agreements are a sensible precaution and can be effective in managing the commercial consequences of disclosure — in particular, by creating contractual obligations not to misuse the information and providing a basis for injunctive relief if those obligations are breached. They do not, however, reliably preserve privilege itself.
The reason for this is fundamental: privilege is a rule of evidence, not a rule of contract. Whether a document is privileged depends on the circumstances in which it was created and disclosed, not on the terms of any subsequent agreement between the parties. A confidentiality agreement can prevent the recipient from voluntarily sharing the document with others, but it cannot prevent a court from ordering disclosure of the document in subsequent litigation if it finds that privilege has been waived. Courts do not give effect to contractual provisions that purport to limit the scope of disclosure obligations in litigation in ways that go beyond what the law of privilege itself permits.
This means that businesses should not treat a confidentiality agreement as a substitute for careful privilege analysis. The correct approach is to identify, before disclosure, whether the relevant exception to waiver — common interest privilege, joint privilege, or the agent principle — is genuinely available on the facts, and to structure the disclosure accordingly. A confidentiality agreement can then be used as an additional protective layer, and its terms should be consistent with the applicable privilege doctrine rather than purporting to create protections that the law does not recognise.
10. Practical Recommendations
Drawing together the principles described above, several practical recommendations emerge for businesses seeking to share privileged documents with third parties without inadvertently destroying privilege.
Before sharing any privileged document with a third party, consider carefully whether one of the recognised exceptions genuinely applies. Ask whether the recipient is an agent or intermediary acting within the scope of the legal matter, whether the parties share a sufficient common legal interest in the advice, whether the recipient is a co-client under a joint retainer, or whether the disclosure is being made for the purposes of litigation in which the recipient is involved. Do not assume that a commercial or transactional alignment of interests is sufficient: the common interest must be a common legal interest in the specific advice or litigation in question.
When structuring disclosures in the context of transactions, invest time in drafting a disclosure protocol that addresses the basis on which privileged material is being shared. Where relying on common interest privilege, consider commissioning a short legal memorandum setting out the analysis at the time of disclosure — this contemporaneous record can be valuable evidence of the parties’ intentions and understanding if the privileged status of the documents is subsequently challenged. Accompany the disclosure with a clear written statement that the material is being shared on a privileged and confidential basis and that the recipient is aware of the privileged nature of the documents.
In litigation, establish a robust document review process to minimise the risk of inadvertent disclosure. Agree a clawback protocol with the opposing party at the outset of disclosure, and ensure that it clearly provides that inadvertent disclosure does not constitute waiver. Act promptly if a privileged document is disclosed inadvertently: delay in asserting the claim to privilege can itself be treated as acquiescence in the disclosure. When instructing experts, give careful thought to the content of the instructions and to whether any earlier drafts of reports should be retained, bearing in mind that served expert reports carry mandatory disclosure obligations in relation to instructions received.
Finally, and perhaps most fundamentally, remember that privilege — once genuinely waived — cannot be recovered. The asymmetry between the ease of waiver and the difficulty of restoration means that conservative caution is almost always the right approach when decisions are being made about sharing legal advice with third parties. When in doubt, seek specific advice before disclosure rather than attempting to reconstruct the position after it.
Conclusion
The relationship between disclosure and waiver of privilege is more nuanced than the general rule might suggest. English law has developed a series of principled exceptions — the agent principle, joint privilege, common interest privilege, disclosure within litigation, and the treatment of inadvertent disclosure — that reflect a sophisticated attempt to balance the policy of absolute privilege against the practical realities of commercial and legal life. None of these exceptions, however, operates automatically: each requires that specific conditions be met, and the courts have been consistent in refusing to extend them beyond their proper limits.
For businesses, the key takeaway is that privilege can often be maintained when sharing documents with third parties, but only if the sharing is structured carefully and with proper regard for the applicable legal doctrine. The consequences of misjudging the position — particularly in the context of regulatory investigations or hostile litigation — can be severe and irreversible. Legal advice on privilege strategy should be sought at an early stage, before disclosure takes place rather than after the event.