Privilege traditionally belongs to the more obscure as pects of English procedural law.

But two recent decisions show how the law on privilege can give rise to difficult issues in both international commercial litigation and large scale corporate finance and banking transactions.

IBM Corp v Phoenix International (Computers) Ltd [1995] 1 All ER 413, examines the circumstances in which a party who has inadvertently disclosed privileged material to an opponent can restrain that opponent from making use of that material.

Nederlandse Reassurantie Groep Holding NV (NRG) v Bacon & Woodrow is a good example of an occasion -- and its consequences -- when legal advice has to be disclosed to non-legal professionals who are advising the same client on the same transaction.

IBM v Phoenix was an intellectual property action which gave rise to large-scale parallel litigation in the USA and England.

Discovery in the English action had to be completed under considerable pressure.

The plaintiffs' review of the defendants' discovery found a number of documents which had been disclosed in error, including lawyers' fee notes.

When Phoenix learned of this it made a late claim for privilege and moved for an injunction restraining IBM from using the information contained in the documents concerned.IBM argued that only a most superficial attempt had been made by the defendants to remove documents on the grounds of irrelevance or privilege, suggesting that the defendants had decided not to undertake any detailed review of the files offered for inspection.

Aldous J decided in favour of Phoenix.

He felt that, absent fraud, 'the general rule is that no injunction will be granted after inspection, unless (a) the document is privileged and (b) disclosure has occurred as a result of an obvious mistake'.He held that: 'The reasonable solicitor, when considering discovery of a large volume of documents, who concluded on inspection that there had been no proper review of such documents, would not be surprised to find mistakes such as disclosure of irrelevant and privileged documents.' He granted the injunction sought and noted that he could see no reason why the defendants might have waived privilege in their legal bills.The judge's decision suggests there is a general rule that wherever disclosure of a privileged document has occurred as a result of an obvious mistake an injunction of the type Phoenix sought will normally be granted.

It appears that the more extensive and careless the discovery exercise the easier it would be to prove that an obvious mistake has occurred and to obtain an injunction.

However, solicitors should treat the result in IBM v Phoenix with caution.

Webster v Chapman is one example where no such leniency was exercised, suggesting that an appeal by IBM which was abandoned on settlement would have been far from hopeless.In the case of NRG v Bacon & Woodrow [1995] 1 All ER 976, a decision by Colman J arose during the course of an action claiming negligence brought by NRG, a Dutch insurance company, against the actuarial advisers, accountants and bankers who had been part of a team, including lawyers, assembled to advise NRG on the acquisition of an insurance group.

NRG disclosed the invoices which the English solicitors had rendered on the original transaction which, in contrast to the IBM case, were treated as unprivileged material.

The accountants contended that since the solicitors were also providing advice on the commercial advisability of the original transaction, as the invoices revealed, that advice was not privileged.

Additionally, they sought the production of all advice g iven to NRG on the grounds that it was not confidential as between NRG and its solicitors.

The reason given was that since some of it had been supplied to the accountants as members of the team advising NRG on the acquisition, it lacked the confidentiality which is a pre-requisite to any claim for privilege.Colman J first examined whether communications including commercial advice qualified for legal professional privilege.

Balabel v Air India [1988] 1 Ch 317 had confirmed that 'legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context'.

Following this judgment Colman J held that these communications were privileged.

Colman J accepted that where solicitors provide legal advice to a client on a transaction involving other professionals their duty of confidentiality is qualified, thus permitting the disclosure of such advice without apparently seeking the clients' express consent to other advisers where the solicitors consider it necessary to discharge their duties.

When this happens, since the advice is no longer confidential to the solicitor and client, and since confidentiality is a pre-requisite to a claim to privilege, such advice cannot be privileged as against the other advisers.

This does not justify the further submission that all advice on the acquisition communicated between the plaintiffs and their legal advisers was not privileged as against the defendants, as members of the team working on the transaction.

Colman J applied an objective test: where documents had been disclosed to the non-legal advisers, they could not be said to be confidential, and so were not privileged as regards them.

Where documents had not been disclosed, they continued to be confidential and so were privileged as regards the non-legal advisers.The decision suggests that in future solicitors should ensure that their advice is not disclosed to their co-professionals without analysing whether they need to see it, to avoid the implication that they were being given access to all legal advice.

Colman J's ruling may also affect the position where auditors ask their clients' lawyers for their opinion on the merits of litigation for the purpose of the statutory audit.

This is a further instance where the lawyer provides information to accountants advising the same client to enable them to do their job.

Traditionally, communications between accountants and their clients have not benefited from the protection given to communications between lawyers and their clients.

Does disclosure mean that privilege in relation to some or all of that advice has been waived, so that an outsider can have access to it in litigation against the client or auditor? Reliance on the confidentiality test applied by Colman J in NRG v Bacon & Woodrow would, however, suggest that showing legal advice to any non-legal members of a team of professional advisers acting for one client would not act as a general waiver of privilege, prejudicing a later claim that the disclosed document is privileged as regards a third party outside the team.

But it should be remembered that when the privileged document is read out in open court the privilege will be lost forever.