The High Court has held that a bank waived privilege in all contemporaneous communications with its lawyers relating to particular transactions that were alleged to be a sham, as the bank had deployed the lawyers’ advice that the transactions were lawful in order to support its case on the merits. That was regardless of whether the particular documents relied on had already lost privilege by the time the bank had deployed them (having been provided to the SFO and used in a separate criminal trial): PCP Capital Partners LLP v Barclays Bank plc  EWHC 1393 (Comm).
This is an application of the principle of collateral waiver, or the “cherry picking rule”, which says that a party who relies on privileged material to support its claim may be required to disclose other privileged material relating to the same issue or transaction. The principle is designed to avoid the unfairness which might result if the court were denied the full picture.
The decision will be of particular interest to financial institutions, because it considered the scenario where the bank had provided the documents relied on in this case to the SFO under a limited waiver of privilege, and the documents had been relied on by the SFO in the context of criminal proceedings. Unusually for cases involving waiver, the documents had therefore already lost their privileged status by the time the bank deployed them in the present civil proceedings. The court rejected the argument that, because of this, reliance could not result in a waiver. The bank had provided the documents to the SFO knowing they might be deployed at the criminal trial. The decision leaves open whether the position might have been different if the bank had had no involvement at all in their deployment. However, this could leave financial institutions in the position where privileged documents put in the public domain through criminal or regulatory investigations, cannot be relied on in follow-on civil proceedings, for fear of collateral waiver of privilege attaching to a broader set of privileged communications.
In many previous cases the court has held that privilege will not be waived if a party relies on the “effect” of privileged material rather than its “content” – though the dividing line in practice has been far from clear. The court in this case equates the “effect” of legal advice with its conclusion or outcome, but says the distinction cannot be applied mechanistically. Instead, the question of whether privilege has been waived depends on an “acutely fact-sensitive exercise” as to whether there is reliance, the purpose of that reliance and the particular context. It’s clear that, if this approach is followed in other cases, a waiver may result even if only the conclusion of legal advice is relied on. But beyond that, the decision arguably makes it no easier to draw a line between references that will result in a waiver and those that will not.
For a more detailed discussion of the decision, please see our litigation blog post.