The High Court has granted an application by a claimant state for orders that the defendant bank disclose an accounting firm’s investigation report (and associated documents) originally withheld from disclosure on the grounds of litigation privilege, as well as to disclose certain categories of documents on a Model E or “train of enquiry” basis and make further enquiries for “known adverse documents”: State of Qatar v Banque Havilland SA and others  EWHC 2172 (Comm).
The decision does not establish new principles relating to litigation privilege, but is noteworthy as it underlines the difficulties caused by the dominant purpose test in establishing a claim for litigation privilege where documents were arguably produced for a number of purposes, including to deal with enquiries from regulators, rather than solely for the purpose of anticipated litigation.
The decision, in particular, illustrates the difficulties for financial institutions seeking to withhold or redact an investigation report (and associated documents) on the basis of litigation privilege where there is little evidence at the time the report was commissioned that: (i) adversarial proceedings were, or were regarded by the bank to be, reasonably in contemplation; and (ii) the sole or dominant purpose in commissioning the report was conducting, settling or avoiding litigation. However, the decision also appears to indicate that where an investigation report is found to be protected by privilege and has been provided to a regulator on a limited waiver basis, the courts will robustly resist any claims that privilege has been waived.
The decision also highlights that, even if disclosure has initially been ordered on a Model D basis (i.e. narrow search-based disclosure of documents which support or adversely affect any party’s case, similar to old-style standard disclosure) under CPR PD 51U (the Disclosure Pilot), the court may later order Model E disclosure (i.e. wide search-based disclosure, to include documents which may lead to a train of inquiry to result in the identification of other documents for disclosure) if appropriate in respect of specific issues.
It also provides useful guidance as to the requirement that a party to civil proceedings has an obligation to undertake reasonable and proportionate checks to enquire for known adverse documents with the relevant custodians, even if they have left the company. In particular, the court highlighted that a check to see if a custodian is aware of any known adverse documents is not satisfied simply by asking whether he or she used a personal email account to send or receive work related emails or a personal device to store work related documents. It was therefore necessary that the bank make further inquiries of certain custodians, as they may have been aware of adverse documents stored elsewhere.
We consider the court’s decision in more detail below.
In mid 2017 several Arab nations severed diplomatic ties and took a number of other measures against the State of Qatar (the claimant). Allegedly at the time of the diplomatic crisis, a presentation was prepared by a former employee of a Luxembourg bank (the Bank), which referred to certain trading and public relations strategies aimed at causing financial damage to the claimant (the Presentation). In late 2017, the contents of the Presentation were featured in an article published on 9 November 2017 on a non-profit media website under the headline: “Leaked Documents Expose Stunning Plan to Wage Financial War on Qatar – and Steal the World Cup”.
Following the publication of the Presentation, the Bank, recognising that this was a serious matter which could have significant regulatory and legal consequences, notified its regulators, the Commission de Surveillance du Secteur Financier (the CSSF) and the Financial Conduct Authority (FCA), that it was investigating the matter. The Bank also (through its Luxembourg lawyers) instructed PricewaterhouseCoopers (PwC) to carry out a forensic investigation and prepare a report (the Investigation Report), which was issued in June 2018 and shared with the CSSF and FCA under a limited waiver.
In April 2019, the claimant brought a claim against the Bank and its former employee (together, the defendants) alleging that they had conspired with several Saudi Arabian and United Arab Emirates banks to attack the Qatari economy by manipulating its financial markets.
In March 2020, at the first CMC, the court gave directions for disclosure which was to be given in accordance with the Disclosure Pilot. Subject to certain exceptions, in most cases disclosure was to be given by the defendants by reference to Model D.
In January 2021, all the parties to the proceedings gave disclosure. The claimant subsequently applied to the court seeking orders that the Bank: (i) disclose the Investigation Report, any drafts and supporting documents prepared in connection with the Investigation Report; (ii) carry out further searches and/or further reviews of documents, including a more extensive review of certain telephone recordings by reference to Model E, due to the facts that had come to light since the first CMC; and (iii) make further enquiries with each of its custodians as to whether they were aware of any known adverse documents, and if so, that it take steps to locate such documents.
High Court decision
The court found in favour of the claimant and granted the orders sought.
The key issues which are likely to be of broader interest to financial institutions are summarised below.
1) The claim to privilege in the Investigation Report
The Bank submitted that it had been entitled to withhold from production or redact the Investigation Report and associated documents on the grounds of litigation privilege, stating that they were prepared: (i) at the time when adversarial proceedings by the claimant and/or the Bank’s regulators were reasonably in contemplation; and (ii) for the sole purpose of collecting evidence and enabling legal advice to be given to the Bank in connection with those anticipated proceedings. The Bank also argued that any waiver of privilege in providing the Investigation Report to the CSSF and FCA was only a limited waiver as it had been given to them under certain professional secrecy restrictions or mutual assistance provisions, which maintained the privileged nature of the document.
In addressing the Bank’s submission, the court considered the principles applicable to litigation privilege and limited waiver.
Litigation privilege principles
As the starting point, the court noted that Three Rivers District Council v Governor and Company of the Bank of England (No 6)  UKHL 48 provided an authoritative summary of the scope of and the requirements for a claim of litigation privilege:
“communications between parties or their solicitors and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation are privileged when the following conditions are satisfied: (a) litigation must be in progress or in contemplation; (b) the communications must have been made for the sole or dominant purpose of conducting that litigation; (c) the litigation must be adversarial, not investigative or inquisitorial.”
The court then went on to highlight the scope of each of the requirements in further detail:
- Litigation must be in progress or in contemplation. Where litigation is not actually in progress at the time the relevant communications are made or procured, it was necessary to demonstrate that litigation was reasonably contemplated or anticipated. The “mere possibility” of litigation did not suffice for litigation privilege, nor was it enough that there was “a distinct possibility that sooner or later someone might make a claim”; but this did not necessarily mean that there must be a greater than 50% chance of litigation (as per United States of America v Philip Morris Inc.  EWCA Civ 330).
- Communication made for sole or dominant purpose of conducting litigation. What matters may not be the state of mind of the author of the communication but of the party that commissioned or procured it (as per Guinness Peat Properties Ltd v Fitzroy Robinson Partnership  1 WLR 1027). Although ordinarily the privileged status of a communication falls to be assessed at the time the communication is made, if what matters is the instigating party’s purpose, the best guide to his or her purpose may be to consider matters at the point in time when the relevant communication is procured, recognising, of course, that a party’s purpose may change. The court also highlighted that a communication made for the sole or dominant purpose of “conducting litigation” also embraces communications made for the dominant purpose of obtaining information or advice in order to settle or avoid litigation (as per WH Holding Limited v E20 Stadium LLP  EWCA Civ 2652).
- Litigation must be adversarial. It was important to consider whether particular types of proceedings are properly regarded as adversarial or as investigative or inquisitive. In the court’s view, what was required for litigation privilege is a contemplation of adversarial litigation, not an investigative or inquisitive procedure. However, the court commented that what may start as an investigation may develop into adversarial proceedings (as per Tesco Stores Ltd v Office of Fair Trading  CAT 6).
Limited waiver principles
The court highlighted that where documents are shown or provided to regulators on a limited waiver basis, and despite the existence of legal rights or duties on the part of the regulators to use, act on or even publish the documents pursuant to their regulatory powers, there will be no waiver of privilege where there were express confidentiality and non-waiver agreements between a bank and a regulator (as per Property Alliance Group Ltd v Royal Bank of Scotland plc  EWHC 1557 (Ch)).
However, the court noted that the absence of an express non-waiver agreement between a bank and a regulator is not necessarily fatal. The court underlined that the question of whether there has been a general or only limited waiver requires the court to have regard to all the circumstances, including what was impliedly communicated between the parties and what each must or ought reasonably to have understood (as per Citic Pacific Ltd v Secretary for Justice  2 HKLRD 701).
Application of litigation privilege and limited waiver principles to the present case
The court held that the Investigation Report was not protected by litigation privilege and must be produced for inspection. Litigation privilege also did not apply to any drafts of the Investigation Report and associated documents prepared in connection with it (to the extent that they were in the Bank’s control). Similarly any documents withheld or redacted on the basis that they referred to the Investigation Report or PwC’s engagement were also required to be produced for inspection.
The court commented that at the time the Bank instructed PwC there was little evidence that the CSSF’s position was, or was regarded by the Bank, as hostile or that adversarial regulatory proceedings were, or were regarded by the Bank to be, reasonably in contemplation. There was also little evidence of the anticipation of adversarial proceedings from the FCA. The court noted that the CSSF’s letter of 13 November 2017 asked a number of questions about the Intercept Article and the Presentation, but it was not particularly aggressive or adversarial and it made no threat of proceedings. There was also nothing in the Bank’s subsequent communications with the CSSF that suggested that the CSSF was adopting an adversarial posture towards the Bank. In the court’s view, it did not consider that the CSSF’s involvement went beyond the investigative stage, nor was there anything to suggest that it would do so. Matters could not be judged with hindsight but the position remained that no proceedings were ever commenced against, and no sanctions were ever imposed on, the Bank by the CSSF. The court also highlighted that the Bank had no contact with the FCA prior to 13 November 2017, and subsequent communications fell short of an anticipation of adversarial proceedings. There was also no evidence of any communication between the claimant and the Bank, or any intimation or fear of a claim by the claimant against the Bank, prior to 13 November 2017 when PwC was instructed.
The court said that, even if it were the case that the Bank reasonably contemplated adversarial litigation as at 13 November 2017 when PwC was instructed or at some later stage prior to June 2018, it was also not satisfied that PwC’s instruction, or the Bank’s request that PwC should produce a report, were for the dominant purpose of the anticipated litigation. In the court’s view, the two most prominent purposes behind PwC’s instruction were to: (i) find the facts, including how a copy of the Presentation had been obtained from the Bank’s files; and (ii) to satisfy the CSSF and put the Bank in a position where it could answer the CSSF’s questions.
Finally, the court said that, as it had found that the Investigation Report was not privileged, it was unnecessary to deal with the argument that privilege in the Investigation Report had been waived by the provision of the report to the CSSF and ultimately to the FCA. However, the court did underline that it would have required a good deal of persuading that the circumstances in which the document was provided to the regulators meant that privilege in the report had been waived generally.
2) Model E Disclosure
The claimant submitted that, whilst Model D may have been appropriate as at the first CMC, in the events that had happened since, a Model E review was now necessary and appropriate.
The court held that Model E disclosure was appropriate on a limited basis.
The court commented that it had not been satisfied at the first CMC that the evidence justified the application to the defendants’ disclosure of Model E to any of the issues for disclosure. Model E was intended to be used only in exceptional cases.
However, in light of the further material now available and what it revealed, it was appropriate to revisit this issue. In the court’s view, a Model E review limited to this particular category of documents (i.e. the telephone recordings) and to a particular issue for disclosure was reasonable and proportionate, and also necessary for the just disposal of the proceedings.
3) Adverse documents
The Bank submitted that the checks it had done or had agreed to do in relation to adverse documents were sufficient. It would contact disclosure custodians with a view to determining whether they used personal email accounts to send or receive work related communications, and whether they used personal devices to store work related documents.
The Disclosure Pilot principles
In its analysis of this issue, the court highlighted that the key principles from the Disclosure Pilot and related authorities to note in relation to known adverse documents were as follows:
- All forms of extended disclosure include known adverse documents (as per paragraph 8.3 of the Disclosure Pilot).
- Known adverse documents are defined as “documents (other than privileged documents) that a party is actually aware (without undertaking any further search for documents than it has already undertaken or caused to be undertaken) both (a) are or were previously within its control and (b) are adverse” (as per paragraph 2.8 of the Disclosure Pilot).
- The circumstances in which a corporate entity, such as the Bank, is regarded as aware of known adverse documents will be when: “any person with accountability or responsibility within the company or organisation for the events or the circumstances which are the subject of the case, or for the conduct of the proceedings, is aware. For this purpose it is also necessary to take reasonable steps to check the position with any person who has had such accountability or responsibility but who has since left the company or organisation” (as per paragraph 2.9 of the Disclosure Pilot).
- The Disclosure Pilot provisions impose an obligation upon a party to undertake reasonable and proportionate checks to see if it has, or has had, known adverse documents, and if so to undertake reasonable and proportionate steps to locate them. These include checks with persons with accountability or responsibility for relevant events even if they have left the company (as per Castle Water Limited v Thames Water Utilities Limited  EWHC 1374 (TCC)).
Application of Disclosure Pilot principles to the present case
The court ordered the Bank to make further enquiries of its custodians about the existence of known adverse documents. The court commented that if an individual is a person with accountability or responsibility within the meaning of paragraph 2.9 of the Disclosure Pilot, then a check to see if he or she is aware of known adverse documents is not satisfied simply by asking whether he or she used a personal email account to send or receive work related emails or a personal device to store work related documents. In the court’s view, the individual custodians may have still been aware of adverse documents stored elsewhere.