Article published – Discussing settlement options: minding the gap between litigation privilege and the without prejudice rule

The recent Court of Appeal decision in WH Holding Ltd v E20 Stadium LLP [2018] EWCA Civ 2652 (outlined here) found that litigation privilege applies only to documents created for the dominant purpose of obtaining advice or information/evidence in relation to litigation, and not the conduct of litigation more broadly. As a result, the privilege did not apply to emails between a company’s Board members which had been prepared to discuss a commercial proposal for the settlement of a dispute.

The decision causes real practical difficulties for commercial parties, exposing an awkward gap in the protection afforded to documents prepared for the purpose of settling a dispute.

Maura McIntosh has published a post on Practical Law’s Dispute Resolution blog which considers the decision and its implications. Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage).

Court of Appeal finds litigation privilege is restricted to the purpose of obtaining advice or information, not the conduct of litigation more broadly

The Court of Appeal has held that emails between a company’s Board members which had been prepared to discuss a commercial proposal for the settlement of a dispute were not covered by litigation privilege: WH Holding Ltd v E20 Stadium LLP [2018] EWCA Civ 2652.

The court found that, to fall within litigation privilege, a communication must be prepared for the dominant purpose of obtaining advice or evidence in relation to the conduct of litigation. It is not sufficient that it is for the dominant purpose of conducting litigation, in a broader sense. This is a point that had previously been unclear in the case law.

The court did not consider that the recent high profile decision in SFO v ENRC [2018] EWCA Civ 2006 (considered here) extended the scope of litigation privilege beyond the recognised categories of advice or evidence, though the decision confirmed that the conduct of litigation includes its avoidance or compromise. The court in the present case added (perhaps tellingly):

“We do not consider that there is any justification for extending the scope of litigation privilege in that respect. It has always been recognised that privilege is an inroad into the principle that a court should be able to decide disputes with the aid of all relevant material.”

The decision is likely to lead to difficulties in the application of litigation privilege in practice, as there may be many communications or documents which are for the purpose of conducting litigation (including avoiding or settling litigation) but which do not fall within the category of obtaining advice or evidence. The court did accept, however, that litigation privilege will apply if advice or information obtained for the conduct of litigation cannot be disentangled from a document, or it would otherwise reveal the nature of such advice or information.

The decision may also suggest that litigation privilege is restricted to communications between parties or their lawyers and third parties, rather than applying to internal communications within a party. This part of the decision is not however clear, and it is difficult to see why litigation privilege should be restricted in this regard, so long as a communication or document is prepared for the required purpose. It may be that the Court of Appeal is merely dismissing an argument that litigation privilege applies to all internal corporate communications relating to litigation even if they fall outside the required purpose.

Finally, the decision also suggests that the courts may adopt a more liberal approach to the question of when they should inspect documents to ascertain whether they are privileged, when a claim to privilege is challenged. Continue reading

Litigation privilege: High Court decision shows continued need to beware of dual purpose

The High Court has found that correspondence with experts was not subject to litigation privilege as it was prepared for two purposes, only one of which was for contemplated litigation, and the claimant had not established that the litigation purpose was dominant: Sotheby’s v Mark Weiss Ltd [2018] EWHC 3179 (Comm).

The other purpose, the court found, was to take a commercial decision as to whether to rescind the sale of a painting. Although a decision to rescind would likely, perhaps inevitably, lead to litigation, the court found that the two purposes could not be regarded as one and the same. This would appear to contrast with cases such as Highgrade Traders [1984] BCLC 151, in which the Court of Appeal accepted that the purpose of considering whether an insurance claim could be resisted (in a case of suspected arson) was a litigation purpose, and what might appear to be a separate purpose (namely, to ascertain the cause of the fire) was part and parcel of that purpose.

However, the court in the present case rejected the attempt to draw an analogy with Highgrade, or with the recent Court of Appeal decision in SFO v ENRC Ltd [2018] EWCA Civ 2006, considered here, which had appeared to return to a more benevolent approach to the question of whether there is a dual purpose, in the context of litigation privilege, following the very strict approach taken at first instance in that case.

The present decision emphasises the fact-sensitive nature of the assessment of dominant purpose, and that the court’s analysis in one case cannot necessarily be applied in different circumstances. This underlines the difficulty for commercial parties in assessing, in any case where a document or communication may be seen as having a dual purpose, whether or not it will be protected by litigation privilege. Continue reading

Article published – ENRC privilege decision: welcome news but difficulties remain

The Court of Appeal’s recent decision in The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2018] EWCA Civ 2006 (ENRC) has, helpfully, departed from the High Court’s overly strict approach to questions of litigation privilege. However, it has left intact the problematic approach to the question of who is the “client” for the purposes of legal advice privilege, derived from the Court of Appeal’s notorious 2003 decision in Three Rivers No 5, as interpreted in more recent case law. It is now clear, therefore, that any change to the law in this area will be a matter for the Supreme Court.

Julian Copeman, Anna Pertoldi and Maura McIntosh have published an article in PLC Magazine which considers the ENRC decision and its implications. Click here for a copy of the article, which first appeared in the October 2018 issue of PLC Magazine: http://uk.practicallaw.com/resources/uk-publications/plc-magazine.

Court of Appeal decision in ENRC: orthodoxy restored on litigation privilege, but narrow interpretation of “client” remains for now

The Court of Appeal has today handed down its eagerly awaited decision in the ENRC appeal: The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2018] EWCA Civ 2006. At first instance, the High Court took a restrictive approach to both litigation privilege and legal advice privilege (see our summary of the decision here). The Court of Appeal has allowed the appeal on the question of litigation privilege but has, with apparent reluctance, dismissed the appeal on legal advice privilege, concluding it is a matter for the Supreme Court.

In relation to litigation privilege, the Court of Appeal has, helpfully, disagreed with the High Court’s overly strict approach to whether documents have been prepared for the dominant purpose of litigation. The High Court found that, where ENRC’s purpose was to investigate allegations made by a whistleblower, this was not sufficient to meet the dominant purpose test. The Court of Appeal disagreed, finding that this was all part and parcel of preventing or defending litigation. It also disagreed with the High Court’s problematic view that documents prepared in order to avoid contemplated litigation were not covered by litigation privilege. In the Court of Appeal’s judgment, the purpose of avoiding or settling proceedings is covered by litigation privilege, just as the purpose of resisting or defending them.

In relation to legal advice privilege, the Court of Appeal considered itself bound by Three Rivers No 5 to find that the privilege is limited to communications between a lawyer and those tasked with seeking and receiving advice on behalf of the client company. In other words, it agreed with the judge’s interpretation of the effect of Three Rivers No 5 [2003] QB 1556, as also arrived at by Hildyard J in the The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch) (considered here).

However, the court said that, if it had been open to it to depart from Three Rivers No 5, it would have been in favour of doing so. This was in part because, in the Court of Appeal’s view, the decision puts large corporations at a disadvantage, when it comes to legal advice privilege, compared to individuals and small corporations. Those tasked with seeking legal advice on behalf of a large corporation are less likely to have the relevant factual information, and will therefore have to rely on employees whose communications with the lawyers will not, on the reasoning in Three Rivers No 5, be covered by privilege (unless litigation privilege applies). The Court of Appeal also accepted that English law is out of step with international common law on this issue, which it considered undesirable. However, it said the matter would have to be considered again by the Supreme Court in this or an appropriate future case.

Julian Copeman, Anna Pertoldi and Maura McIntosh consider the decision further below. Continue reading

Two recent decisions consider application of principle of limited waiver of privilege

In two recent decisions, the High Court has considered the extent to which a party can provide privileged documents to a third party for a particular purpose without resulting in a wider waiver of privilege. The decisions illustrate the importance, in these circumstances, of making clear any intended limits on the use of the privileged material.

In FM Capital Partners Ltd v Marino & ors [2017] EWHC 3700 (Comm) the court found that a company had waived litigation privilege in an investigation report because, before the proceedings had commenced, it had provided a copy of the report to one of the defendants (its former CEO) for the purposes of a disciplinary hearing against him. The company had not imposed an express restriction on the use of the report. In the absence of such a restriction, and given that the report was prepared for the purposes of potential litigation including litigation against the defendant, the natural inference was that the defendant would be free to use the report for that litigation.

In Belhaj v Director of Public Prosecutions [2018] EWHC 513 (Admin), in contrast, the government had shared its privileged advice with the police, the Crown Prosecution Service (CPS) and Director for Public Prosecutions (DPP) subject to a clear express limitation on its use. In those circumstances, the court found privilege had not been waived for the purposes of a subsequent judicial review application. It rejected the claimants’ argument that the judicial review was so closely linked to the review for which the advice had been shared that there was an inferred waiver for the purposes of the judicial review. The contrary conclusion would mean that, in almost any case where one government department waived privilege to assist another, privilege might be lost for the purpose of a subsequent judicial review, and this would be strongly against the public interest.

The FM Capital decision also contains interesting comments on the dominant purpose test for litigation privilege where a company is facing serious potential claims against it as well as dealing with disciplinary proceedings against an employee. Although each case will turn on its facts, the decision suggests that a court might readily accept that the company’s greater concern will be preparing for the litigation, rather than disciplining its own employee, potentially making it easier to establish a claim for litigation privilege in these circumstances. Continue reading

Commercial Court finds non-party not entitled to assert litigation privilege

The Commercial Court has held that a non-party who controlled litigation was not entitled to assert litigation privilege against the party it was controlling and who was the party to the proceedings: Minera Las Bambas SA v Glencore Queensland Ltd [2018] EWHC 286 (Comm).

The decision is a reminder that litigation privilege belongs to the party to the litigation. A third party who controls litigation but is not itself party to the litigation may have other rights in respect of the material covered by litigation privilege in the hands of the litigating party, such as joint or common interest privilege. However, these rights will not allow the third party to assert privilege as against the litigating party.

The decision also contains a puzzling suggestion that the claim to privilege failed for the additional reason that the documents were prepared for use in other proceedings (in this case Peruvian proceedings) rather than the current proceedings in which the right to privilege was asserted. It is not clear, however, why that should be relevant: litigation privilege will ordinarily apply where documents have been prepared for the dominant purpose of any litigation that was in reasonable contemplation at the relevant time, whether or not such litigation ultimately ensued. As it’s put in Charles Hollander’s Documentary Evidence, litigation privilege “can be claimed in this jurisdiction in relation to litigation in foreign courts, even if the foreign court knows no such privilege”.

We understand that the Court of Appeal has refused permission to appeal against the decision. Continue reading

High Court decision supports orthodox view of litigation privilege

The High Court has found that documents prepared by the defendant in the course of an investigation into allegations by HMRC were protected by litigation privilege: Bilta (UK) Ltd (in liquidation) & ors v Royal Bank of Scotland Plc & anor [2017] EWHC 3535 (Ch).

The decision arguably departs from the reasoning in the controversial decision in SFO v ENRC [2017] EWHC 1017 (considered here), where the court took a very strict approach to the question of whether documents prepared in the course of an investigation were for the dominant purpose of litigation. The court in ENRC found that the primary purpose was to find out if there was any truth in allegations made by a whistleblower and (if there was) to decide what to do about it, and took the view that this was not sufficient to meet the dominant purpose test. It also drew a rather problematic distinction between documents prepared in order to take legal advice in relation to litigation, which would be privileged, and those aimed at trying to avoid contemplated litigation, which it said were not. The ENRC decision is subject to an appeal which is due to be heard by the Court of Appeal in July this year.

In the present case, Vos LJ expressed the view that there was “something of a tension” between ENRC and the Court of Appeal’s decision in Re Highgrade Traders [1984] BCLC 151 (CA), in which the court was prepared to find that discovering the truth and enabling advice to be given in relation to litigation both formed part of a single overarching purpose. Similarly, on the facts of the present case, Vos LJ found that the defendant’s subsidiary purpose of avoiding litigation if possible could be “subsumed into” the dominant purpose of preparing for litigation which it considered almost inevitable. He said it was necessary to take a “realistic, indeed commercial, view of the facts”, which supported the defendant’s case.

Vos LJ emphasised that determining the dominant purpose is a question of fact in each case, and so conclusions reached in one case cannot simply be applied across to another context. However, the present decision is encouraging in that it appears to return to what may be considered a more orthodox view of litigation privilege than that underlying the decision in ENRC. Until the Court of Appeal has considered these issues in ENRC, however, parties may wish to take a cautious view.

Continue reading

High Court decision takes restrictive approach to both litigation privilege and legal advice privilege

A High Court decision earlier this week has applied a strict approach to litigation privilege in the context of criminal proceedings, finding that litigation was not in reasonable contemplation (so the first limb of the test for litigation privilege was not met) even though a criminal investigation by the SFO was reasonably contemplated: SFO v Eurasian Natural Resources Corporation Ltd [2017] EWHC 1017 (QB). 

The decision suggests it is likely to be easier to establish that litigation is in reasonable contemplation in the context of civil proceedings than criminal proceedings. However, the decision contains unhelpful comments regarding the second limb of the test for litigation privilege – whether a document has been prepared for the dominant purpose of litigation – which would appear to apply equally to civil proceedings. The decision also endorses a restrictive view of who is the "client" for legal advice privilege, as recently applied by the High Court in the RBS Rights Issue Litigation (see our blog post on that decision here):

Key points of interest arising from the present decision include:

  • The court found that the test of whether litigation is in reasonable contemplation is not met just because a criminal investigation is contemplated. Only a prosecution, not an investigation, amounts to "litigation" for these purposes, and the contemplation of a criminal investigation does not necessarily equate to the contemplation of a prosecution. Prosecution only becomes a real prospect once it is discovered there is some truth in the allegations, or at least some material to support them.
  • The court commented that the situation is different for civil proceedings. There may be reasonable grounds to contemplate that litigation will be commenced by (say) a commercial counterparty even where there is no proper foundation for a claim. In contrast, criminal proceedings cannot be brought unless the prosecutor is satisfied that there is a sufficient evidential basis for prosecution. It is therefore likely to be easier to establish the first limb of the test for litigation privilege in the civil context.
  • The decision takes a strict approach to whether documents have been prepared for the dominant purpose of litigation, finding that even if litigation was in reasonable contemplation at the time the documents in question in this case were prepared, they were not prepared for the purpose of that litigation. The court found that the primary purpose here was to find out if there was any truth in allegations made by a whistleblower and (if there was) to decide what to do about it, and this was not sufficient.
  • Even if the purpose was to obtain advice in relation to a criminal investigation and minimise the risk of it happening, the court said this would not mean the documents were covered by litigation privilege. The court accepted that the purpose of conducting litigation includes the settlement of litigation once it is in train. However, it rejected the submission that litigation privilege extends to documents created to obtain legal advice as to how best to avoid contemplated litigation, even if that entailed seeking to settle the dispute before proceedings were issued. This seems a fine distinction, and an arbitrary one, which may give rise to significant problems in practice.
  • The court rejected an alternative claim for legal advice privilege over certain of the documents, which comprised lawyers' notes of interviews with their clients' employees, on the basis that there was no evidence that the interviewees were authorised to seek and receive legal advice on behalf of the client company. The decision strongly endorses the narrow approach to the question of who is the "client" for the purposes of legal advice privilege (as applied in the RBS case) which excludes those who are authorised only to communicate relevant facts to the lawyers, rather than seeking and obtaining advice on the company's behalf. The court comments that the decision in RBS is "plainly right" and there is no justification for departing from it. It does not however endorse the judge's obiter suggestion in RBS that the "client" may be restricted even further to comprise only those who are the "directing mind and will" of the organisation.
  • The court also rejected an argument that the lawyers' notes were privileged on the basis that they were lawyers' working papers, endorsing the decision in RBS that lawyers' working papers are privileged only if they would betray the trend of the legal advice.
  • The court accepted that a lawyer's summary of the facts, including information in the public domain, will be privileged if it is part of the continuum of communications between solicitor and client for the purpose of giving or receiving legal advice. This is consistent with the High Court's decision in PAG v RBS [2015] EWHC 3187 (Ch) (considered here).
  • The decision suggests that privilege is unlikely to attach to communications with individuals who are qualified lawyers but are not employed in a legal role, even if they are in fact giving legal advice. Here privilege was denied to advice given by ENRC's Head of Mergers and Acquisitions, even though he was a qualified lawyer, had previously been ENRC's General Counsel, and subsequently reverted to that role.   

According to press reports, ENRC has said it will appeal against the decision. James Norris-Jones, Rod Fletcher and Maura McIntosh consider the decision further below.

Continue reading

Article published on common interest privilege

Common interest privilege allows communications or documents that are already privileged to be shared with others who have a common interest in their subject matter without losing privilege.

The practical significance of this concept is greatly reduced as a result of the principle of limited waiver under English law, which allows privileged material to be shared confidentially with selected third parties without losing privilege as against the rest of the world – whether or not there is a common interest. Even so, the concept of common interest privilege is often referred to, sometimes in circumstances where it is inapt or unnecessary, and so causes a great deal of confusion.

Maura McIntosh has published a post on Practical Law’s Dispute Resolution blog entitled “Common interest privilege: common misconceptions” which aims to dispel some common myths about common interest privilege. Click here to download a copy of the post (or here for the Practical Law Dispute Resolution blog homepage).