High Court finds privilege not waived in expert report referred to in context of security for costs application

In a recent decision, the High Court found that the claimant’s reference to an expert’s preliminary report in the context of a security for costs application had not amounted to a collateral waiver of privilege, so the report itself did not have to be disclosed: Two Renewables Ltd v Reeves [2020] EWHC 789 (Ch).

It is well-established that, where a party relies on privileged material to support its claim, it may be required to disclose other privileged material relating to the same issue or transaction. This is due to the principle of collateral waiver, or the “cherry picking rule”, which is designed to avoid the unfairness which might result if parties were permitted to rely on privileged material out of context.

In the present case, the court found that the claimant had relied only on the effect of the report, rather than its content – a distinction which has been applied in other cases, but which is often a very fine line. The decision also suggests that a collateral waiver may be less likely to result where a privileged document is deployed only for a limited purpose which does not go to the merits of the claim (here, to rebut a suggestion that the claimant’s liquidators could not possibly believe the stated quantum of the claim).

In practice, however, any decision to refer to privileged material in support of a party’s position – whether an interlocutory stage or at trial – should be considered very carefully. It may be difficult to predict in any given circumstances whether a collateral waiver will result or how far it will extend. Continue reading

Article published – Dealing with the COVID-19 pandemic: are your emails privileged?

The COVID-19 pandemic has brought with it huge challenges for businesses. While the focus has been on keeping business going, rather than the prospect of litigation in the future over decisions taken now, it seems inevitable that litigation will follow such a major disruption of the global economy.

Given that documents created now will be highly relevant in any such litigation, Anna Pertoldi has published a post on Practical Law’s Dispute Resolution blog which considers what will and will not need to be disclosed, and in particular, what documents will be privileged. Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage).

Our new Commercial Litigation Podcast Series

We have today launched our new series of commercial litigation update podcasts, looking at developments in civil procedure that will be of interest to in-house lawyers and others who deal with litigation in the English courts.

In this first episode we look at recent developments in disclosure and privilege. This episode is hosted by Anna Pertoldi, who is joined by Maura McIntosh and Chris Cox.

Our podcast is available on iTunes, Spotify and SoundCloud and can be accessed on all devices. A new episode will be released every couple of months. You can subscribe and be notified of all future episodes.

You can find links to our blog posts on the cases covered in this podcast below:

And here is a link to our most recent webinar on the disclosure pilot in the Business and Property Courts: The Disclosure Pilot – 10 months on: how is PD51U working in practice?

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
Christopher Cox
Christopher Cox
Senior associate
+44 20 7466 2203

Court of Appeal rejects claim to without prejudice or litigation privilege in communications incorporated into settlement agreement

The Court of Appeal has held that the claimant was not entitled to withhold from inspection communications that had been incorporated into a settlement agreement with one of five defendants. That was despite the fact that, at the time they were made, those communications had been protected by the without prejudice rule, and potentially also litigation privilege (on the basis that the claimant’s dominant purpose in conducting those communications was to collect evidence against the other defendants): BGC Brokers LP v Tradition (UK) Ltd [2019] EWCA Civ 1937.

The decision is unsurprising in finding that communications incorporated into a settlement agreement thereby lost their without prejudice status. It has long been established that, where a settlement agreement is concluded by the acceptance of a without prejudice offer, the offer ceases to be protected by the without prejudice rule since it forms part of the contract. It seems logical that the same should be true of without prejudice communications incorporated into a settlement agreement.

It is also unsurprising that any litigation privilege in those communications should have been lost as a result of their being incorporated into the settlement agreement. The Court of Appeal’s reasoning on this issue may, however, be seen as more novel. The court accepts that the dominant purpose of the original communications may have been to collect evidence, but says that was not the purpose of incorporating them into the settlement agreement, and therefore litigation privilege does not apply. Ordinarily, though, the rule is “once privileged, always privileged” unless privilege is waived or confidentiality is lost – at least insofar as legal advice privilege is concerned (see this post). The present decision may suggest that the same is not true for litigation privilege. As a practical matter, therefore, parties should exercise caution in using material that is subject to litigation privilege for any purpose apart from its original litigation purpose. Continue reading

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