Commercial litigation podcast series – Episode 3: General update

In this third episode of our series of commercial litigation update podcasts, we look at developments in disclosure and privilege since our February update, as well as some developments relating to costs and funding. This episode is hosted by Anna Pertoldi, who is joined by Maura McIntosh and Ajay Malhotra.

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.

Below you can find links to our blog posts on the cases covered in this podcast:

 

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
Ajay Malhotra
Ajay Malhotra
Senior associate
+44 20 7466 7605

High Court takes expansive view of when reference to legal advice may result in broader waiver

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: PCP Capital Partners LLP v Barclays Bank Plc [2020] 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 is of particular interest for two reasons:

  1. 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.
  2. Unusually for cases involving waiver, the documents relied on in this case had already lost their privileged status by the time the bank deployed them, as they had been provided to the SFO under a limited waiver of privilege and relied on by the SFO in criminal 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.

Continue reading

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

Court of Appeal finds regulator cannot demand production of client’s privileged documents unless statute overrides privilege

In a judgment handed down this morning, the Court of Appeal has held that an audit client was not required to hand over its privileged documents in response to a notice from its auditor’s regulator requiring the production of documents in connection with an investigation into the auditor’s conduct: Sports Direct International Plc v The Financial Reporting Council [2020] EWCA Civ 177.

The court overturned the High Court’s judgment in this case, which had found that the audit client’s privilege would not be infringed by requiring production (see our blog post on the first instance decision here).

The decision is helpful in reinforcing the protection of privilege in the regulatory context, whether the privilege belongs to the person who is subject to a regulatory investigation or a client of that person. In either case, privilege will be a defence to a notice requiring production of documents under a regulator’s statutory powers, unless the statute overrides privilege either expressly or by necessary implication.

The decision also confirms that privilege cannot be claimed for non-privileged documents merely because they are attached to privileged communications. The court rejected an attempt to distinguish between a non-privileged attachment and the communication of that attachment between lawyer and client. Continue reading

Court of Appeal confirms instructions to law firm relating to escrow monies were privileged

The Court of Appeal has upheld a High Court decision which rejected an application for disclosure of documents containing a client’s instructions to its lawyers regarding the holding and transfer of escrow monies, in circumstances where the law firm had provided a confirmation to a counterparty as to the nature of its instructions:  Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd [2020] EWCA Civ 11. Our blog post on the first instance decision is here.

The decision confirms that where a client authorises a lawyer to make a statement to a third party as to the instructions he or she has received from the client, this does not, without more, give rise to a loss of confidentiality in the documents which contain or evidence the instructions. The question is whether the client has authorised the lawyer to disclose the underlying communications. This may of course be a fine line in some cases.

The Court of Appeal also held, by reference to Australian authority, that privilege will be waived if the client “puts in issue” the content of the instructions to the lawyer. This shows that privilege may be waived where a party puts the content of a privileged communication directly in issue, for example by alleging that a lawyer acted without the client’s authority in agreeing a settlement. This is in addition to the more familiar situation where a party deploys its privileged material in legal proceedings such that the principle of collateral waiver (or the “cherry picking rule”) comes into play. In practice, however, the two scenarios are likely to be closely linked: where a party puts its privileged communications directly in issue, it would seem inevitable that the communications will also be relied on in support of its case. Further, it is clear from previous authority that privilege will not be waived merely by putting in issue a matter to which a privileged communication is relevant, as opposed to putting in issue the content of the communication itself.

The Court of Appeal’s decision also helpfully illustrates the breadth of the communications that can be protected by legal advice privilege. The privilege covers the continuum of communications between solicitor and client, so long as they are directly related to the solicitor’s performance of his professional duty as legal adviser. There is no requirement to separate out communications which contain actual instructions or advice and those which do not. That remains the case despite the subsequent decision of the Court of Appeal in CAA v Jet2.com [2020] EWCA Civ 35 (on which we reported here) which found that legal advice privilege is subject to a “dominant purpose” test, ie that the dominant purpose of the relevant communication was to give or obtain legal advice in a broad sense. Continue reading

Court of Appeal finds legal advice privilege is subject to a “dominant purpose” test

In a decision handed down earlier this week, the Court of Appeal has found that legal advice privilege (LAP) is subject to a “dominant purpose” test, ie that in order to benefit from LAP it is necessary to show that the dominant purpose of a communication was to give or obtain legal advice: The Civil Aviation Authority v The Queen on the application of Jet2.com Ltd [2020] EWCA Civ 35.

That has long been the case for litigation privilege, where it is essential to show that a communication or document was prepared for the dominant purpose of contemplated litigation, but the question of whether LAP is subject to a dominant purpose test has been far more controversial. Whilst the judge at first instance had found that there was such a test, leading textbooks and obiter comments by the Court of Appeal in SFO v ENRC [2018] EWCA Civ 2006 (considered here) suggested there was no such test. The application of a dominant purpose test in connection with LAP has often been viewed as inconsistent with the broad protection afforded under the LAP head, which covers the whole continuum of communications between lawyer and client which take place in a relevant legal context, as confirmed by the House of Lords in Three Rivers No 6 [2004] UKHL 48 (and applied for example in the RBS v Property Alliance Group decision considered here).

There is however good news from the perspective of those seeking to obtain the protection of LAP for lawyer/client communications to seek or obtain legal advice. Despite finding in favour of a dominant purpose test for LAP, the Court of Appeal’s decision in this case does not significantly narrow down the protection of LAP as it was previously understood. The decision is clear that, where a lawyer is instructed in a relevant legal context, most communications between lawyer and client will be privileged. That is because, once there is a relevant legal context: (i) legal advice is widely defined, in that it is not limited to what the law is, but includes what should prudently and sensibly be done in the relevant legal context; and (ii) the protection includes communications aimed at keeping both lawyer and client informed so that advice may be sought and given as required. A particular document will not be privileged if it falls outside that legal context (and equally, part of a document will not be privileged if that part falls outside the legal context, assuming the parts can be separated out), but in general terms the protection of LAP should remain broad. Against that background, the dominant purpose test arguably does not add very much to the previous understanding of when LAP applies.

The decision also discusses the application of LAP in the context of emails sent to multiple addressees, including both lawyers and non-lawyers, particularly in an in-house setting. Unfortunately, the Court of Appeal’s discussion of this important area is not easy to follow.

  • The decision says that if the dominant purpose of the multi-addressee email is to settle the instructions to the lawyers, then (subject to the principle set out in Three Rivers No 5 – as to which see below) it will be privileged, whereas if the dominant purpose is to seek commercial views from the non-lawyer addressees, then it will not be privileged, even if a subsidiary purpose is simultaneously to obtain advice from the lawyer addressee(s).
  • That may be taken to suggest that, in the Court of Appeal’s view, the multi-addressee communication must be viewed as a whole and its overall purpose determined. However, shortly afterward, the decision states that the court’s “preferred view” is that each communication between the sender and each recipient should be considered separately, since LAP essentially attaches to communications and “it is difficult to see why the form of the request (in a single, multi-addressee email on the one hand, or in separate emails on the other) in itself should be relevant as to whether the communications to the non-lawyers should be privileged”.
  • Similarly, in the context of a meeting attended by lawyers and non-lawyers (where, the court said, the same principles should apply): “Legal advice requested and given at such a meeting would, of course, be privileged; but the mere presence of a lawyer, perhaps only on the off-chance that his or her legal input might be required, is insufficient to render the whole meeting the subject of LAP so that none of its contents (including any notes, minutes or record of the meeting) are disclosable.”

Overall, therefore, the analysis would appear to be that combining a privileged communication to a lawyer with a non-privileged communication to a non-lawyer (in a single email or in the same meeting) will not give the protection of privilege to the otherwise non-privileged communication.

The decision does contain some helpful discussion of the very narrow approach to who is the “client” for the purpose of LAP under English law, following the Court of Appeal decisions in Three Rivers No 5 and SFO v ENRC. Like the Court of Appeal in ENRC, the court said that if it had been free to do so it would have been “disinclined” to follow that approach. This adds to the weight of criticism of the Three Rivers No 5 approach at Court of Appeal level. However, any change to the law on that point will have to await a Supreme Court decision.

Intriguingly, there is some suggestion in the CAA v Jet2.com decision (including the discussion of multi-addressee emails referred to above) that the Court of Appeal was inclined to consider internal communications between non-lawyers to be privileged where they are for the dominant purpose of instructing the lawyer. It is not, however, clear precisely what scenario the court had in mind. In general, communications between non-lawyers will not be privileged under the LAP head (given that only lawyer/client communications are protected) save to the extent that they evidence the content of a privileged communication (or as the court put it in this case, if they “might realistically disclose” legal advice). Presumably the Court of Appeal’s comments need to be understood in that context. Continue reading

No collateral waiver where party relied on the effect of legal advice rather than its content

The High Court has held that a claimant did not waive privilege where, in evidence filed in response to an application to strike out its claims under Dutch law, it stated that it had received Dutch law advice and had formulated its claims on the basis of that advice: KMG International NV v Chen [2019] EWHC 3634.

Where a party relies on privileged material to support its claim, whether on an interim application or at trial, the principle of collateral waiver or the “cherry picking rule” may come into play to require the disclosure of other privileged material relating to the same issue or transaction. This principle is based on fairness, so as to avoid a party being able to put forward only part of the picture.

The present case is a reminder that the court will distinguish between reliance on the content of a privileged document and reliance on its existence or effect. Only the former rather than the latter will give rise to a collateral waiver. As the judge recognised in this case, however, the dividing line between reliance on the contents of a document and reliance on its effect is by no means clear cut. In practice, therefore, parties to litigation should be very cautious in referring to privileged materials in any evidence submitted. Continue reading

High Court finds privilege not lost despite document being referred to in open court

The High Court has recently held that privilege was not lost in a solicitor’s note of a client interview in circumstances where the note had been disclosed to the SFO under a limited waiver and then referred to in the course of argument during a criminal trial held in public: SL Claimants v Tesco plc; MLB Claimants v Tesco plc [2019] EWHC 3315 (Ch).

In this case, there was no contention that the party entitled to the privilege had deployed the privileged note in such a way as to bring the principle of collateral waiver (or the “cherry picking” rule) into play. That principle applies where a party to proceedings deploys privileged material to support its case, and may result in a requirement to disclose further privileged material to avoid giving an unfair or misleading impression.

In the present case, the only question was whether confidentiality had been lost so as to result in a loss of privilege. The judge found that confidentiality had not been lost in the note itself, despite parts of it having been quoted or summarised in open court and/or read silently by the judge.

The decision is of interest in showing that a loss of confidentiality in some of the information contained in a privileged document will not necessarily mean a loss of confidentiality (and therefore privilege) in the document itself, and as a reminder that collateral waiver has no place unless there’s deployment by the party entitled to the privilege. That will be welcome to those seeking to maintain privilege despite some part of the information contained in a privileged document having been made public.

However, the question of whether references to a document, or the information it contains, are sufficient to result in a loss of confidentiality in the document itself is described by the court as “a matter of degree”. The risk of a loss of privilege in such circumstances is therefore obvious, and caution should be exercised. That is particularly the case given the (somewhat surprising) suggestion in the judgment that confidentiality and therefore privilege may be lost due to the application of the principle of open justice, even if the references to a privileged document would not have been sufficient to amount to a loss of confidentiality without recourse to that principle. Continue reading

Court of Appeal confirms “once privileged, always privileged” unless privilege is waived – even if there is no longer anyone who can assert the privilege

The Court of Appeal has confirmed that the documents of a dissolved company remain privileged, regardless of whether there is anyone who can assert the company’s privilege: Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600.

The decision establishes that, once a privileged communication comes into existence, that privilege is absolute and remains intact unless and until it is waived by a person entitled to do so. This illustrates the strength of the principle “once privileged, always privileged”, which is based on the public policy underlying privilege – that is, the need for a client to be confident, when consulting a lawyer, that the privileged communications will never be disclosed without the client’s consent.

Although the point was not in issue in the present case, the decision may be said to bolster the protection given to documents in a litigating party’s possession which are subject to a third party’s privilege – so for example where the litigating party has received the documents under a limited waiver of privilege. The reasoning in this case would appear to suggest that the court must respect the privilege unless and until the privilege holder has waived it, regardless of whether it has come forward to assert it.

It is worth noting that the Court of Appeal states in its judgment that it is concerned only with legal advice privilege, rather than litigation privilege. The decision may therefore leave open an argument that the position is different for documents subject to litigation privilege – although the court does note that the two forms of privilege have a common purpose, though their scope is different. Continue reading

Privilege: a reminder of the dangers of cherry picking

The Employment Appeal Tribunal (EAT) has held that an employer waived privilege in redacted parts of a draft dismissal letter setting out its lawyer’s comments, as a result of the employer’s decision to rely on other privileged material relating to the claimant’s dismissal: Kasongo v Humanscale UK Ltd [2019] UKEAT 0129_19_0909.

It is well established that, where a party to proceedings deploys privileged material to support its case, the “cherry picking” rule (also known as the principle of collateral waiver) means that the waiver may extend more broadly than intended. A court or tribunal may require the relevant party to disclose further privileged material, which relates to the same issue or transaction, to avoid giving an unfair or misleading impression based on the material disclosed. In the present case, the EAT rejected the employer’s submission that the redacted comments represented a separate “transaction” from the legal advice given six days earlier and therefore were not caught by the cherry picking rule. They were all part of the same transaction, which was advising the employer on the claimant’s dismissal.

While the decision is not surprising on its facts, it acts as a reminder of the dangers of relying on privileged material – even where it appears on its face to be helpful to a party’s case – if there is related privileged material which is less helpful and may undermine the benefit obtained. Given the risks of opening up further privileged material, and the difficulty of anticipating where the line will be drawn in a given case, a decision to waive privilege should never be taken lightly. Continue reading