Focus on disclosure and legal professional privilege

Justin Clayden and David Hadfield discuss recent decisions.

Judging by the number of reported cases over the last 24 months, the issue of privilege from disclosure is alive and well, with two Court of Appeal decisions in particular exciting attention.[1] Truth be told, neither decision really resulted in any new law but the second of the decisions, WH Holding Ltd v E20 Holding LLP, does have potentially considerable ramifications of which you need to be aware.

The rule that permits a party to litigation to refuse disclosure of documents on the grounds of legal professional privilege (‘LPP’) is an exception to the requirement of our legal system that a party must disclose all documents in its possession that (to use a shorthand) relate to the issues in the case; including those documents damaging to its own case or helpful to the other side’s case. LPP itself has two sub-divisions:

  • Legal advice privilege – This protects (written or oral) confidential communications between a lawyer and a client for the purpose of giving or receiving legal advice, and it depends on the involvement of a lawyer.[2] Communications repeating the advice or the gist of it can also be covered.[i]
  • Litigation privilege – which protects communications between parties or their solicitors and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation.

Importantly, however, litigation privilege – which is what the two decisions referred to were about – only applies 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.[3] And most disputes on privilege centre on whether (a) and/or (b) applies in a particular case, particularly (b).

When the decision of the Court of Appeal in Director of the Serious Fraud Office v Eurasian Natural Resources Corp Ltd came out it was greeted in some quarters as if it announced some startling new legal proposition; it did not. What, however, it did make clear is that litigation privilege also applies to legal advice given so as to head off, avoid, or even settle reasonably contemplated proceedings, as much as to advice given for the purpose of resisting or defending such contemplated proceedings. But that was really no more than re-stating a proposition decided in the 19th century.

Much more interesting is WH Holdings, and not purely because it involved a premier league club. This case was about a dispute between West Ham United and the owners of the Olympic Stadium, now used by WHU, over the number of seats in the stadium WHU were allowed to use. The disclosure/inspection dispute centred in a small number of emails, some internal to E20 and some from E20 to stakeholders, the subject of which was discussions of proposals for a commercial settlement of the dispute with WHU. E20’s problem was that the documents apparently did not refer to or reveal the nature of the legal advice E20 might at that stage have received on the dispute. They solely concerned commercial discussions within the organisation.

The Court of Appeal held without any apparent hesitation that these documents were not covered by litigation privilege and, giving important guidance for both lawyers and their clients, concluded as follows:

  • Litigation privilege is engaged when litigation is in reasonable contemplation.
  • Once litigation privilege is engaged it covers communications between parties or their solicitors and third parties for the purpose of obtaining information or advice in connection with the conduct of the litigation, provided it is for the sole or dominant purpose of the conduct of the litigation.
  • Conducting the litigation includes deciding whether to litigate and also includes whether to settle the dispute giving rise to the litigation.
  • Documents in which such information or advice cannot be disentangled or which would otherwise reveal such information or advice are covered by the privilege.
  • There is no separate head of privilege which covers internal communications falling outside the ambit of litigation privilege as described above.

In an aside, the court also made it clear that internal corporate internal communications are not covered by some sort of blanket privilege even if they discuss litigation, unless they also fall within the requirements for litigation privilege.

What needs to be understood is that in order to attract litigation privilege it is not enough that it relates to a dispute that is or may become litigious, it must also be for the sole or dominant purpose of conducting that litigation, and a discussion solely about commercial considerations even if they relate to such a dispute do not fall within that definition – or so the court decided.

The implications of the decision are clear. Essentially, if internal communications about a commercial settlement are in the context of the legal advice received about the dispute, then privilege can be claimed but we suggest that the context must be genuine. Simply appending a note about advice received to what is essentially a commercial discussion is probably not sufficient.

The Commercial Court recently considered the status of documents generated by discussions between a party and consultant architects relating to a future claim against a developer in Skymist Holdings Ltd v Grandlane Developments Ltd [4] and concluded that the dominant purpose test was satisfied and that these documents were privileged.

As if the cases that determine whether LPP can be invoked are not tricky enough, a deliberate waiver of privilege and disclosure (of what could otherwise be a privileged document) can give rise to its own problems. A recent case in the Employment Appeal Tribunal[5] concerned the deliberate disclosure of documents containing legal advice (for which normally privilege might be claimed). Privilege was claimed in relation to a third document (a draft solicitor’s letter with redacted comments). The Tribunal concluded that the letter was part of the same transaction along with the other voluntarily disclosed documents and ordered its complete disclosure.

The cases underline that great care must be taken in preparation of internal documents relating to a (potential) dispute, what generally is committed to writing, and who is involved in discussions.

Things to remember

  • Legal advice privilege – the term ‘client’ is narrowly construed and applies only to the particular individuals in an organization who are authorised to seek and receive advice. So communications between the lawyer and/or the authorised individuals and individuals outside that group may not be privileged;
  • ‘Confidentiality’ does not mean ‘privileged’ unless the confidential material otherwise falls within the definition of a privileged communication. So ‘confidential’ communications between an underwriter and his boss about a problematic risk are unlikely to be privileged per se;
  • Documents you might produce because of, for example, a regulatory issue or because of a customer complaint are unlikely to be privileged because the dominant purpose will not be connected to litigation;
  • Loss adjusters’ reports unless solely concerned with and prepared in connection with litigation (as a dominant purpose) or in contemplation of litigation at the behest of an insurer’s lawyers will not be privileged. The same considerations apply to reports of forensic investigators;
  • To maintain a document’s privileged character you must maintain its confidentiality, so privileged material should not be circulated too widely. This is a particular temptation with email, added to which once a document has been emailed, the sender has no control over its further dissemination. If a privileged document has to be circulated it should be marked as such, with a warning against onward circulation;
  • Before circulating advice to third parties make sure they are necessary recipients and mark any documents clearly as confidential and privileged;
  • If you have to disclose a privileged document to, for example, your regulator, make sure you stress that you are waiving privilege only for that purpose and not more widely, stressing they must not disclose it further;
  • Unless you are an in-house lawyer avoid as much as possible adding your own written commentary on advice; it may well not be privileged;
  • If circulating by email, apart from restricting the recipients, send as read only.

 

For more information, contact Justin Clayden or David Hadfield

 

[1] Director of the Serious Fraud Office v Eurasian Natural Resources Corp Ltd [2018] ECWA 2006 and WH Holding Ltd v E20 Stadium LLP [2018] EWCA 2652.

[2] It is clear that LPP does not apply to advice given, for example, by accountants even if that advice might be about tax law, and even if the advice is given by a lawyer employed by the accountancy firm.

[3] Per Lord Carswell in Three River DC v Governor & Company of the Bank of England (No 6) [2005] 1AC 610

[4] Skymist Holdings Ltd v Grandlane Developments Ltd [2019] EWHC 1834

[5] Kasongo v Humanscale UK Ltd 9 WLUK 55 [2019]

[i] USP Strategies PLC & Ors v London General Holdings Limited [2004] EWHC 373 approved in Kasongo v Humanscale UK Ltd 9 WLUK 55 [2019]

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