Legal privilege | High Court offers some crumbs of comfort

Published on 14th Dec 2017

2017 has seen two of the most significant, and for many, unwelcome, decisions on legal privilege for some time, in the form of the RBS Rights Issue litigation and SFO v ENRC (which is currently being appealed).

As two more recent cases demonstrate, though, parties claiming privilege are still to a large extent “judge in their own cause”. The courts are reluctant to look behind assertions of privilege, even when it comes to greyer areas such as communications with litigation funders. It is one thing to suspect that an opponent’s claim to privilege might not pass close inspection by the courts; it is quite another thing to persuade the courts to carry out that inspection.

Give us a clue

One of the elements of the test for legal advice privilege is that the document in question is a ‘confidential communication between a lawyer and a client for the purposes of giving or receiving legal advice’. This will include not just the instructions or legal advice itself, but also anything which ‘evidences’ that legal advice. In the case of Re Edwardian Group Ltd, the question was whether this extended to communications with a litigation funder that (potentially) “gave a clue” as to the legal advice.

The petitioning party had disclosed many of the documents in question , but had redacted them on the basis that they “reproduce, summarise, embody or otherwise reveal directly or indirectly the nature, content or effect of privileged communications.”

As one of the issues in dispute was whether or not the process of seeking litigation funding had been the cause of a delay in bringing proceedings, the respondents challenged those assertions of privilege.

What did the court decide?

Upholding the claim for privilege, the judge found that legal advice privilege would apply “where there is a definite and reasonable foundation in the contents of the document for the suggested inference as to the substance of the legal advice given” – in other words, where the document revealed the nature of the legal advice originally given to the client. He distinguished this from “merely something which would allow one to wonder or speculate whether legal advice had been obtained and as to the substance of that advice”, which would not be privileged. One of the examples of that non-privileged category was a board minute recording a commercial decision taken after legal advice had been given (as opposed to recording the substance of that advice).

Judge in their own cause

Having established the correct test, the judge went on to consider whether the petitioners had in fact applied that test correctly. The judge revealed that he did have doubts as to whether the test had been applied correctly. However, the judge reiterated that it will be difficult to go behind an affidavit supporting a claim for privilege, unless it is reasonably certain from the available materials that the affidavit is incorrect or incomplete on material points, or mis-characterises the documents over which privilege is claimed.

In this case, the judge could not be ‘reasonably certain’ that the affidavit was deficient in any of those ways. Even if he had been, the judge explained that, rather than ordering inspection of the documents (or inspecting them himself), he would have simply required the petitioner to provide a further affidavit, giving more detail as to the test that had been applied.  This was similar to the approach taken by the judge in the Astex case in 2016.

Known unknowns

Re Edwardian follows on from another recent case, Hutchison 3G v EE (unreported), in which the court refused to look behind a party’s claim to privilege.

In Hutchison, the claimant suspected that privilege had been wrongly applied in particular to communications sent to both in-house lawyers and non-lawyers. The claimant sought an order requiring the defendant to provide a list of the communications over which it was claiming privilege, along with details of the sender and recipients, and whether the privilege claimed was litigation privilege or legal advice privilege.

The judge refused that request. The defendant’s lawyers had provided a clear statement that they had applied the law on privilege as understood by both parties. The judge also considered that to comply with that request for the large number of documents over which privilege was claimed would be unduly onerous. The claimant’s lawyers were not able to provide an explanation of why it believed that additional non-privileged documents existed – although that is perhaps not surprising since the claimant could not have known what was in the documents it had not been given.

Where does this leave us?

Contrasting these latest decisions on privilege with the ENRC and RBS Rights Issue judgments, there is a clear gap that can leave businesses facing the worst of both worlds. On the one hand, if an assertion of privilege comes under scrutiny, the court is likely to strictly apply tests, for example, in relation to the definition of a client for legal advice privilege or when litigation is reasonably in prospect for the purposes of litigation privilege. Businesses therefore need to take a cautious approach to assessing which documents may be privileged.

On the other hand, when there are suspicions that another party has been overly generous in its claims to privilege, it can be very difficult to persuade a court to subject those claims to scrutiny.

Further judicial clarification would be welcomed and all eyes will therefore be on the ENRC appeal, which is due to be heard in 2018 (although even then it may well be appealed further to the Supreme Court).

In the meantime, understanding the privilege red flags and risk areas can help to avoid having to disclose damaging documents later down the line. The following do’s and don’ts can help you to navigate some of the common privilege traps:

  • Do consider at the outset which individuals within a business constitute the ‘client’ for any piece of legal advice; be clear who is authorised to instruct external lawyers;
  • Do ensure that privileged documents and communications remain confidential; only disclose to a third party where strictly necessary and subject to commitments to keep them confidential;
  • Do record when and why litigation is considered to be “reasonably in prospect” and make clear where documents are created for the purposes of that litigation;
  • Don’t assume privilege will apply to documents created for the purposes of an internal investigation – if in doubt take advice on this first;
  • Don’t assume that a communication will be privileged just because an email is copied to a lawyer and marked “privileged” – again, if in doubt, take advice on this first.
  • Don’t waive privilege lightly; once privilege has been lost, it cannot be regained.
  • Don’t forget that the laws on privilege vary significantly by jurisdiction; documents that can be protected by privilege in England and Wales may be disclosable in another country, and vice versa. If in doubt, seek advice on local law in other relevant jurisdictions.
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