Passmore on Privilege: a blog

Reviewing the more interesting cases arising under the law of legal professional privilege.

Colin Passmore is Senior Partner at Simmons & Simmons. He published the third edition of "Privilege" in July 2013; one of the leading textbooks on the subject of legal professional privilege.

 

 

 

 


 16 December 2016


Introduction

A very important decision on the unavailability of legal advice privilege (LAP) in relation to the conduct of interviews in the course of an internal investigation was handed down last week by Hildyard J in The RBS Rights Issue Litigation, Re [2016] EWHC 3161 (Ch). The only good thing to come from this decision is a possibility that the decision will be appealed and will thereby allow our appellate courts – perhaps even the Supreme Court - to re-examine the policy reasons behind the much criticised Court of Appeal decision from 2004, Three Rivers (No 5) (TR5). Given the importance of this decision, our analysis is longer than usual.

Background

TR5 is well known for its restrictive approach towards the availability of LAP where the client is a corporate institution, such as a bank. In such circumstances, the Court of Appeal held in TR5 that only communications made between those authorised by the corporate to seek legal advice on its behalf and its lawyers fell within the scope of the privilege. All communications within the corporate, even where geared to generating information needed by the lawyers to provide the advice being sought fell outside the privilege and could only be protected if falling within the wider litigation privilege (which was not available in TR5). The decision has been consistently criticised, not least because of the challenges it gives rise to in terms of the corporate trying to determine whether it risks generating non-privileged communications which may be discloseable in later litigation in which those communications may become relevant. Even though TR5 has not been followed in Australia, has been distinguished in Singapore and rejected outright in Hong Kong, it has remained the prevailing precedent under English law for 12 years now.

Context

RBS concerned the status of interviews of current and former bank employees, conducted in circumstances where litigation privilege was unavailable. This arose in various actions concerning a RBS rights issue taken up in 2008 just before the Great Financial Crisis broke. Many years on, RBS shareholders seek to invoke statutory remedies against RBS under ss 87A, 87G and 90 of the Financial Services and Markets Act 2000 (FSMA) to recover substantial investment losses incurred further to the collapse of RBS shares on the grounds that the prospectus for the rights issue was not accurate or complete. The actions are due to be heard in March 2017 (albeit recent press reports suggest that many of these actions have settled).

The claims to privilege arose out of two internal investigations, one responding to two US SEC subpoenas and the second following certain allegations made by a former employee.

The claimants sought disclosure of transcripts, notes or other records of 124 interviews conducted by or on behalf of RBS with current and ex-employees as part of both investigations. In asserting privilege over these, RBS's evidence was that the only documents in existence within these categories were Interview Notes prepared by RBS's in-house lawyers (in respect of the second Investigation) and by a US law firm (assisted by a London firm as their agents) in respect of the first, each of which was said to summarise those interviews.

There was no dispute that RBS authorised each of the interviewees to participate in the relevant interviews; that all interviewees were told that the Interview Notes would be, and be kept, confidential; and that the interviews would be subject to what was described to them as "attorney-client privilege". RBS accordingly asserted LAP over the Interview Notes, alternatively that the Interview Notes were lawyers' privileged working papers. RBS also resisted disclosure on the basis that the Court ought to apply the federal law of the United States of America (US law) under which the Interview Notes were said to be privileged.

Analysis

RBSs’ claims to privilege did not rely on the Interview Notes being part of client/lawyer communications in which legal advice was sought or given; nor did RBS suggest that the interviewees were themselves seeking or being provided with legal advice. Rather, RBS accepted that the Interview Notes and their communication comprised information gathered from employees or former employees at the instance of RBS's lawyers for the purpose of enabling RBS to seek legal advice from its external counsel.

Recognising that TR5 was a major impediment to its claims to privilege, RBS contended that, under English law as well as US law, any communication by an employee who is authorised to communicate with a legal adviser for the purpose of her employer seeking legal advice is privileged: and that it is no part of the test that the communication should consist of instructions rather than information. Accordingly, RBS submitted that the communication of factual information (in this case, evidenced in the Interview Notes) gathered by or for the purpose of being provided to its lawyers was privileged, provided that the person providing and communicating information was authorised to do so by RBS.

Ruling against RBS, Hildyard J. noted last month’s decision in Astex Therapeutics where Chief Master Campbell said it was unlikely, in most circumstances where a corporation is "seeking information" from employees and former employees that persons who merely provide that information will be the "client" for the purposes of TR5. Hildyard J. agreed, noting (1) that the client for the purposes of privilege consists only of those employees authorised to seek and receive legal advice from the lawyer and (2) that legal advice privilege does not extend to information provided by employees and ex-employees to or for the purpose of being placed before a lawyer. He said:

In summary, I consider and hold that the Interview Notes, albeit that they record direct communications with RBS's lawyers, comprise information gathering from employees or former employees preparatory to and for the purpose of enabling RBS, through its directors or other persons authorised to do so on its behalf, to seek and receive legal advice. It is clear from the judgment in Three Rivers (No 5) that "information from an employee stands in the same position as information from an independent agent" … . The individuals interviewed were providers of information as employees and not clients: and the Interview Notes were not communications between client and legal adviser. I do not consider that any sufficient basis has been demonstrated for not applying Three Rivers (No 5).

From there, it got worse for us litigators, because the Judge then rejected the argument that the Interview Notes could still fall within the scope of LAP as comprising "lawyers' working papers", it being common ground that in English law such papers are protected by LAP as per the Court of Appeal in Balabel.

The application of these principles to notes made by lawyers of non-privileged communications has long been “out there” but to date is something that has not had to be addressed head on by the courts. The usual response is either to demonstrate that these notes are more than mere records of the communications concerned, ie not verbatim1 and thus inflected with the lawyer’s mental impressions; alternatively to use them as the basis of a communication to the client for which a claim to LAP can properly be made, as in Re Sarah Getty’s Trust. As, Warren J noted in Stax Claimants v Bank of Nova Scotia [2007] EWHC 1153 (Ch), one can contrast a note which records the substance of a conversation (which would not be privileged) with a note which also records "the note-taker's own thoughts and comments on what he is recording with a view to advising his client" (which almost certainly would be privileged). Clearly then, such cases depend on the evidence before the court as to the nature of the communication concerned.

Hildyard J’s starting point in RBS was that if RBS was not entitled to claim LAP in relation to the Interview Notes, it must follow that the starting point of the analysis in relation to the lawyers' working papers point is that the interviews themselves were not privileged communications. Thus, RBS had to demonstrate some attribute of or addition to the relevant Interview Notes which distinguished them from verbatim transcripts or revealed from an evident process of selection the trend of legal advice being given, and was such as to trigger their protection as lawyers' working papers. The claim thus involved proving facts which demonstrated that the documentation for which privilege is asserted does have some attribute or addition such as to betray or at least give a clue as to the trend of advice being given to the client by its lawyer. The burden of demonstrating this fell upon RBS.

The Judge accepted on the one hand that full account had to be taken of the fact that any notes of an interview, as distinct from a bare transcript, are likely to reflect, even if only to a limited extent, the particular interests, lines of inquiry and perception of the relative importance of the points covered (including those omitted) of the person making the note, so that, to that extent at least, such notes may be taken to reflect the note-maker's "mental impressions" (as per the US lawyers’ evidence). On the other, it also had to be borne in mind that the "mental impressions" rubric is routinely prayed in aid in the US.

In addition, the Court in assessing the claim to privilege was entitled to scrutinise the evidence, not least as to what it did not say, as well as to what it did. As to this, the Judge held that RBS's evidence was conclusory in nature and based on the assumption that it followed from the fact the Interview Notes were not verbatim that therefore they must contain legal input or selection justifying the claim to privilege. This did not address the objection that it cannot be that the mere fact that a note is not verbatim, and therefore may betray some selection or line of enquiry (as recognised above), suffices. Something more is required to distinguish the case from the norm. Here, nothing beyond mere conclusory assertion was offered. For example, RBS's evidence did not show anything substantial of its legal team's analysis of the documents nor even in the most general and careful terms give examples of the sort of legal input said to justify and be capable of justifying the claim of privilege. Even the reliance on the evidence that the Interview Notes reflected "mental impressions" was not backed up by any assertion that such Interview Notes did in fact, upon careful review, contain material that would or could reveal the trend of advice:

In short, all that has really been offered by way of discharging the burden on RBS is that (a) the Interview Notes carry the annotation as to "mental impressions" described above because (b) they reflect preparation which reveals the lawyers' "train of inquiry" and because (c) being a note not a transcript, some greater or lesser degree of selection is reflected. This, in my judgment, is not sufficient: the evidence is not such as to substantiate the claim to privilege on the basis of "lawyers' working papers". My conclusion is reinforced by the consideration that there is a real difference between reflecting "a train of inquiry" and reflecting or giving a clue as to the trend of legal advice …”

As a last point, Hildyard J rejected the bank’s attempt to have the Interview Notes covered by US law privilege: he accepted the long standing practice that it is only English law rules that apply.

Conclusions

This is a very important decision. There have been waves of internal investigations since the GFC and the issue of how to protect employee interview notes under English law has long challenged litigators. Any comfort that the “mental impressions” practice will work has now been blown away - litigators will really need to think about how they can, if at all, get within the privilege. Of course, there is a major policy issue at play here - whether litigants and the courts should have the best evidence of what an opponent’s employee witnesses thought at the time, or whether clients are entitled to prepare their positions in relation to investigations that may give rise to potentially major litigation under the cloak of secrecy. The English court with this decision has swung the balance firmly in favour of the former position. Those on the receiving end of major investigations will not welcome this decision - the claimant community no doubt will (as will regulators). How to summarise this decision?

  1. It makes clear that unless and until the Supreme Court is invited to look at these issues, the considerable challenges presented by TR5 remain. As Hildyard J. ruled, the “fundamental basis” of TR5 is that LAP is strictly confined to communications between a lawyer and his client for the purpose of giving or receiving legal advice. Thus in the absence of litigation privilege, LAP will not protect communications whose only purpose is the provision of factual information by employees to lawyers.
  2. Thus there is a very real danger in the absence of litigation of creating discloseable material as a consequence of employee interviews. The mere fact these are undertaken by lawyers does not get us home - nor does the fact that they are more than mere verbatim records. Something rather more is needed - and will need to be proved - to get within LAP.
  3. What will the consequences of this be? Well, lawyers and their clients will now have to think very carefully about whether to record, what to record and how to share whatever they do record with the client. The one avenue not expressly closed off in this case is an advice given to a client based upon the unprivileged employee discussions. That however is all very well in the simple case like Sarah Getty, it is nigh on impossible where the lawyer takes 124 detailed proofs. This is now a real problem and we must expect more such challenges to the unprivileged interview process - not least from the SFO who will no doubt approve of this decision.

In rejecting RBS’s submissions, Hildyard J. made a number of other observations worth noting:

  1. There can be no real doubt as to the present state of the law: TR5 confines LAP to communications between lawyer and client, and the fact that an employee may be authorised to communicate with the corporation's lawyer does not constitute that employee the client or a recognised emanation of the client.
  2. However, TR5 does not require that only a specially constituted committee of the company can be the client in every case. Hildyard J. said “such a proposition would be absurd, not least since … such committees are, if not now a rarity, certainly far from invariable.”
  3. In relation to the Claimant’s argument that the authorities are clear that a company may only claim privilege in respect of communications between the "client" and its legal advisers where the "client" is a small number of identified company employees who are authorised to obtain legal advice, the Judge took this to signify “ …that a corporation would in the usual course only entrust the process of communication with a legal adviser for the purposes of seeking or receiving legal advice to a restricted, and in all probability small, number of persons.”
  4. As to this last point, the Judge toyed with the possibility that in a corporate context only individuals singly or together constituting part of the directing mind and will of the corporation can be treated for the purpose of legal advice privilege as being, or being a qualifying emanation of, the "client". While it was not necessary for the Judge to determine whether a further corollary or implication of the decision in TR5 was to restrict the meaning of "client" in this way, he suspected that such a restriction would often reflect reality: “a corporation is unlikely to authorise an individual to seek and receive legal advice on its behalf to an individual or body which is not its directing mind and will. … So I do incline to the view that only communications with an individual capable in law of seeking and receiving legal advice as a duly authorised organ of the corporation should be given the protection of legal advice privilege.” One assumes that all members of the in-house legal function would be so regarded when seeking advice from external lawyers. But nothing seems that certain these days.


1Verbatim transcripts of unprivileged interviews would also themselves not be privileged. As Birss J held in Property Alliance Group v RBS (No 3) [2015] EWHC 3341 (Ch) (at §24): "a record of a non-privileged conversation, whether in the form of a verbatim note or a transcript, cannot itself be privileged if the underlying conversation was not privileged."
Expand all
07 December 2016

Interview notes, privilege and civil litigation

The question of whether lawyers’ notes of interviews with company employees in the course of an investigation are privileged has been a hot topic recently. That is mainly due to the SFO’s various statements on how it will treat any claims to privilege made over interview notes where the company was internally investigating potential criminal wrongdoing. One of the challenges that arises here is whether litigation privilege is available to protect such notes, or whether the party asserting privilege has to fall back on legal advice privilege, in which case issues arising from the well-known Three Rivers (No. 5) come into play. These issues are not confined to criminal matters, they also arise in civil litigation, as the recent rulings in Astex Therapeutics Ltd v AstraZeneca AB demonstrate.

This decision concerned a commercial dispute as to how certain drugs should be categorised under a co-operation agreement between the two pharmaceutical companies involved. AstraZeneca had carried out an internal review on this issue which pre-dated the dispute. For this purpose, a number of its current and former employees were interviewed. The conclusions drawn from this review led to the disagreement but, when it came to disclosure, AstraZeneca claimed privilege over the notes of interviews made during the review.

Several points arise from this case that are worthy of a reminder, even if they do not break entirely new ground.

Any claim to privilege in a disclosure list needs to be specific

The Defendant in its disclosure list included a section to cover privileged documents (not to be available for inspection) that read:

Confidential letters and other communications passing between the Defendant and its legal advisors and patent attorneys for the purposes of giving or obtaining legal advice and assistance, together with drafts and internal memoranda and notes thereof prepared for the purposes of giving or obtaining legal advice, and any other documents which are by their nature privileged and excluded from inspection.”

Chief Master Marsh said that this generalised wording at the end “has no place in modern litigation, let alone litigation of very real complexity. It is clearly unhelpful, without describing the documents said to be privileged, to say that ‘their nature’ explains why they are privileged because the recipient of the list of documents has no way of knowing which documents, or classes of documents, are being referred to.”

Disputes over privilege are discouraged by the court

Parties’ lawyers effectively act as judges of privilege over their client’s documents, which means that it is necessary for them to be as specific as possible where an issue arises as to whether privilege is properly being claimed. The court will intervene only where it has a serious concern that the test is not being applied properly, but that makes it incumbent upon the party asserting privilege to give as full reasons as it can in correspondence.

Where a party has produced an affidavit in support of an assertion of privilege, case-law provides the court with four options if the claim to privilege is challenged:

(a) order disclosure on the basis that the reasons disclose no grounds for an assertion of privilege
(b) order a further affidavit to answer specific questions
(c) order cross-examination of the person who provided the affidavit (rarely appropriate)
(d) review the documents itself to determine the claim for privilege, which is a last resort.

The requirements for Legal Advice Privilege

The defendant claimed both legal advice and litigation privilege for attendance notes made of conversations or meetings with its current and former employees, which occurred as part of the internal review. The Master noted that in Balabel v Air India, Taylor LJ held that LAP extended beyond communications with a lawyer requesting or giving advice, to the “necessary exchange of information between client and lawyers of which the object is the giving of legal advice as and when appropriate”.

However, the information must still pass between lawyer and client. In the context of corporations, that means applying Three Rivers (No.5) to identify who is the “client” within the company, as it will not be every employee. Only those authorised to seek legal advice will be the “client” and in this case few of the employees interviewed were in that position, so LAP could therefore not apply to the interview notes.

In one sense, this is not a surprising conclusion and echoes the result in Three Rivers (No.5) itself. However, what would have been helpful would be to know the nature of these attendance notes. There is little in the judgment to indicate whether the notes were merely verbatim notes of what was said (clearly not privileged) or whether they were in the form of a memorandum/summary report sent to the client (probably privileged): as in the 1987 decision in Re Sarah C Getty Trust.

Even then, there are degrees between these two options. As Warren J. said (in relation to litigation) privilege in The Stax Claimants v The Bank of Nova Scotia Channel Islands Limited (2007):

“ … if a note of a conversation were also to contain the note-taker’s own thoughts and comments on what he is recording with a view to advising his client, the position would almost certainly be different: it is difficult to see why such a note should not attract litigation privilege.”

The same would apply in relation to advice privilege.

The requirements for Litigation Privilege

The Master also considered the standard test for whether Litigation Privilege applies and found that litigation was not in reasonable contemplation at the time the review was carried out, nor was it the dominant purpose. This is often an issue, as a review may be commenced to ascertain the company’s position on something, or to discover why something went wrong, with any potential litigation simply an afterthought. This was not a situation where the nature of what was being discussed obviously raised the prospect of contentious proceedings, as would usually be the case in an investigation into allegations of criminal wrongdoing. The Master here held that some objective evidence needed to be presented in order to make good an assertion that litigation was in contemplation: the party asserting privilege cannot simply state that they had litigation in mind.

The need for care

The case shows once again that any claim to privilege need to be carefully examined both by the party making it and the opposing party. The court may be slow to look behind a claim to privilege made by reputable solicitors, but vague claims over whole categories of documents are unlikely to escape scrutiny. If such claims prove ill-founded, disclosure of the documents will be ordered.

16 November 2016

Work on my fourth edition continues slowly but surely, so time spent on my blogs has been limited.

But I thought I would use this article for an interim blog, an article just published by GIR to whom thanks for allowing this to be used here.

07 September 2016

I am conscious that it is some time since I posted a blog on privilege developments...

although there have been a lot of recent privilege decisions, some of which I plan to cover in the ensuing months.

A subject I wanted to tackle in this short blog is The Law Society’s new Draft Guidance on Privilege, which can be found here.

Before discussing this Guidance, it is worth noting the comments of the current President of The Law Society, Robert Bourns, who wrote an interesting article in The Law Society Gazette a few days ago called “Standing up to Attacks on LPP”. A link to the article can be found here.

I know Robert well and so I am pleased that, notwithstanding the demands of his role, he has found the time to stand up on behalf of the profession to try to counter a range of threats to legal professional privilege. As he says, LPP is at the very heart of the relationship that solicitors have with their clients and it is therefore with growing concern that The Law Society has responded to a range of threats to this vital legal concept in recent months, as well as challenging a growing inclination to misrepresent and denigrate the principle of privilege.

Robert’s article addresses the threat to privilege which is still posed by the Investigatory Powers Bill (back before Parliament next month), the consultation by The Financial Conduct Authority on the way senior in-house solicitors might be covered by its new accountability regime (The Senior Managers Regime) and also the tendency of parliamentary committees (the one investigating the collapse of BHS being the most recent one) to criticise legal witnesses for refusing to waive their clients’ privilege.

So many of these attacks ignore the fundamental principle that the privilege belongs to the client and not the lawyer, and that it is not so straightforward just to say that lawyers hide behind the privilege.

An additional area where The Law Society, supported by a number of private practitioners (myself included), has been working to protect privilege from threats to its long-standing status concerns the Law Society’s draft Guidance on Privilege. This is designed to provide an easy reference point for the main principles that underpin privilege and thereby to remind the profession of the circumstances in which privilege is available and the importance of the need that we, as a profession, only advise our clients to assert it when it is proper to do so. Why is such Guidance needed? Surely as lawyers we should know the do’s and don’ts of privilege? Guidance has been produced in the main in response to attempts by some of our regulatory authorities, most notably the SFO, to create a climate in which certain clients, particularly in the financial services sector, feel inhibited from asserting privilege, even though in doing so they are legitimately exercising an ancient and well established right. Those attempts are plainly wrong, and so I hope that this Guidance will signal to our regulators that the profession, backed by its primary professional body, is willing to stand up and push back.

The Guidance is still under consultation so any commentary on it would be welcomed by The Law Society. I will also be speaking on it at a number of client dial-ins in the coming weeks.

If anyone would like to discuss the Guidance with me and the reasons for its creation, please do get in touch.

29 June 2016

I have written before about my concerns that the Investigatory Powers Bill, which is due to replace RIPA...

...has in its various iterations contained provisions that for the first time ever in a UK statute expressly seek to override legal professional privilege.

There has been a lot of discussion between interested bodies (The Law Society, Bar Council and others) on the one hand and Government on the other, and I had become very concerned that we were losing the battle and that this legislation would go through.

It is therefore very heartening to see that this week a number of prominent lawyers in the House of Lords – particularly Lord Pannick QC, Lord Lester of Herne Hill QC and Lord Carlile of Berriew QC (to name but a few) have spoken out against this legislation in a way that has clearly conveyed the legal professions’ concerns.

I was particularly pleased to see that Lord Pannick said in Parliament on 27 June 2016:-

“ …One matter that will require particularly careful consideration… is the protection of legal professional privilege. … The reason for that is that unless a client knows that the solicitor and counsel will not disclose what they have been told in confidence, the client will simply not be prepared to speak honestly and openly when seeking legal advice. LPP is, therefore fundamental to the rule of law. It is important to emphasise that these rights belong to and benefit the client. They are not privileges for lawyers.” (Para 51).

Well said – and I really hope that the Government will listen and reconsider how best to balance the need for the authorities to have up to date powers to obtain information to address the real dangers that we all face from terrorism and serious crime, as against this long established fundamental human right that is so integral to the administration of UK justice.

22 June 2016

I haven't posted a privilege blog for some time now, and one of the reasons is that I have had a blitz on writing parts of the 4th edition of Privilege...

...(which is still some way off completion). One subject that I have spent a lot of time on is the growing impact of human rights law on privilege and that has caused me to re-examine a Court of Appeal decision from last year, R v Edward Brown (formerly Latham).

Here, the appellant, who was already serving life sentences in a secure hospital, was convicted of the attempted murder of a fellow patient. During the course of his trial, the appellant was refused the right to meet with his defence counsel without being accompanied by at least two nurses to whom he was handcuffed in order to protect him from self harm, as well as to protect others. The Crown Court where his trial was conducted had no facilities in the cells to protect defence counsel from the appellant, for instance by separating the appellant from counsel by means of a secure transparent screen. Following conviction, the central ground of the appeal was that the conviction was unsafe because the requirement that the conferences at court had to take place in the presence of the nurses breached the appellant’s right at common law to consult privately with his lawyers, as well as his rights under Article 6(3)(c) ECHR to “defend himself through legal assistance of his own choosing”. In particular, the appellant contended that the trial judge erred when he decided that the right to confidential communication between him and his legal representatives was “not absolute” but instead was qualified, and that in any event it did not trump the defendant's right to life.

Examining the position first by reference to the common law , the Court of Appeal (Criminal Division) was driven to the conclusion that when privilege exists, “it is inviolate”. Needing a route around this, the Court fashioned a small extension to the “crime-fraud” (or iniquity) exception to privilege and linked this to its duty as a public authority (within the meaning of s.6(1) HRA) to protect human life in circumstances where this positive obligation is applicable.

Fulford L.J. said:-

“Article 2 of the Convention undoubtedly applied in this case (Everyone's life right to life shall be protected by law) and it is desirable that the common law is interpreted (and, if necessary, developed) in a way that is compatible with an individual's Convention rights. Indeed it may be that this is required of a court, since the obligation created by section 6 of the Human Rights Act is a statutory one and legislation normally overrides the common law. In our judgment, by way of an additional common law qualification or exception to the inviolable nature of legal professional privilege, and in what is likely to be an extremely narrow band of cases, it will be appropriate to impose a requirement that particular individuals can be present at discussions between an individual and his lawyers if there is a real possibility that the meeting is to be misused for a purpose, or in a manner, that involves impropriety amounting to an abuse of the privilege that justifies interference. This case exemplifies the rare circumstances in which it will be necessary to take this step.”

Fulford L.J. concluded that in this context, the duty to protect life was clearly enforceable if there were a risk an individual might abuse legal professional privilege in this particular “iniquitous” manner: the risk identified by the judge would have constituted an occurrence that amounted to a clear and sufficient abuse of the privilege such as to justify this particular interference in order to preserve the defendant's Art. 2 rights.

What is really interesting about this part of the decision is both the impact on privilege considerations of human rights law and the fact that at common law privilege continues to be absolute as per Derby Magistrates. But two further important considerations arise. First, the Courts are increasingly testing whether their decisions at common law yield the same result under human rights law. Thus, having next held that, even if there had been an infringement of the defendant's right to confidential communications with his lawyer under the common law, and that interference was not justified under section 6 HRA, the proceedings were not, as a result, rendered unfair nor the conviction unsafe, Fulford L.J. then tested whether Convention jurisprudence yielded a different result.

By reference to Art. 6.3(c) (see above), the defendant argued that the necessary corollary of that right is the right to confidential communications with his lawyers, which the presence of the nurses had undermined. This was to ignore consistent Convention jurisprudence which recognises that the right of access to a lawyer may be subject to restrictions for good cause and the question in each case is whether the restriction, in the light of the entirety of the proceedings, has deprived the accused of a fair hearing. That brought into play the second important point this case raises, which is that privilege is not absolute under human rights law. As Fulford L.J. put it:-

“ …under the jurisprudence of the European Court of Human Rights, the right to confidential communications with lawyers …can be restricted for good reason and one of those reasons is if the individual's life is at risk.”

That good reason was provided by Art. 2 which imposes a positive obligation on public authorities, including the Court, to take reasonable measures to avert a real and immediate risk to life, and in the circumstances of this case the restrictions imposed on the defendant’s ability to have confidential communications with his counsels were held to be a proportionate and appropriate response to the growing threat he posed to himself. Accordingly, the Court did not accept that they rendered the proceedings unfair and that therefore there had been no breach of Art. 6.

Interesting stuff - the same result but by two different routes. And this leaves me to wonder whether, ultimately, Convention jurisprudence will lead to a weakening of the Derby Magistrates absolutist approach to privilege. I will explore that in detail in edition 4. Watch this space.

22 March 2016

A claim to privilege usually requires that the communication concerned has been made confidentially and that that confidentiality is maintained.

Two recent cases have looked at the position where privileged materials have been obtained improperly and are potentially available on social media - does that result in a loss of the all essential confidentiality that in return destroys the claim to privilege?

This is not a situation that has featured in the case law hitherto, the nearest example being Supperstone J’s decision in 2011 in London Borough of Redbridge v Lee Johnson where an application for an Ashburton Injunction was challenged on the grounds the claimant’s privileged materials which had been inadvertently disclosed to the defendant had been circulated by him on Twitter. On the facts, that ground was not made out.

Such a situation almost arose in Lachaux v Independent Print Limited/Evening Standard Limited [2015] EWHC 3677 (QB). Here, the claimant’s privileged communications with his French lawyer had been improperly obtained by his ex-wife who had passed them to the defendant publications whom the claimant was suing for libel. The defendants wished to use these materials because they contended that it was impossible to reconcile their contents with a statement that the claimant had previously made in the course of the proceedings. The underlying facts concerned a contested custody dispute between the claimant and his former wife, in the course of which she had (according to her witness statement) made contact with a large number of public organisations to help her regain contact with their child of whom her ex-husband had custody. From the best of her recollection, her former husband’s privileged documents had been sent to the FCO, the UN Rapporteur and various media organisations. The former wife also asserted a right to continue to use and share these documents, albeit without specifying to whom she intended to make any further disclosure. Sir Michael Tugendhat was persuaded that the ex-wife’s statements were vague, identified no individual to whom, nor date on which, she had disclosed or intended to disclose the documents, and he therefore accepted that the evidence fell far short of showing that any quality of confidence in the documents had already been lost or that the grant of the injunction the claimant sought would serve no further purpose.

It must be said that the outcome in this case, and the absence of any detailed discussion around the potential loss of confidentiality, was a mite surprising, not least having regard to the ex-wife’s threat in her statement to continue to mis-use the claimant’s privilege. What is even more surprising is that the privileged documents concerned can almost certainly be found by searching websites relating to the ex-wife’s custody battles. I for one have located on the internet what appear to be the documents in dispute.

However, this issue arose head on in a recent Singapore case, HT S.R.L. v Wee Shuo Woon [2016] SGHC 15. Here, the plaintiff’s computer systems had been hacked, resulting in privileged and confidential email communications with its lawyers being uploaded onto the Wikileaks web-site. It was accepted that (i) these emails contained legal advice pertaining to the dispute with the defendant, (ii) they included express provisos that they contained privileged and confidential information and (iii) the defendant had had nothing to do with the hacking. The defendant therefore sought to use them in support of an application to strike out the bulk of the plaintiff’s claim on the ground of abuse of process, the defendant alleging that the present suit had been initiated for the collateral purpose of obtaining documents to further the plaintiff’s interest in other proceedings. The plaintiff responded swiftly to this by seeking an order for all references to the emails in an affidavit served by the defendant to be expunged and for an injunction to restrain further use of them.

The main part of Hoo Sheau Peng JC’s Judgment is a good reminder and summary of the interplay of the principles between the Calcraft v Guest and Ashburton v Pape lines of authority, as eventually reconciled in Goddard v National Building Society [1986] 3 WLR 734. In essence, the Judge recognised that the Court might, in the exercise of its equitable jurisdiction to restrain a breach of confidence, restrict the disclosure and use of privileged documents which have been inadvertently or improperly disclosed to third parties in order to protect their confidential character. He recognised that the Court could restrain the use of privileged documents by way of an order to expunge offending portions of pleadings or affidavits. He further noted that such an application must be filed before the privileged documents have been formally admitted into evidence.

Here, the big question for the Court was whether the documents in this case had already lost their confidential character because they had entered into the public domain on account of their general availability on Wikileaks. The Judge accepted that the correct approach was to look at whether the documents had entered into evidence (that is, entered the Court’s’ record) and that since this had not happened in this case, the Court had jurisdiction to grant the relief that the plaintiff sought.

The interesting part of the Judgment concerns the defendant’s unsuccessful attempts to argue that references to “the public domain” meant that the documents had become public property and public knowledge, since the emails had been uploaded onto the internet and were freely available for access: why, the defendant submitted, would they be protected by the law, since the law of confidence should not act to protect information which is so widely known that there was no confidentiality to protect? Treating this as a mechanistic approach, as if the fact that documents are publicly accessible alone would be sufficient to defeat a claim for protection, the Judge preferred the narrower approach to public domain.

As to this, the Judge observed that one reason why the law of confidence does not protect documents in the public domain in the wider sense is because generally there is no purpose to granting an injunction when the material is already publicly known and accessible. He referred to the Spycatcher case (Attorney General v Observer Limited [1990] 1 AC 109) to illustrate this. Based upon speeches in that case, he suggested that the question is not so much the accessibility of the information per se but whether the degree of public accessibility is such that it would be senseless, as a practical matter, to try to protect the information as confidential. This requires the Court to examine whether there was any value to the party claiming confidentiality against the other party, and that was essentially a question of fact. In this case, the Judge held that the plaintiff continued to have a compelling interest in restraining the use of its emails, especially:-

“ … his desire to avoid having the contents of his discussion with his lawyer over the conduct of the present suit, which were full, free, frank, and told in an atmosphere of confidence, used against him. One cannot over-emphasise the fact that the emails concerned the present suit, and that the original documents remain privileged against disclosure (for which privilege has not been waived). … If there were to be any person whom the plaintiff would have an interest in keeping the information from, it would have been the defendant, his opposing party. Obviously, that was no longer possible. However, the plaintiff still has an interest in seeking an order that the documents not be used by the defendant in the present suit. The prayer to expunge would serve this very purpose.” (Para 51).

In reaching this conclusion, the Judge was evidently struck by the practical realities, namely that the plaintiff was the victim of a cybercrime, the defendant was aware of that and whilst there was no suggestion that the defendant was responsible for the hacking, he was well aware of the circumstances leading to the unauthorised disclosure of the plaintiff’s information onto the internet. Given the express provisos contained within the information that the defendant wished to use, he had clearly been put on notice of the privileged and confidential nature of the emails, which notwithstanding he had sought to use. Considering all of this and the manner in which the defendant came to be in possession of the emails as well as the nature of the information within them:-

“ … it seemed to me that an obligation of confidentiality could still be justly and reasonably imposed on the defendant in respect of the Emails. Given that the defendant is the opposing party, the plaintiff would have every interest in restraining the use of the information in the present suit. To sum up, I was of the view that the emails in question could still be protected by the law of confidence.” (Para 54).

Evidently, the fact the plaintiff had moved quickly enough to prevent these documents being used in evidence was enough to get it home, notwithstanding that the documents continue to be freely available on the internet.

As an interesting postscript to this decision, the Judge also addressed whether the Court had any other discretion in the matter in order to refuse relief. This point arose because the defendant contended that if information were to be freely available online such that anyone might have sight of it, the Court should not lightly ignore a source of relevant material. Taken at its highest, the Judge understood this to be an argument that the Court should not exercise its discretion, if any, in favour of the grant of relief because it would mean the exclusion of relevant material, possibly to the prejudice of the defendant.

In order to answer this question the Court considered whether it could balance the public interest in having the maximum relevant material available to it and the public interest in the maintenance of confidentiality. Referring to Laurence Collins J’s decision in Istil Group Inc. v Zahoor (2003) EWHC 165 (Chancery), the Judge held that it was not open to him to refuse relief on the grounds that it would increase the amount of relevant material available to the Court.

If there is one criticism to be made of this decision it is that the Judge might have examined a little more closely the basis of the defendant’s contention that the plaintiff’s proceedings were being used allegedly for a collateral purpose. It is of interest to note that in the Istil case, Laurence Collins J held that an injunction should be refused on the ground of the public interest in the disclosure of wrongdoing and the proper administration of justice. There, the email communications in dispute revealed certain wrongdoing on the part of the claimant who additionally had apparently misled the Court in a material respect connected with the documents for which the injunction was claimed. Although the position was much more blatant in this English case, one might have expected in the Singapore decision that the Judge would have given some thought as to whether that provided support for concluding that the injunction here should be refused given the allegedly improper purposes for which the present claim was pursued. Perhaps the reason for this was that the Judge felt unable to consider the documents in dispute since the whole purpose of his original decision was that privilege over them was to be maintained.

It is notable that in the Lachaux decision a similar argument was also rejected. There, the Judge also considered the Istil decision but reflected that for a Court to conclude on the papers alone that the maker of a witness statement had lied to the Court required it to be satisfied to a high standard that that was the fact. In Lachaux, he was not satisfied that the claimant either had lied or was threatening to advance in the proceedings a factual case that he knew to be false. He accepted that if the defendants were to be permitted to adduce the contested documents at trial, there might well be questions that the defendants could probably put in cross-examination of the claimant based on the documents. But that was a long way short of the Judge concluding that there was no answer that the claimant could give to such questions other than to have to admit that he had lied.

Returning to the main issues, there is a common thread that even in the age of the internet, if a client’s privileged materials are improperly made available to third parties, even the whole world, the courts will take the pragmatic step still of refusing to allow such materials to be admitted in evidence, even where the defendant has had no part to play in bringing that result about - provided the claimant acts quickly enough to prevent their use before the court. Surely a pragmatic and just result, even if the fact that everyone bar the parties in court can undertake a simple search and find the documents concerned.

23 February 2016

The Investigatory Powers Bill presently before Parliament is a major piece of draft legislation, which is intended to replace the complex Regulation of Investigatory Powers Act 2000...

This blog post was first published on the Practical Law Dispute Resolution blog on 23 December 2015.

Bringing the Investigatory Powers Bill in line with existing laws on privilege

The Investigatory Powers Bill presently before Parliament is a major piece of draft legislation, which is intended to replace the complex Regulation of Investigatory Powers Act 2000 by both updating it and by consolidating, in a clear and transparent way, the law enabling all state-sponsored intrusive capabilities.

The Bill has sparked a multitude of concerns, not least concerning the extent to which the powers to be conferred by it can be used, for example, to listen in to privileged communications.

On behalf of the Law Society (and in tandem with a number of other professional bodies), I gave evidence to the House of Lords/House of Commons’ Joint Committee established to examine the draft Bill. I expressed the Law Society’s concerns about the fact that this legislation is unique in not addressing privilege on its face, meaning that privileged materials are not taken outside the scope of surveillance powers. In literally hundreds of other statutes, Parliament has protected privilege by addressing it on the face of the legislation, so that, for example, the SFO, the police and HMRC have no entitlement to compel the production of privileged information. This is not currently the case with RIPA (see the 2009 House of Lords decision in McE) and nor with the Investigatory Powers Bill as presently drafted.

It would appear that, in opposition to this view, the Home Office has argued inter alia that legal professional privilege is abused on too many occasions, and that there is a necessity to draw a (delicate) balance between the privacy of clients of lawyers and the ability of law enforcement and the security and intelligence agencies to investigate wrongdoers in a manner which is not unduly fettered.

The Joint Committee published its conclusions on 11 February 2016. From a privilege perspective, these are satisfying, because the Committee has rejected the Home Office’s overtures.

In particular, the Committee expressed its concerns that “there are no substantive provisions addressing LPP…on the face of the Bill and considers that this may call into question the application of LPP when the Bill’s powers are exercised…” Quite right.

The Committee therefore recommended that provision for the protection of privilege in relation to all categories of acquisition and interference addressed in the Bill should be included on the face of the Bill, and not solely (as currently planned by the Home Office) in a code of practice. It was further recommended that the Home Office should review its proposals in relation to privilege to ensure that they met the requirements of Article 8 ECHR, and relevant case law, and that the government should consult with the Law Society and others as regards how best this can be achieved.

What to make of this? The clear interpretation of what the Joint Committee is saying is that the government needs reminding of the need to recognise that, even with legislation of this sort, designed to assist law enforcement agencies and to protect the state in the most extreme of situations, the importance of privilege is such that it is appropriate to ensure it is not overridden or minimised. To the contrary, the recommendation that express provision should be made on the face of the legislation demonstrates that the Joint Committee has taken on board concerns that even the acquisition of communications data, if not properly regulated, can undermine privilege.

It remains to be seen how the Home Office will react to this report, both generally and in relation to the specific recommendations in relation to privilege. At least an influential body within Parliament has accepted what has been the position under English law for many years now, namely the overriding importance of privilege. It is to be hoped that the Home Office will now accept this position and bring the Bill into line, so far as concerns privilege, with all other UK legislation.

30 December 2015

Readers will know that there is presently before Parliament the very important Investigatory Powers Bill, which is generating a lot of heat and discussion...

This blog post was first published on the Practical Law Dispute Resolution blog on 23 December 2015.

Safeguarding legal professional privilege

Readers will know that there is presently before Parliament the very important Investigatory Powers Bill, which is generating a lot of heat and discussion. It is a very important Bill, as it will provide a long overdue opportunity to address the inadequacies of the excruciatingly drafted Regulation of Investigatory Powers Act 2000 and thereby, we hope, provide a clear legislative basis for intrusive investigations into the activities of individuals and others in this country.

No right thinking citizen would ever seriously question, particularly given global events of the last ten years or so, the entitlement of the state to have fairly far reaching intelligence powers to protect national security and our personal safety.

But even these powers cannot be granted to the state without some limits. The Law Society, together with the Bar Council, has been making sustained representations to the Joint Select Committee currently reviewing the Bill on a very important limitation. It concerns the extent to which these powers should or should not be allowed to intrude, whether inadvertently or otherwise, and whether by means of interception or surveillance, on communications and communications data that are protected by legal professional privilege.

  • We all know the importance of privilege:
  • The common law developed right that is now 500 years old.
  • The highest right known to the law.
  • A right that has evolved into a fundamental common law right.
  • A right that is also protected by Articles 6 and 8 of the European Convention on Human Rights, as well as being recognised and protected under the law of the European Union.

Accordingly, privilege is jealously guarded, not only by the legal profession but also by our judiciary, since it is the common law which has shaped the evolution of this right into its present status and has repeatedly stated at the highest levels that privilege is sacrosanct. That status, and the supremacy of privilege as a right to communicate in absolute secrecy, has also long been fully recognised by Parliament, which has ensured that provisions protecting privileged communications have been included - with one notable exception - in every statute and statutory instrument that confer, for example, investigatory and evidence gathering powers.

The very real consequence of this is that previously no state agency or public authority - for example, the police, the SFO, HMRC, the Bank of England, the FCA etc - has been entitled under English law to compel a citizen or his lawyers to reveal the contents of their communication. In short, English law confers an absolute protection upon privilege which can never be overridden, even if this means that, for example, the police and other law enforcement agencies - and indeed the courts - are potentially deprived of relevant, even crucial, evidence or information. The House of Lords 1996 decision in Derby Magistrates is the best example of this.

The draft Investigatory Powers Bill, along with RIPA, are unique in failing to recognise the supremacy of privilege and to accord it anything like these appropriate levels of protection. It appears that Parliament did not debate whether RIPA was intended to override privilege, and it is clear that the House of Lords was reluctantly driven in its 2009 decision in McE to accept, as a matter of interpretation, that it was nevertheless Parliament’s intention that RIPA could permit the use of covert surveillance techniques to be used, in certain circumstances, to listen to privileged conversations between clients and lawyers. However, that decision caused the House of Lords to warn of the very “real chilling effect” that such surveillance activities can have on the effectiveness and openness which should govern communications between client and lawyer. They proceeded quite clearly on the basis that such interference should happen rarely.

It is probably the case that revelations over the last year, especially the Investigatory Powers Tribunal decisions in Belhadj and other cases, have led us to realise that although we thought - even hoped - that interference with privilege under RIPA and related security services legislation was exceptional, the probability is that it seems to be happening on a more routine basis.

This has the ability to undermine privilege, which is already under attack from the way in which some of our criminal justice and regulatory enforcement bodies seek to chip away at a client’s ability to assert privilege. The draft Bill is therefore an incredibly important opportunity for the legal professions to lobby and persuade Parliament through the Joint Select Committee to reassert the importance of privilege and the primacy of the right that it represents, by inserting express protection for the privilege on the face of the Bill.

I was fortunate enough to give evidence on behalf of the Law Society to the Joint Select Committee last week, as its expert on the subject. Who knows what the Joint Select Committee will conclude, but it is fair to say that it seems to have fully grasped the implications of what the Law Society is saying (and indeed the Bar Council, Liberty and other bodies) about the impact on this famous and important right if steps are not taken to amend the Bill in the way that is being suggested.

I have been concerned for some time that unless such steps are taken to correct what the House of Lords clearly reluctantly held in McE in 2009, then we are sleep walking into a situation where the right to privilege will be more and more undermined and its value more and more diminished. As the year in which we have rightly celebrated the 800th anniversary of Magna Carta draws to a close, I hope that all lawyers in the UK will join together in working to protect this right by supporting the efforts of The Law Society and the Bar Council.

23 December 2015

In my last blog, I considered a case in which the Court rejected a claim to litigation privilege...

...over communications between the Claimant’s representative and two potential witnesses whom the Claimant met for the purposes of seeking their help with his intended litigation. The claim for privilege was denied because the witnesses were deceived as to the purpose of the meetings which they attended with the Claimant’s representative: see PAG v RBS. In Hallows v Wilson Barca [2015] EWHC 3188 (Ch), a claim to litigation privilege was accepted by the Court, even though the party with whom the Claimant communicated was unaware of the Claimant’s aim of using their correspondence for his threatened litigation. However, that very ignorance ultimately undid the privilege because the communication concerned was with a Local Authority subject to the Freedom of Information Act 2000, as explained below.

In the Wilson case, the Claimant sued his former solicitors for failing to register the fact that he claimed to have rights of way over a London property which his solicitors failed to register when title to the property was registered. The Claimant believed that this failure materially affected the development value of the property. To help prove this, his current solicitor sought the views of the planning department of the relevant Local Authority on whether planning permission would be granted. Accordingly, he wrote to the Local Authority asserting that he was investigating the likelihood of obtaining planning permission, albeit no definite proposal was being submitted because his client was looking for “in principle” advice on the acceptability of the proposed application. The Local Authority was asked to treat this request for Pre-Planning Advice (PPA) as confidential.

The defendant became aware of the PPA so provided when the Local Authority responded to its freedom of information request, although it did not receive the Claimant’s solicitors letter. HH Judge Jarvis QC accepted that the Claimant’s solicitor’s communications with the planning department were covered by litigation privilege because the lawyer was seeking advice from a third party in respect of existing litigation and for the dominant purpose of aiding him in the conduct of that matter. And this was not withstanding that the Local Authority was unaware of the Claimant’s underlying purpose in seeking the PPA. While rejecting the defendant’s argument that this manner of seeking the PPA was somehow “immoral” or a “trick” - because it would have been highly unlikely that the Local Authority would have provided the PPA had it been aware of that purpose - the Judge nonetheless agreed that the Local Authority’s ignorance of the Claimant’s motives was the very undoing of the claim to privilege.

This was because the privilege was lost because the Claimant had not kept in mind that because Local Authorities are statutory bodies, they fall within the scope of FOIA. Whilst acknowledging that the legislation contains exemptions in relation to privileged advice, that does not apply where the Local Authority simply receives or provides information on the basis that it is within the normal course of business, and not in relation to litigation. In this case, the Local Authority had no indication at all that the request made of it was in the context of litigation or that any privilege could possibly exist:-

“It seems to me that if a solicitor seeks advice in this way, and it does not reveal in any way that it is going to be covered by LPP, then it has to be subject to the duties of the Local Authority under the [FOIA]. The solicitor knows that there could be no restraining of a Local Authority unless he puts it on notice of the legal professional privilege. He should know that this information will come into the public domain. … Once it is the position that a Claimant through his solicitor accepts that information can come into the public domain, he is impliedly and necessarily … waiving that … privilege.”

That being so, there was no basis for injunctive relief. But HH Jarvis QC went on to suggest that even if privilege could have been maintained, this was not a case where it was appropriate to grant equitable relief. The primary reason for this was that the way in which the application for advice was dealt with enabled the disclosure to the Defendant’s solicitors to take place. Once it was disclosed to them, the Judge did not think that they should have done anything other than read it and consider it. Since the Defendant’s solicitors were not put on notice that the advice was obtained for the purpose of litigation - they were not provided by the Local Authority with the Claimant’s original letter which asserted confidence - there was nothing to indicate that what they were given was covered by the privilege.

02 December 2015

The PAG v RBS litigation - concerned with alleged mis-selling of interest rate swap contracts - has thrown up another privilege judgment ([2015] EWHC 3341 (Ch.)). In this one, Birss J has held that meetings with potential witnesses induced by one side’s deception could not be said to have been held for the dominant purpose of the litigation and accordingly secret recordings of those meetings were not protected by litigation privilege.

In this latest skirmish, R, the founder of PAG, induced two individuals, J and G - both former employees of RBS at the time the swap contracts were entered into - to meet him, ostensibly to discuss whether they could provide consultancy services to PAG. As the Judge found, it was clear that R’s true motive in procuring these meetings was to seek information and evidence which might assist PAG in the claim it then intended to bring against RBS. To further that end, R deliberately deceived them about his motives, since he did not consider that either individual would meet him if he told them why he wanted to meet them. Nor did he tell them that the meetings were being recorded because he thought they would be more likely to speak openly about RBS if they believed they were speaking off the record. Both individuals confirmed in their evidence that they believed the meetings were to discuss the furthering of their respective business relationships with PAG and both were disappointed when they discovered R’s deception.

The issue for Birss J was whether such a conversation could be privileged. As a first point, he accepted (para 29) numerous common law authorities to the effect that a verbatim recording or transcript of a non-privileged conversation cannot be privileged even where it can be said that the reason that the recording was made was for use in litigation. That focussed the enquiry on whether the recorded conversation was made in circumstances that satisfied the litigation privilege “dominant purpose” test.

Both parties accepted that the dominant purpose is to be assessed objectively, but the Judge rejected RBS’s contention that “objective” in this context meant from the point of view of a dispassionate observer who was aware only of the information which had "crossed the line" between the two parties, in other words, passed openly between them. That would have meant that R's secret purpose was irrelevant. Since the only facts known to an objective observer were the facts known to J and G, then looked at that way, the purpose of the meeting was to catch-up or to discuss the possibility of working with PAG in the future. The Judge preferred PAG’s approach to assessing objectivity:

“The test is objective in the sense that the decision is one for the court not the parties. The decision is arrived at objectively, taking into account all the evidence. That includes evidence of what the persons involved say their intentions were. RBS's submission is in effect that the court is to imagine a sort of officious bystander. That seems to me to be unnecessarily complicated.”

However, this test was ultimately applied to RBS’s benefit: on the one hand, assessed objectively, R’s purpose in arranging the meetings was to gather evidence for the litigation. Equally plainly, assessed objectively now, the purpose of the individuals in attending the meetings with R was to catch up and discuss possible future business. Starting from those facts, Birss J did not think it made a lot of sense to pretend that one could distil a dominant purpose from those two clear but entirely divergent purposes:

“.. the critical point is that [R] actively deceived J and G, [R] induced them to attend and speak freely by representing to [them] that the meeting was a catch-up and was concerned with possible future business. [R] knew or it was obvious to him that they were only likely to attend and speak on that basis. It is the existence of this deception which distinguishes the circumstances from the example of the solicitor taking a proof of evidence … In this case [R] cannot complain if the Court concludes that the fair and correct way of assessing what the dominant purpose of the meeting was, is to look at it from [J and G’s] point of view. If [R] had not misled these two gentlemen then things might be different but that is not what happened.” [Para 41].

Accordingly, the Judge held that the dominant purpose of the meetings was not for the purposes of litigation and accordingly the meetings were not privileged and so neither were the recordings or the transcripts of the recordings.

What this decision shows is that while the Court will usually place considerable weight on the dominant purpose of the person who procured the meeting in which the relevant communications were made (see for example Guiness Peat v Fitzroy [1987] 1 WLR 1027), here, R’s motives were undermined by his deception of the individuals whose assistance he sought. As Millett J observed in Plummers v Debenhams [1986] BCLC 447 [at p459 a]

" … it is not open to a party to litigation to withhold production to a relevant document by claiming that the purpose for which it was brought into existence was to obtain legal advice in connection with contemplated litigation, when that purpose was deliberately concealed from the other party, and when the document contains and its conclusions are based on evidence obtained from the other party only by suppressing the purpose for which it was required."

A further issue in this judgment concerned a privileged email that PAG inadvertently disclosed to RBS, which revealed the existence of the recordings of the meetings with J and G. The appropriate course would have been for the bank’s solicitors to have written to PAG’s solicitors about the disclosure as soon as it was identified and for an application for permission to use the email to have been made at the earliest opportunity.

25 November 2015

Property Alliance Group Limited v The Royal Bank of Scotland PLC [2015] EWHC 3187 (Ch) is a decision following on from that of Birss J last June when the Judge ordered that certain documents be reviewed by another Chancery Division Judge to see whether or not the claims to privilege over those materials were well founded.

The litigation concerns allegations that RBS induced PAG to enter into interest rate swap agreements that employed three month GBP LIBOR as a reference rate. PAG claims that by proposing such swaps, RBS implicitly misrepresented that it was not rigging the relevant LIBOR rate. Whilst RBS admitted involvement in rigging the LIBOR rates for other currencies, it denied misconduct in relation to the setting of any GBP LIBOR rates.

To address this, and in order to focus the massive disclosure exercise that resulted, RBS disclosed “high level” internal reports, reviews and summaries relating to the allegations of LIBOR misconduct. In relation to such documents. attention focussed on the role of the Bank’s ESG (Executive Steering Group). At the earlier hearing, Birss J had not been not satisfied that its role in relation to the Bank’s handling of its LIBOR investigations justified claims to privilege over these materials and hence he made an order for inspection by Snowden J.

In advance of the Judge’s inspection, RBS put forward further witness statements to justify its claims to privilege. Consequent upon these, the Judge accepted that the ESG documents fell into two categories:

  1. Confidential memoranda in the form of tables prepared by RBS’s solicitors, which advised and updated the EGS on the progress, status and issues arising in the underlying regulatory investigations.
  2. Confidential notes/summaries drafted by the solicitors concerning discussions between the ESG and its legal advisors at the ESG meeting. All of these documents were produced by the solicitors for the ESG and they were expressly marked “privileged and confidential” and were communicated to the ESG either before or following their meeting.

The Judge was content with these descriptions, although suggested that the tables “informed and updated” the ESG on the progress, status and issues in the investigations, rather than advising and updating them. The term “advised”, he thought, was a loaded term in the current context, since on inspection it was clear that many of the relevant entries in the body of the documents were no more than a brief factual recital of a recent event that had occurred or which was scheduled.

Mindful of the fact that over the years solicitors have tended, in addition to offering legal advice, to offer a range of what might loosely be described as business services, with the result that not all communications between solicitor and client will necessarily be for the purpose of giving or obtaining legal advice (para 20), the Judge was “entirely satisfied” (as per Three Rivers (No.6)) that Clifford Chance, who were the authors of the documents, were engaged by RBS in a “relevant legal context”, which thus brought privilege into play: the evidence made it clear that RBS was facing regulatory investigations in a number of jurisdictions that could have had - and did have - the consequence that RBS was subjected to very large regulatory penalties and consequent private actions for very significant sums of money. Dealing with and co-ordinating the communications and responses to such regulators was a serious and complex matter upon which RBS naturally wished to have the advice and assistance of its specialist lawyers. CC were engaged to provide that advice and assistance which was undoubtedly related to the rights, liabilities and obligations of RBS and the remedies that might be granted against it either under private law or public law.

And notwithstanding that not every communication and document passing between CC and the ESG necessarily gave direct legal advice, the Judge was also satisfied (per Balabel) that both types of high level documents formed part of a “continuum of communication and meetings” between RBS and the solicitors, the object of which was the giving of legal advice as and where appropriate (emphasis added): the tabular memoranda prepared for the ESG meetings fell precisely into the type of documents described in Balabel as “information … passed by the solicitor or client to the other as part of a continuum aimed at keeping both informed so that advice may be sought and given as required”. While the tables did not in terms asked the question “what do you want us to advise you on?”, their purpose was clearly to provide a comprehensive and up to date summary of developments in the regulatory investigations as the basis for the discussions at the regular ESG meetings.

As for the summary minutes of those meetings, these demonstrated that lawyers from different jurisdictions supplemented the contents of the tables with reports and references to some of the meetings which they had attended and the communications which they had had with the regulators on behalf of the Bank. Importantly, according to the Judge:-

“ … The lawyers also gave their impressions of those matters, they responded to questions as to RBS’s position, and they gave their suggestions as to what RBS should do next in the context of the regulatory investigations. The role of the lawyers at such meetings was to convey information to the members of the ESG and to provide them with legal advice.” (Para 30).

PAG sought to argue that it could not be the case that the entirety of these documents were privileged. It sought to draw an analogy between minutes of the strategic decisions taken by the ESG, and minutes of decisions taken by a Board of Directors, which it argued would not be privileged. Snowden J rejected these submissions:-

“As I have indicated above, in Balabel, Taylor LJ held that all documents forming part of the continuum of communications between lawyer and client for the purposes of obtaining legal advice would be privileged, even if they did not expressly refer to legal advice, provided that they were part of the “necessary exchange of information of which the object is the giving of legal advice as and when appropriate. It is therefore quite clear that the communication of information between a lawyer and client can be privileged, provided that it is information that is communicated in confidence for the purposes of the client seeking, and the lawyer, legal advice. The test is one of relevance and purpose: the source of the information makes no difference.”

As for the examples given in Balabel by Taylor LJ of the types of communications that are not privileged, these were far removed from the ESG high level documents. The tabular memoranda were entirely focused on providing the information concerning the Regulatory Investigations which the ESG needed to know: they did not contain extraneous material. Further, so far as he could detect, the summary minutes of the ESG meetings were similarly focused and did not appear to have recorded discussions or decisions taken on matters unrelated to the regulatory investigations with which the lawyers were continuing to deal. (Para 33).

The Judge also noted that if the ESG high level documents had been prepared by the ESG itself, recording its deliberations or decisions, then elements of PAG’s submissions might have had some force. As to this PAG further argued that ESG was essentially acting in a supervisory or managerial role in relation to part of RBS’s business and that if briefing papers listing the investigations or minutes of its meetings had been prepared internally by an RBS employee, these documents would not have been privileged and would have had to be disclosed, albeit with any references to legal advice redacted. PAG also focused on the description of Clifford Chance’s role, as per the evidence, of also acting as the Secretariat for the meeting. How could that be privileged?

Snowden J could see that depending on the facts a Court might not uphold a claim to privilege in respect of the minutes of a business meeting simply because the minutes were taken by a lawyer who was present and subsequently sent them to his clients. The same might also apply if, for example, solicitors were asked to send press cuttings from its own library to the client for the purpose of a Board Meeting because the client’s own public relations department could not find them. But in either case that would be because the Court would have taken the view that the lawyer was not being asked qua lawyer to provide legal advice (Lord Roger in Three Rivers No.6). The lawyer would simply have been asked to take the minutes or collect the press cuttings and to supply them to his client because it was convenient for him to do so.

But that was not this case and the Secretariat description should not be taken out of context:-

“The documents and … [the] evidence show that Clifford Chance did not organise or attend the ESG meeting simply, or even primarily, to provide administrative support to the ESG. The ESG meetings all had a very substantial legal content and it is no surprise that … the lawyers present led the discussions. They were doing so because they were handling the many regulatory investigations and claims in different jurisdictions on behalf of RBS, and the ESG meetings were being held so that the lawyers concerned could give information and legal advice to the members of the ESG as to what to do about those investigations and claims. In that legal context it was entirely understandable that Clifford Chance should take the lead in deciding how to present the relevant information to the ESG members, in setting the agendas and co-ordinating the meetings, in leading the discussions and preparing the minutes. They were not providing those services as a simple matter of administrative convenience: they were doing so as an integral part of their provision of legal advice and assistance to the ESG.” (Para 42).

In summary, this is a very helpful decision for entities the subject of regulatory investigations. Advice given by its lawyers (whether internal or external) to its internal committees set up to deal with such matters will almost certainly fall within a legal context that allows their deliberations and minutes to be protected by legal advice privilege so long as these are focussed on the overall conduct and progress of the investigations and notwithstanding that information is imparted eg in tabular form that does not necessarily impart legal advice at every step of the investigation. While the Judge noted that certain limited types of documents could still be open for attack as outside the privilege, so long as the committee is set up with the conduct of the investigations at its heart, and minuted accordingly, these deliberations will not become available to claimants.

In conclusion, those establishing groups to manage investigations should consider:

  • Where a committee or steering group is established to manage an investigation, it should not be assumed that all its workings will automatically be privileged, even if a major part of its mandate is to seek and receive legal advice. PAG is obviously helpful where the committee is set up well in ensuring that most communications will be protected by privilege.
  • The legal context of the investigation should be kept in mind and referred to regularly in the documents, in order to make clear that the discussions form part of a process of seeking and giving advice, even if no advice is being given at that moment.
  • The membership of the committee should be kept to as few people as possible and lawyers (in-house or external) given a prominent role - the fact that the lawyers here chaired the meetings was referred to by the judge.
  • It is important that, when updating the client on factual developments, lawyers from time to time give their impressions of the impact of such developments on the client’s legal position.
  • All communications with the committee should be marked “Confidential and Privileged”: this is not determinative, but is always helpful when asserting privilege.
  • It is vital to ensure there is consistency as to the basis of the claim to privilege. In this case PAG was able to exploit differences in what RBS said as between correspondence, witness statements and skeletons to cast doubt on the claim to privilege.
16 November 2015

It is sometimes hard to believe that the great financial crisis started at least seven years ago and yet major litigation arising from those events is still coming before the English Courts.

Often still in their early stages, these claims are starting to give rise to applications for disclosure of internal bank documentation that sheds light on what was going on in relation to key issues the subject of the litigation. Two recent cases in which claims to privilege were made over such documentation have shown, on the one hand the vulnerability of the banks in having to disclose contemporaneous privileged documentation to their shareholders and, on the other, the way in which privilege protects the Banks’ communications once the litigation has arisen.

In my first blog for some months, I start with the case of Sharp v Blank, Lloyds Banking Group Plc and Others [2015] EWHC 2681 (CH).

It is often not appreciated that, subject to an important exception the focus of this decision, there is a general rule that a company is not entitled to assert privilege against its shareholders when they are in litigation with each other. The foundation of this rule is the same as the foundation of the similar general rule that applies in the case of trustees and beneficiaries: just as a trustee who takes advice as to his duties in relation to the running of a trust, and pays for it out of the trust assets, cannot assert privilege against the beneficiaries who have, indirectly, paid for that advice, so too a company taking advice on the running of the company’s affairs and paying for it out of the company’s assets cannot assert a privilege against the shareholders who, similarly, have indirectly paid for it.

However, there is an exception to this rule which is that a shareholder cannot, for example, seek counsel’s opinion taken by the company in respect of a matter in dispute between them. In Woodhouse & Co v Woodhouse [1914] 30 TLR 559, it was held (as per the headnote) that the rule does not apply where the company has brought an action against the shareholder, even though the shareholder has set up a counterclaim alleging the invalidity of the resolution authorizing the action. Lush J commented that in the absence of such an exception it would otherwise be “absolutely impossible for a company in litigation with a shareholder to obtain confidential advice. Where a company obtained advice in the common interest and paid for it out of the common fund, undoubtedly the shareholder would have a right to see it. But that did not apply where the interests of the company and the shareholders were adverse. The fact of a counterclaim alleging that the company’s name ought not to have been used made no difference, if the opinion were obtained by the company to enable it to carry on the litigation.”

Sharp is a group action brought by Lloyds Banking Group shareholders over its acquisition in 2008 of the former HBOS. At the first CMC, Nugee J was asked to consider as a matter of principle whether Lloyds’ claims to privilege against the Claimants in respect of legal advice obtained back in 2008 prevailed against its shareholders. Essentially, Lloyds sought to withhold from disclosure advice received from its solicitors and other legal advisors relating to the acquisition, as well as and its participation in the UK Government’s Recapitalisation Scheme in November 2008.

Lloyds sought to argue that the exception to the general rule applied here because even at this early stage the parties’ interests were “adverse”. For this proposition, the bank argued that there needed to be a “common interest” between the parties (as per Lush J above) for the general rule to apply, so that once their interests were adverse the exception that prevented disclosure came into play.

Nugee J rejected this contention: the authorities including Woodhouse were all consistent with the notion that the exception to the general rule applied “where the advice taken by the company is in relation to litigation - that litigation being actual, threatened or in contemplation.” Expanding on this, he added:

“… the foundation of the exception is the fact that not only the interests of the parties have diverged, but that litigation, actual, threatened or in contemplation, has caused the company to take advice in defence of, in connection with, or relevant to, that actual, threatened or contemplated litigation.”

Lloyds sought to circumvent this by arguing that as soon as litigation was reasonably contemplated then the interests of the company and the shareholders could be seen to diverge and thereafter the shareholders were not entitled to see any legal advice taken by the company. The foundation of this argument was Re Hydrosan Limited [1991] BCLC 418, where Harman J held that the issue of a notice convening an extraordinary general meeting and of a circular explaining the nature of the business to be considered at that meeting, was a date from which it plainly could be contemplated that there might well arise litigation.

Nugee J refused to accept that this enunciated a general principle that once the company was committed to a particular course of action, litigation was therefore really in contemplation. Looking at the facts of Hydrosan, Nugee J noted that there had been a previous section 459 petition and the shareholders were obviously parties who had been at loggerheads, such that it was perhaps not surprising that litigation was readily in contemplation, or that any advice about the rights issue the subject of the EGM could be seen to be advice in connection with that dispute which was then in contemplation.

On the facts before him, Nugee J was unpersuaded that there is any general principle which enabled him to conclude that litigation was actually or reasonably in contemplation on 18th September 2008 - the date when Lloyds announced that it had agreed with HBOS to form an enlarged group. Even though dissenting voices were raised at an analyst meeting at that time, the Judge said that it was one thing to say the Board could reasonably have expected some dissentient shareholders to be unhappy with the decision; and quite another to say that litigation was in the circumstances reasonably contemplated. It therefore did not follow from the facts that an EGM was being called in order to approve a transaction that the Board was unanimously recommending that litigation could be said to be in reasonable contemplation. And even if it was shown that there were circumstances which made it appropriate to conclude that litigation was in reasonable contemplation sometime in September or October 2008 it did not follow that all legal advice taken from that date by the Board was advice in defence of or in connection with that contemplated litigation.

It was only advice of the latter type, namely advice which was obtained by the company to enable it to carry on with litigation, advice which was in connection with that dispute, and advice in defence of the contemplated litigation, which fell within the exception to the general rule and so would be privileged against the shareholders.

This decision is no real surprise in terms of its application of well-established principles, but it may come as a nasty reminder to many companies and their advisers that in the shareholder/company scenario, privileged advice which hitherto only the company is privy to can nonetheless see the light of the court room day when these interests fall out. And as Sharp demonstrates, it takes much more than the embarking upon a corporate course of action that might in due course lead to litigation to trigger the exception - if the falling out with shareholders takes place at a later date, so that litigation cannot be said even to have been in contemplation when the advice was sought then the company’s hitherto privileged advice will have to be disclosed if relevant to issues in the dispute between them.

In my next blog I will look at a decision in which advice taken by a bank in contemplation of litigation was, unsurprisingly, held to be privileged.

08 July 2015

Legal Advice Privilege and the Gathering of Information - Some Common Sense in Hong Kong

The Hong Kong Court of Appeal has rejected the English Court’s approach to the scope of legal advice privilege laid down in Three Rivers (No.5). By rejecting the focus on a narrow “client within a client” grouping which can alone communicate with their lawyers under the cloak of this head of privilege, Hong Kong has restored some common sense - and a much more workable test - to this troubled area of privilege.

Introduction

Last month, the Hong Kong Court of Appeal held that Three Rivers (No.5) does not represent Hong Kong law. This is of course the 2003 English Court of Appeal decision well-known for the challenges it presents companies who wish consultations with their legal advisers to benefit from the protection of legal advice privilege. Widely condemned by commentators as having been wrongly decided, there has been no opportunity in the intervening 12 years to ask England’s Senior Courts to reconsider its merits.

It is therefore of considerable interest that Hong Kong’s CITIC litigation (see below) presented a golden opportunity for Three Rivers (No.5) to be fully reviewed, resulting in the conclusion that it does not represent Hong Kong law. While the decision will be of little precedent value before the English Courts - and indeed will throw up additional challenges on cross-border matters - it says something that a Special Administrative Region within the People’s Republic of China (albeit one whose jurisprudence is firmly based upon and steeped in the English common law, and whose courts still regard England’s higher court decisions as being of strong persuasive authority) can be guided by “rule of law” principles to reach a decision that is long overdue in the very jurisdiction from which the concept of privilege originated. So how has this state of affairs come about?

The Problem

The challenge faced by companies (and other large organisations) when seeking legal advice in relation to non-contentious matters arises from the way in which Three Rivers (No.5) was decided. In summary, the Bank of England sought legal advice in order to prepare its submission to the 1992 Bingham Inquiry set up to examine the way in which the collapsed BCCI Bank had been regulated by the BoE in London. The BoE had appointed a committee of three senior Bank officers – known as the Bingham Inquiry Unit (BIU) - who worked with their external legal advisors in preparing its submission. In doing so, they communicated with a large number of BoE personnel in order to obtain information to guide the preparation of that submission. In litigation with BCCI’s liquidators (represented by the Three Rivers District Council) some years later, the Court of Appeal held that legal advice privilege only protected from disclosure the communications between the BIU and the legal advisors, with the consequence that all communications between the BIU or the external advisors and other representatives of the BoE, including the Governor himself, were outside the scope of legal advice privilege: since litigation privilege was unavailable (the Bingham Inquiry being a non-adversarial process) all such communications were discloseable to the liquidators.

This decision has been treated as meaning that preparatory communications made with or by other representatives of the client, not being those who have been deputed to seek legal advice on the company’s behalf, will be outside the scope of legal advice privilege, even if those communications were intended for submission to the client’s lawyers or prepared at their request in order to enable legal advice to be sought. In other words, for the purposes of legal advice privilege, the “client” is a narrowly focussed group of individuals within the wider client entity such that the only communications protected by advice privilege are those (a) prepared by this narrow group and (b) addressed to the lawyers; or (c) received by this narrow group from the lawyers.

This approach causes ongoing practical difficulties for corporate clients in terms of trying to work out who within the organisation can communicate for the purposes of seeking legal advice with the benefit of privilege, and who cannot. Such difficulties are thrown into stark relief by the fact that, once a matter becomes contentious, they fall away since communications with other corporate representatives will, if the requirements for litigation privilege are satisfied, be protected. This is particularly noticeable in relation to internal investigations which can often start as non-adversarial matters (where only advice privilege is available) and then become adversarial, such that litigation privilege is available - and with it the ability to engage in protected communications with all corporate representatives. Such investigations produce a prodigious quantity of new material, much of it highly sensitive, including investigation reports, witness statements, and so on; but until that uncertain moment is reached where the matter can be classed as adversarial, all of this material is vulnerable to disclosure to regulators and potential future adversaries in litigation.

The CITIC decision

Against this background, hopes may not have been particularly high that the Hong Kong Court of Appeal in CITIC Pacific v Secretary for Justice and Commissioner of Police would do anything other than follow Three Rivers (No.5) - just as the trial judge, Wright J, had done.

CITIC concerned the execution of search warrants authorising the seizure of a large number of documents held by CITIC in relation to its forex trading and various related trading announcements. A blanket claim of privilege was made in respect of the documents thereby seized as a result of which they were sealed pending the determination of the privilege claims. One particular category which Wright J held was not protected by privilege concerned documents relating to the gathering of information from “third parties”, being employees of the plaintiff other than those in the Group Legal Department. Applying Three Rivers (No.5), Wright J concluded that that meant that the “client” of the external legal advisors was the Group Legal Department; and that other employees of CITIC (including a qualified solicitor in the Company Secretariat Department) who had communicated with the external lawyers in respect of the same matter should be regarded as third parties. The consequence of that was that privilege did not attach to their communications, whether they were sent directly from such employees to the external lawyers or collected through the legal department with the intention that they should be submitted to them.

The Court of Appeal’s route to disagreeing with Three Rivers (No.5) started with its concern that the restriction on the scope of advice privilege through a control mechanism of the narrow approach to the identification of “the client” was incompatible with the modern day “rule of law” rationale of the privilege. As the House of Lords has expressed it:

“… it is necessary in our society, a society in which the restraining and controlling framework is built upon a belief in the rule of law, that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers’ legal skills in the management of their (the clients’) affairs, should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else…”

The Court of Appeal thought this rationale equally applicable in Hong Kong as it was “perfectly consonant with [privilege] being constitutionally protected [in Hong Kong, under the Basic Law] to reinforce the rule of law as a core value in our society” - and it went on to hold that that value was in effect undermined by the Three Rivers (No.5) “client” approach. Whilst recognising that this was a means of placing limits on the scope of privilege, its preference was to deploy a dominant purpose test (which it felt was just as capable of “effectively screening out unmeritorious claims for LPP”), since the English control mechanism placed undue restrictions on corporates seeking legal advice. It sought to demonstrate this by considering documents generated in the course of a transaction or event. These are never protected by either head of privilege and their production to a solicitor cannot alter their character. However, the processing of knowledge to be derived from such documents and its reduction into a documentary form for the purpose of seeking legal advice (whether for litigation purpose or for non-litigious purpose) is different:

“If such document comes into existence as part of a process in the communication with a lawyer with a dominant purpose of getting legal advice, the compulsory disclosure of the same would impinge on the confidential communication between a client and his lawyer. Prima facie, the right to confidential legal advice under Article 35 of the Basic Law is engaged.”

In the Hong Kong Court’s view, it is meaningless to have a right to confidential legal advice if the protection is confined to communications setting out that advice:

“Lawyers need to have the relevant information from their clients before proper advice can be given. Thus, it is a necessary incident of the right to confidential legal advice that the whole process is protected by privilege so as to safeguard the confidentiality. In the context of a corporation, where the necessary information may have to be acquired by the management from employees in difference departments or at various levels of the corporate structure, there is a need to protect the process of gathering such information for the purpose of getting legal advice. It would be meaningless to have a right to confidential legal advice if the management is hampered in such process by the concern that statements taken in that process could be open to discovery. Additionally, particularly in the present day, it is unlikely that a small group of employees within the legal department of a corporation would be likely to have all the technical knowledge or skills that may be required to obtain information for, and put together, suitable instructions for the corporation’s lawyers. To adopt a restrictive definition of who constitutes the client in such circumstances would be just as likely to impinge upon the ability of the corporation to seek and obtain meaningful and useful legal advice, since it might well discourage those defined as the client for the purposes of legal professional privilege from seeking the input or assistance of other employees who might be better qualified or able to provide it.”

This is the heart of the judgment and these are astute observations that focus on the very real difficulties which many English lawyers can attest have been caused by the Three Rivers (No.5) approach. It is therefore little surprise that the Court of Appeal in CITIC agreed with the original approach of Tomlinson J at first instance in Three Rivers (No.5), as follows:

“… if the principle is that a person should not be in any way fettered in communicating with his solicitor, and must not be fettered in preparing documents to be communicated to his solicitor, it must be axiomatic that it is the confidentiality of the whole process of communication which requires protection, not just those documents which can be recognised as comprising the actual or final communication. This becomes particularly obvious when one considers the case of a corporation which can only act through individuals, perhaps needing to act through many.”

Reflections

So, where does this leave us? It is now clear (subject to any appeal to the Court of Final Appeal) that Three Rivers (No.5) does not represent the law in Hong Kong (nor indeed in Singapore and other common law countries), thus leaving the English position somewhat out on a limb. It does not mean that the English courts will necessarily follow suit, although one hopes it may cause them to stop and think - not least because of the problem practitioners handling cross-border matters between Hong Kong and England now face, namely two competing approaches to advice privilege that cannot lead to the same result in both courts. This will mean that practitioners will have to keep the challenges posed by Three Rivers (No.5) in mind - at least until an opportunity to ask the English Court of Appeal - or more likely the Supreme Court - to revisit that decision arises. If it ever does, it will be interesting to see what it says about the Hong Kong Court’s reasoning.

A final observation: the Court of Appeal’s adoption of the dominant purpose test as its preferred control mechanism on the scope of advice privilege is not one that would necessarily be accepted in England. Aside from the fact that a “dominant purpose” can be difficult to prove, it isn’t strictly necessary, as the House of Lords demonstrated in Three Rivers (No.6). So be it - it is never a perfect world and lawyers will no doubt learn to live with these two major differences between the approaches of the Hong Kong and English courts.

26 June 2015

The Court of Appeal (Criminal Division) has toughened its stance on the need for a waiver of privilege where an appeal is advanced based upon eg the incompetence of the appellant’s trial lawyers whose services are dispensed with prior to the appeal. In R -v- Achogbuo [2014] EWCA Crim 567, Lord Thomas LCJ said:

“Of late it has become the habit for a number of cases to be brought on appeal to this court on the basis of incompetent representation by trial solicitors or trial counsel. As in this case, many such cases proceed without any enquiry being made of solicitors and counsel who acted at trial. That means that the lawyer who brings such an application acts on what is, ex hypothesi, the allegations of a convicted criminal - and in this case a convicted paedophile. For a lawyer to put forward such allegations based purely on such a statement, and without enquiry, is in our view impermissible. Before applications are made to this court alleging incompetent representation which is based upon an account given by a convicted criminal, we expect lawyers to take proper steps to ascertain by independent means, including contacting the previous lawyers, as to whether there is any objective and independent basis for the grounds of appeal. As long ago as 1997 in R -v- Doherty and McGregor [1997] 2 Cr App R 218, this court drew attention to the fact that it was proper for fresh representatives as a matter of courtesy to speak to former counsel before grounds of appeal are lodged. Today circumstances have changed. The frequency of this kind of appeal makes it clear to us that counsel and solicitors would be failing in their duty to this court if they did not make enquiries which would provide an objective and independent basis, other than complaints made by the convicted criminal, as to what had happened.” (16 and 17)

The failure in this case to consult the prior legal team caused significant costs to be incurred with the result the Court used its powers under s.20 Criminal Appeal Act 1968 to strike out the appeal as frivolous. (S.20 provides: "If it appears to the registrar that a notice of appeal or application for leave to appeal does not show any substantial ground of appeal, he may refer the appeal or application for leave to the Court for summary determination; and where the case is so referred the Court may, if they consider that the appeal or application for leave is frivolous or vexatious, and can be determined without adjourning it for a full hearing, dismiss the appeal or application for leave summarily, without calling on anyone to attend the hearing or to appear for the Crown thereon.")

Commenting that the Court expects “not only the highest standards of disclosure but also strict compliance with the duties of advocates and solicitors”, the LCJ added:

“It is the fundamental duty of advocates and solicitors to make applications to this court after the exercise of due diligence. In cases where the incompetence of trial advocates or solicitors is raised, the exercise of due diligence requires, having made enquiries of trial lawyers said to have acted improperly, taking other steps to obtain objective and independent evidence before submitting grounds of appeal to this court based on allegations of incompetence.”

The failure to do that in Achogbuo had the further and serious consequence in that the Court reported the solicitors to the Solicitors Regulation Authority. The Lord Chief Justice returned to this theme in R -v- McCook [2014] EWCA Crim 734, where the CACD was faced with another reference pursuant to s.20. Here, the grounds of appeal were directed at a matter arising in the appellant’s first trial, in relation to which his conviction had been set aside (the appellant having been convicted following a second trial). Dismissing the appeal on the basis it was plainly vexatious, the LCJ reiterated that it is always desirable to consult those who have acted before in a case where fresh counsel and solicitors have been instructed. Whereas in Achogbuo [2014] EWCA Crim 567 the Court stated that it was necessary to do so where criticisms of previous advocates or solicitors were made, or grounds were to be put forward where there was no basis for doing so other than what the applicant said, it was now necessary to go further “to prevent elementary errors”:

“In any case where fresh solicitors or fresh counsel are instructed, it will henceforth be necessary for those solicitors or counsel to go to the solicitors and/or counsel who have previously acted to ensure that the facts are correct, unless there are in exceptional circumstances good and compelling reasons not to do so. It is not necessary for us to enumerate such exceptional circumstances, but we imagine that they will be very rare.” (Para 11)

Once more, the solicitors concerned were referred to the Solicitors Regulatory Authority.

15 June 2015

As Green J noted in Devon & Cornwall Autistic Community Trust (trading as Spectrum) -v- Cornwall Council [2015] EWHC 129 (QB), it is common in the Court of Appeal Criminal Division (“CACD”) for appellants who have been convicted to instruct new legal representatives for the appeal and then “to blame their predicament upon the alleged misconduct and/or breach of duty of previous legal representatives. In such circumstances, the CACD will not, ordinarily, entertain such an appeal without the appellant having waived privilege and without the previous legal representatives having had an opportunity to explain their position to the Court: see e.g. R -v- Cook [2014] EWCA Crim 734.”

Green J has applied the same approach in a civil case where a party sought relief from sanctions (pursuant to the Court of Appeal decisions in Mitchell -v- News Group Newspapers Limited [2013] EWCA Civ 1537 (“Mitchell”), and Denton -v- TW White Limited [2014] EWCA Civ 906 (“Denton”)) consequent upon a failure to comply with court orders. Pursuant to Mitchell, the burden of proof lies with the party seeking relief from sanctions to persuade the court to grant relief. In particular, the court will want to consider why the default occurred (Mitchell para [41]).

In Cornwall, Green J found the reasons advanced for the procedural failures “to be opaque”. Although the Claimant had experienced internal difficulties as a result of the engagement of senior personnel with the police, there was no evidence before him to explain how or why these events actually caused the failure on the part of the Claimant to comply with the court orders. Further, there was no direct evidence explaining why the Claimants’ legal team had withdrawn from the case. A witness statement had suggested that it was the communication by the Defendant to the Claimant’s legal representatives of the police involvement that led to the lawyers terminating their retainer and instructions and that this termination was unjustified. However, this was

“… a deeply unsatisfactory manner in which to advance an explanation. On the face of it, I can see no reason why the mere communication of that information would cause the Claimant’s legal advisors to refuse to continue to act unless there were some other, additional, facts, of which I am unaware, that gave rise to serious professional embarrassment on the part of those legal advisors. In my judgment, the reasons which explain why matters have come to this pass cried out for proper and detailed explanation. In circumstances such as this, I would have expected a detailed witness statement from senior employees of the Claimant setting out, with full particulars, the precise events which have led to the present situation and, for reasons set out below, a waiver of privilege thereby permitting the legal advisors to explain themselves. I do not consider that any issue relating to privilege can amount to an obstacle to the provision of such a proper explanation. The position of the Claimant now is to blame the conduct of its prior legal advisors which, it is said, could lead to regulatory complaints and litigation. I do not accept that a claimant can hide behind privilege as a reason for not providing an explanation to the court which justifies such an assertion which is advanced by way of exculpatory justification.” (paras 21 and 22).

After referring to the position in the CACD (See above), Green J continued:

“In the present case, as I have observed, no adequate explanation has been provided by any employee of the Claimant and all that I have before me is a series of unsubstantiated assertions of a particularly serious nature about the conduct of previous legal advisors.”

Whilst Green J did not read Mitchell as precluding in all cases reliance upon the conduct of present or past legal advisors, the suspicion he harboured was that the reason for the breakdown in relations between the Claimant and its previous legal advisors and which led to the latter’s departure had some connection to the problems which the Claimant’s senior employees were then facing in relation to investigations being conducted by the police. It was for this reason that the case “cried out for a full, detailed and candid explanation of the relationship between the Claimant and the previous legal advisors.” Although criticism was essentially directed at the conduct of the previous solicitors for the Claimant, Green J could not ignore the fact that the QC they instructed also no longer appeared for the Claimant. That justified at least the prima facie assumption that both were aware of their professional duties and will not have acted lightly. This was a further reason which compelled the conclusion that the explanations proffered fell far short of being adequate.

In the event, an inadequate explanation does not preclude of itself relief from sanctions and Green J went on to order that, on the one hand, the pending trial would not be vacated, but on the other the Claimant would still be allowed to adduce witness evidence albeit pursuant to a tight timetable backed up by an unless order.

20 May 2015

The fact that there have been privileged communications cannot qualify the lawyer’s duty to not knowingly mislead a Court or to take the risk that a Court might be misled. So confirmed the Administrative Court in Brett -v- Solicitors’ Regulatory Authority [2014] EW HC 2974 (Admin).

Here, a newspaper journalist unmasked a high profile but anonymous blogger, initially by gaining illegal access to his email account. The paper’s lawyer (B) advised the journalist that the story was unpublishable, from a legal perspective, if it was based upon unlawfully obtained information, whereupon the journalist sought to verify the blogger’s identity from publicly available sources.

Having apparently done that, the blogger was informed that the newspaper planned to publish an article exposing his identity, whereupon an injunction was sought to prevent publication. Following an adjournment, the blogger’s lawyers wrote to the newspaper interrogating a statement made by their Counsel at a preliminary hearing to the effect that the blogger had been identified “largely” by a process of deduction. This suggested, said the lawyers, that their client was identified, in part, by a process other than deduction. They asked, amongst other things, whether the journalist had at any time made any unauthorised access to the blogger’s email account, bearing in mind (they said) that the journalist had “a history of making unauthorised access into email accounts”. In response, B wrote that he regarded this as “a baseless allegation” intended to prejudice the paper’s defence of the action (albeit he did not explicitly deny the journalist had acted illegally).

Subsequently, the journalist’s witness statement set out an account of how he identified the blogger, but he failed to state clearly that this was done only by reference to publicly available information. Thereafter, in ignorance of the earlier hacking of the email account, the newspaper’s Counsel filed a skeleton argument asserting that the blogger’s identity had been established “using publicly available materials, patience and simple deduction”.

As a result of the Leveson Inquiry, the paper disclosed emails and other material which recounted the journalist’s original disclosure that he had hacked the blogger’s account. B gave evidence to the inquiry, in the wake of which the SRA brought proceedings before the SDT against him, alleging inter alia a breach of Rule 11.01 (“knowingly allowed the Court to be misled…”). The SDT found the allegation proved beyond reasonable doubt, and that at the best B had turned a blind eye to what he had been told about the hacking. B’s appeal under Section 49 Solicitors Act 1974 was unsuccessful: the Court found there could be no doubt in the circumstances that the Court had in fact been misled into believing that there had been no illegal activity on the journalist’s part.

The privilege issue which arose which was that B was concerned by a perception that the SDT, as part of its reasoning, had appeared to be of the view that he was under a duty to disclose to the Court that the journalist had initially identified the blogger by means of his unlawful access of the blogger’s account. That, B asserted, would have contravened the journalist’s privilege which was the basis upon which the disclosure to him had been made.

Approaching the case on the basis that it may well have been the case that the journalist made his hacking disclosure on an occasion of confidentiality or privilege, that did not excuse B: the duty not knowingly to mislead the Court or not to take the risk that it will be misled, was not incompatible with the duty of confidentiality to a person who had disclosed material on an occasion of legal professional privilege. B was, like any other lawyer, always in a position to avoid misleading the Court or to remove that risk without breaking the privilege. In this respect, said Wilkie J, there were several options open to him, none of which B took:

  1. Obtain the agreement of the journalist to waive privilege, so that the true factual position could be presented to the court.
  2. Alternatively, correct the misleading impression given by the witness statement by making it clear that it only intended to convey that the identity of the blogger could have been revealed through publicly available sources, as evidenced by the fact that the journalist had undertaken such an exercise. Wilkie J commented that “In the absence of a waiver of privilege [B] could have adopted the position that [the paper] was not prepared to say how it was that [the journalist], in fact, discovered the identity of [the blogger].”
  3. A third option was for B to disclose to his instructed counsel the true position concerning the circumstances in which the journalist had initially discovered the blogger’s identity and to invite them to correct the skeleton and in open court to make a statement, different from the one which was in fact made. This would have avoided giving a misleading impression to the court. 
  4. A fourth option was for B, on behalf of his newspaper client to abandon defending the claim without revealing the information given to him by the journalist on an occasion of legal professional privilege.

Wilkie J concluded that “None of these options would have involved breaking the confidence in which [the journalist] had made his disclosure to [B], but each of them would have avoided allowing the court to be misled.”

A salutary lesson, reinforced by the Lord Chief Justice’s trenchant observation that:-

“Every lawyer must be alive to the fact that circumstances can arise during the course of any lawyer’s professional practice where matters come to his knowledge (or are obvious to him) which may have the effect of making the duty to the Court his paramount duty and to act in the interests of justice. … The reason why that is so important is that misleading the Court is regarded by the Court and must be regarding by any disciplinary tribunal as one of the most serious offences that an advocate or litigator can commit. It is not simply a breach of a rule of a game, but a fundamental affront to a rule designed to safeguard the fairness and justice in proceedings.”.

02 March 2015

There has been a run of cases on the without prejudice privilege over the last year, so I thought I would cover another useful decision in my second blog of the year.

In Vestergaard Frandsen A/S etc & Ors v Bestnet Europe Ltd & Ors [2014] EWHC 4047 (Ch) the defendants wished to adduce in evidence WP correspondence that allegedly evidenced the claimants’ intransigent approach to settlement negotiations. They argued that the claimants had lost their entitlement to the protection of the privilege because, while their communications with the claimants reflected a genuine attempt to settle matters, the claimants’ replies did not.

The court (Dep High Court Judge Iain Purvis QC) rejected this as being without merit, because once a party has made a without prejudice offer, the recipient of the offer is plainly free to make a without prejudice response. He noted that the response may be to make a counter-offer, it may be to ask for more information, or it may be simply to reject the offer outright. He noted that the recipient may even choose to ignore the offer completely: “all those responses will be protected by the privilege.”

Noting that there was copious authority in support of these propositions, he referred to the well-known passage in Cutts -v- Head in which Oliver LJ made clear that the privilege protected all communications, which included “of course, as much the failure to reply to an offer as an actual reply”. If the privilege covers the failure to reply to an offer, it obviously must include the rejection of an offer. The Judge said:-

“Even without this authority, it is in my view plain from first principle that a rejection of a without prejudice offer (without making a counter-offer) is not admissible in evidence. No such rejection could be given in evidence in isolation, that is to say without also providing the initial offer as well (indeed the entire chain of correspondence). …. It logically follows that it can never be open to one party who has made a genuinely “without prejudice” offer to disclose the response to that offer without the consent of the offeree.”

The Judge further rejected a response to this argument to the effect that an initial without prejudice offer was not in fact subject to joint privilege at all, but rather to a unilateral privilege belonging to the writer of the letter. So the respondent suggested that the joint privilege only crystallised once a positive response making a genuine counter-offer had been received. To this, the Judge said:-

“This imaginative suggestion is not supported by any authority. Indeed it is in my view flat contrary to what Oliver LJ said in Cutts -v- Head… that the “failure to reply to an offer” was as much protected as an actual reply. If [Counsel] were right, a failure to reply would never be protected, because the writer of the original letter would always be able to waive his privilege. Furthermore, his approach contradicts the definitive statement of Lord Esher in Walker -v- Wilsher that “nothing that is written or said without prejudice should be looked at without the consent of both parties, otherwise the whole object of the limitation would be destroyed.”

Obvious points all, perhaps, but useful to have them clarified.

02 January 2015

The last quarter of 2014 saw the usual rush of decisions on privilege so I will kick off my 2015 blog with a look at one of the more important of these decisions, concerning the without prejudice privilege.

The courts have often said that the basis for this privilege rests on the public policy of allowing parties to make admissions in order to try to settle their dispute, in circumstances where those admissions will be inadmissible against them if settlement is not achieved. Equally, the privilege can rest upon an implied or express agreement between the parties to keep their communications inadmissible, for example with the “without prejudice save as to costs” convention. In many cases, especially where the parties’ communications are marked “without prejudice”, both justifications will apply.

But over the last 15 years, the Courts have grappled inconclusively with the question of when the contractual basis for the privilege can apply and in particular whether there needs to be an underlying dispute to which the privilege is tied. In the two recent House of Lords cases, Bradford & Bingley plc v Rashid and Ofulue v Bossert, one saw a split of opinion. Lord Mance in Ofulue was clear that:

“It is not open to a party or parties to extend at will the reach of the "without prejudice" rule or of the "privilege" it affords as regards admissibility or disclosure.”

In the earlier Bradford case, Lord Browne had said:

“In both Cutts v Head and Rush & Tompkins itself the communications in question had been expressly made "without prejudice" and, generally speaking, such communications will attract the privilege even without the public policy justification of encouraging parties to negotiate and settle their disputes out of court.”

In Avonwick Holdings Limited v Webinvest Limited & Anor [2014] EWCA Civ 1436, the Court of Appeal came down in favour of the Lord Browne approach. Lewison LJ said:

“There are two bases for the operation of the without prejudice rule. The first rests on public policy and that policy is to encourage people to settle their differences. However, in order for that head of public policy to be engaged there must be a dispute. The concept of dispute is given a wide scope so that an opening shot of negotiations may fall within the policy even though the other party has not rejected the offer. … In order to decide whether this head of public policy is engaged, the court must determine on an objective basis whether there was in fact a dispute or issue to be resolved. If there was not then this head of public policy is not engaged. … The other basis for the rule is contractual, that is by contract the parties may extend the usual ambit of the without prejudice rule. In Cutts v Head the dispute was over so the justification was purely in terms of contract. In Unilever the possibility of extending the scope of the rules was expressly envisaged … .”

The Judge added:

“Freedom of contract is a basic principle of English law. If A and B agree for valuable consideration that their communications will not be used in civil proceedings in court, I find it difficult to see why, as a matter of principle, the court should not uphold their agreement. Confidentiality clauses are the stuff of commercial life. Moreover, it is often open to two parties by agreement to immunise their acts from what would otherwise be their legal consequences. A non-reliance clause in a contract would immunise what would otherwise be a misrepresentation and an entire agreement clause would immunise what would otherwise be a collateral warranty. This must however be done by agreement. One person cannot unilaterally impose a rule on another.”

In Avonwick, the Court of Appeal agreed with the judge that on the facts there was no dispute at the time the communications said to be protected by without prejudice (WP) took place. Were they, then, protected by the fact that the communications and underlying heads of terms when exchanged were marked WP - and also subject to contract? Lewison LJ again:

"The question boils down to this: was there a contract in this case? It is not a good start that the communications are headed, “Subject to contract” which is generally taken to mean that no legal consequences are to flow from the communications. [Counsel] argued that the subject to contract heading applied only to the heads of terms, but since they were separately headed “Subject to contract”, that does not seem to me to be a strong argument. [Counsel] has pointed to many usages of the phrase, “Without prejudice” apart from the settlement of extant or contemplated disputes. One such usage is that the user of a statement does not mean to give up any right that he may have. In my judgment, that is the way in which the phrase is used in this case.”

This is arguably a surprising conclusion to this decision, that is, that the WP marker was negatived by the subject to contract tag. But it seems that, had the subject to contract tag not been used, or only used on the heads of terms, the Court might well have accepted that the parties had contracted to treat the communications as WP – and therefore inadmissible in court proceedings – arising from the fact both parties without debate used the WP tag. Given what Lewison LJ had said earlier, namely that “If A and B agree for valuable consideration that their communications will not be used in civil proceedings in court, I find it difficult to see why, as a matter of principle, the court should not uphold their agreement,” parties need to be clear that such an agreement is in place – if that is what they want – or to think through the consequences of agreeing such an arrangement.

I predict this is not the last time this issue will trouble the English courts.

13 November 2014

Last week, it was revealed in a claim before the Investigatory Powers Tribunal against the Security Services and GCHQ that the UK intelligence services may have been routinely targeting third party privileged communications as part of their covert operations…

While the precise facts of what has happened are unclear, inevitably concerns have been raised as to whether the intelligence services’ policy in this regard has given rise to abuses of process that have caused injustice in any individual case. This is because of the sacrosanct nature of privileged communications which Parliament has consistently recognised by ensuring that all statutory powers of investigation or evidence gathering are clearly circumscribed so as to ensure a client’s privilege is unequivocally off limits.

Summary extracts from these policy documents (now publicly available) repeatedly emphasise the importance of privilege and the fact that the confidentiality in such communications is “fiercely guarded by the law”. But equally, it is clear (even in the most recent guidance) that the services may “obtain, retain or disclose” privileged materials, albeit “only so far as necessary and proportionate for the proper discharge of its functions in accordance with s.2(2)(a) Security Service Act 1989.” It is this, and the assertion that “the service must not use [privileged] material in a way that gives the appearance of enabling the State to gain an unfair advantage in current or future proceedings” that lawyers find so disturbing.

But we must bear in mind that in 2009 the House of Lords in McE -v- Prison Service of Northern Ireland (concerned with surveillance of lawyer meetings with clients in custody) inclined to the view that privilege extends only to the protection of the product of legal consultations, rather than rendering their surveillance unlawful per se. Lord Philips in that case suggested that privilege does not confer at common law an unqualified right to privacy of lawyer-client communications. Accordingly, s.27(1) RIPA 2000 entitles the State to undertake covert surveillance of privileged communications where conducted with an authorisation properly granted under that Act. Of course, what it does not do, and the House did not hold, is to permit the use of such materials in Court proceedings.

Why then the outrage at last week’s disclosures? Despite its decision in McE, the House was uncomfortable with the targeting of lawyer-client exchanges. Lord Phillips said:

“It would seem desirable, if not essential, that the provisions of the [Covert Surveillance Code of Practice] should be such as to reassure those in custody that, save in exceptional circumstances, their consultations with their lawyers will take place in private. The chilling factor that LLP is intended to prevent will not then occur.”

In the event, new codes of practice were introduced that were designed to reinforce this, but if the materials just disclosed are taken at face value, the interception of privileged materials as part of security operations may have become chillingly routine, notwithstanding. It is this that rightly has caused so much alarm and demands close scrutiny and urgent re-evaluation.

23 October 2014

A court in Australia has recently handed down a decision that will be surprising to many English (legal) eyes, but not to Australian or American lawyers.

In Bartolo -v- Dautta Galla Aged Services Limited [2014] FCCA 1517, the applicant had been dismissed from his employment by the respondent’s chief executive. That step had been taken after the CEO had met with the respondent’s Board, following its receipt of both a privileged report from its external legal advisers who had undertaken an investigation into aspects of the applicant’s conduct and oral advice from one of the lawyers who prepared the report. The applicant sought disclosure of the report in the course of proceedings brought under the Australian Fair Work Act 2009. The thrust of his application was that the state of mind of the board was at issue, and because this had been reflected in the respondent’s pleadings, it was thereby “enlivened” (sic) as an issue in those proceedings. In other words, the Board had formed a view that led to his dismissal which was based on the advice of the lawyers; and so the applicant contended that he was entitled to see documents relevant to the board’s state of mind and these included the report provided to the board by the lawyers.

The Federal Circuit Court (Judge Whelan) accepted the application, even though it accepted that the external lawyers who undertook the investigation had been retained to investigate and to provide legal advice regarding workplace laws and the Board’s governance and compliance responsibilities. Notwithstanding, their resultant report lost its privileged status because the respondent acted in a way that was inconsistent with the maintenance of its claim to privilege over that report. The Judge’s reasoning towards this startling (at least to English eyes) conclusion began with an acceptance that a mere reference to having received legal advice does not amount to a disclosure of it, nor could a mere reference to a decision having been made after consultation with lawyers amount to a disclosure of the contents of the lawyers’ advice.

However, because, following the meeting with their lawyer, the Board recommended to their CEO that the applicant be dismissed, and reasons for his dismissal were detailed in their pleadings, the respondent had raised specifically the Board’s reasons for recommending the termination of the Applicant’s employment. Based on the respondent’s evidence that the legal advice had had some bearing on the Board’s recommendation to the CEO, the Judge held:

“It is difficult to see how the Board could have formed those views at the [Board] meeting … other than on the basis of the report and the advice given by [the external lawyers]. … The involvement of the Board in the decision to terminate the Applicant’s employment is an issue in these proceedings. The reasons given for the Board’s recommendation to [the CEO] to terminate the employment are set out in the pleadings. At the very least, this opens to scrutiny the basis for those recommendations which it is likely came from the report of [the external lawyers]. That report appears to have dealt with a range of matters some of which may have attracted legal professional privilege and some of which in the normal course may not. I am satisfied that it would be unfair to the Applicant … to allow the Respondent to rely on those pleadings without disclosing to the Applicant the factual basis on which the Board formed the reasons which gave rise to the recommendation that the Applicant be dismissed.” [Paras 93 and 95]

At first blush, this is an extraordinary decision (albeit of an inferior court) because there is no evidence of any disclosure of the contents of the lawyers’ advice or reports, nor any reference to content which would, under English law, trigger an application to the effect there had been some sort of waiver.

The guiding principle in this case seems to be that because somehow the Board’s state of mind as to the reasons for its recommendation to terminate the applicant was in issue, then it had effectively pleaded the report into relevance. This is an approach that the English Courts have very clearly rejected (see Bingham LJ in Paragon Finance Plc -v- Freshfields (a firm) 1999 1 WLR 1183), in the knowledge that Australian authority takes a different view, and this is therefore not a decision that on its facts would be applied in England.

In other words, an applicant in the position of Mr Bartolo would not have the right to an order for disclosure of the investigation report under English law. However, the decision does throw into relief the challenge that the respondent would nonetheless have in rebutting his case: in the absence of any other evidence to support the pleaded reasons for his dismissal, the respondent would be faced with the choice of being forced to waive privilege over the lawyers’ report, or leading no (or no adequate) evidence at all. It is for this reason that, in such cases, we often see benefit in the lawyers producing two reports for the client – one over which privilege will be fully maintained, and another prepared in a way that the employer’s decision making can be shared with the employee, without undermining privilege in the other report.

30 September 2014

It is interesting that at least once a decade there is litigation that is so hard fought that it inevitably requires many Court decisions on the way to its final resolution...

The Derby -v- Weldon litigation is an example of this in the 1990s; and perhaps a modern version has been the Tchenguiz brothers’ recent litigation against the SFO.

What these two pieces of litigation have in common is that they have thrown up a number of privilege disputes. In the case of the claims against the SFO, these have required resolution at both Commercial Court and Court of Appeal level. What do we get out of the Tchenguiz brothers’ privilege disputes in the SFO litigation?

In my view, three decisions in particular have demonstrated a hardening of the Courts’ approach when it comes to proving claims to privilege (in this case, litigation privilege). In the decisions concerned - see Eder J at [2013] EWHC 2297 (QB) and [2014] EWCA Civ 136, and the Court of Appeal at [2013] EW8C 2297 (QB) – one can detect the Court undertaking a much closer analysis and testing of the way in which the claim to privilege has been formulated. There is also some indication in these decisions (and see also Westminster International BV & Ors v Dornoch Ltd & Ors [2009] EWCA Civ 1323) that the English Courts are beginning to think about who is the appropriate person by whom evidence is to be put before the Court in order to advance the claim to privilege. Here, there is an interesting contrast with the position in Australia, where there are frequent and lengthy Court hearings whilst claims to privilege are asserted and tested and often subjected to minute cross-examination, including as to the appropriateness of the witness who is advancing the claim to privilege. An interesting example here is Asahi Holdings (Australia) -v- Pacific Equity Partners [2014] FCA 481.

There is no evidence that the English Courts will follow just yet the stringent Australian approach, but what we can say is that the recent SFO decisions do demonstrate a hardening of the Courts’ approach and particularly its willingness to entertain challenges to the effectiveness of the basis upon which a party asserts that it has the benefit of litigation privilege because it has satisfied the all important “dominant purpose” and “reasonable anticipation of litigation” tests.

Without going into the detail of any of these cases, it is notable that in one of his first instance decisions, which the Court of Appeal later upheld, Eder J said of the claim to privilege:-

“Although the magic words “dominant purpose” are used, it seems to me significant that there were no relevant extant proceedings at that stage and although [the deponent] does indeed say that litigation “…was, and remains contemplated …”, such statement is, to my mind, entirely vague and lacks specificity. For example, [he] states that such litigation was and remains contemplated “… against potential defendants …” but does not specify who such potential defendants might be.”

Perhaps we have had it too easy for too long in England before the English Courts. At the very least now, every claim to privilege that needs to be tested in front of a judge should be very carefully analysed by reference to the case law before it is advanced by way of a witness statement.

27 August 2014

English lawyers are brought up to understand that a privileged communication will retain its special status for all time and in all circumstances...

This is reflected in the maxim, “once privileged, always privileged”. Before the English courts, this proposition is rarely questioned. The last time it was, Parker LJ in the Aegis Blaze [1986] 1 Lloyds Rep 203 said:

“The rule has been stated time and time again over a very long period, and in my view it would not be right to depart from it now even if we are not bound by authority, and even if we desired to change it. For my part I do not desire to change it. I think it is a correct rule …”

But common law courts elsewhere have begun to challenge this view, at least where litigation privilege is concerned. In 2006, the Canadian Supreme Court in Blank –v- Canada (Minister of Justice) [2006] 2 SCR 319 placed a time limit on the duration of litigation privilege. It did so by recognising that advice and litigation privileges are “distinct conceptual animals and not…two branches of the same tree”, such that the object of litigation privilege (per Fish J) is:

“…to ensure the efficacy of the adversarial process and not to promote the solicitor-client relationship. And to achieve this purpose, parties to litigation, represented or not, must be left to prepare their contending positions in private, without adversarial interference and without fear of premature disclosure.”

The resultant “zone of privacy” in relation to pending or apprehended litigation is one whereby:

“Once the litigation has ended, the privilege to which it gave rise has lost its specific and concrete purpose—and therefore its justification. … Except where … related litigation persists, there is no need and no reason to protect from discovery anything that would have been subject to compellable disclosure but for the pending or apprehended proceedings which provided its shield…”

Blank was followed in March 2014 by the High Court of Ireland in University College Cork –v- ESB [2014] IEHC 135. Ms. Justice Finlay Geoghegan held that, as the objective purpose of litigation privilege is to give a party the opportunity to properly prepare its case without premature disclosure or interference from the opposing party, then such objective purpose does not require the privilege to automatically continue beyond the final determination of either that litigation or, as per Blank, any closely related litigation.

The Irish decision concerned a claim for privilege over an expert’s report prepared for threatened litigation against ESB by a different claimant arising out of a flood that occurred in 1990. Following a further flooding in 2009 which gave rise to the present claim, ESB relied on the “once privileged etc” maxim to resist disclosure of the earlier report. As, on the evidence adduced, there was no substantive or close connection between the later University claim and the claims arising out of the 1990 flood, the Defendant was ordered to produce the earlier report.

Is there any prospect that this decision will be followed by the English Courts? One is tempted to say “no”. However, one senses that the English judiciary is sometimes left uneasy by the scope of litigation privilege, and decisions such as Re Barings ([1998] 1 All E.R. 673) evidence occasional attempts to keep it within bounds. That said, no decision has addressed the Blank approach; and although Lord Taylor in the famous Derby Magistrates decision ([1996] A.C. 487) referred with approval to the once privileged, always privileged maxim as a “long established rule”, it is often overlooked that in the same case Lord Nichols canvassed the concept of “spent privilege”. As to this:-

“I would not expect a law, based explicitly on considerations of the public interest, to protect the right of the client when he has no interest in asserting the right and the enforcement of the right would be seriously prejudicial to another in defending a criminal charge or in some other way.”

Of course, this is not how the courts approached matters in Canada and Ireland, and “spent privilege” has not been developed by the English courts. Save for a single case in Hong Kong and dismissive comments by Blackburne J in Nationwide Building Society –v- Various Solicitors [1999] P.N.L.R. 52, the idea has long lain dormant.

How would the Blank approach fare here? Impossible to predict, but in the right case with the right set of facts – so long as it only concerned (a spent?) litigation privilege– one can see that the English Courts might well consider following suit.

04 August 2014

Periodically, the question arises whether a solicitor can be compelled to disclose his client’s name and address, and whether the communication of those details by the client is covered by privilege...
While the circumstances in which this issue will arise will be rare indeed, the English Court undoubtedly has jurisdiction (confirmed by s.37(1) Senior Courts Act 1981) to order disclosure, but when will it do so and what is the relevance of privilege?

In JSC BTA Bank -v- Solodchenko (No.3) [2011] EWHC 2163 (Ch) Henderson J ordered disclosure, on the grounds that the client had no present need of legal advice and because the primary purpose of the disclosure was to aid enforcement of a committal order already made. But the decision was reached anxiously, the Judge being alert not to make an order which might inhibit the client’s fundamental right to seek and obtain legal advice from his solicitors. That consideration caused Teare J to refuse to order disclosure of a client’s telephone and email details in JSC BTA Bank -v- Ablyazov [2012] EWHC 1252 (Comm). Here, those details were protected from disclosure by privilege since those communication facilities had been set up expressly for the purpose of giving and receiving confidential and privileged legal advice. 

In other cases, the communication of client details will not be covered by privilege, eg R -v- Manchester Crown Court, ex parte Rogers [1999] 1 WLR 832, where a record of appointment with a solicitor was disclosed. Bingham LJ held that, while such a record involves a communication between a client and the solicitor’s office, it is not “without more” made in connection with legal advice. 

Nonetheless, in SRJ -v- Person(s) Unknown [2014] EWHC 2293 (QB) it was argued that the court has never treated the client’s identity as information that can be protected by privilege; further, that the client’s name is supplied to his solicitors before any retainer arises.

In SRJ, the defendant authored two blogs in which confidential information was published. The claimant believed him to be a former employee and sought details of his identity in order to assess the risk of further breaches of their confidentiality. In response, his solicitor’s evidence was that his true identity had been disclosed in the strictest confidence and for the purpose only of obtaining advice and assistance, with the result that the solicitor took appropriate measures within the firm to maintain his anonymity. 

Sir David Eady held:-

“… the Defendant’s identity was indeed the subject of legal professional privilege and thus protected (whether “absolutely” or according to settled practice). Even if it were not, there are powerful reasons not to override the duty of confidence. It was not simply a piece of neutral background information, as would generally be the case with a client’s name, since both he and his solicitor were well aware that the claimant was keen to establish his identity (for perfectly legitimate reasons): it was accordingly central to their discussions about the retainer that confidentiality should be maintained.”

In a concluding comment, the Judge was at pains not to minimise the concerns of the claimant as to possible harm arising from the defendant’s breaches of confidence and thus it was with some reluctance that he found himself unable to grant the relief sought, ultimately driven to that conclusion by the underlying policy considerations that accord privilege its absolute nature.
21 July 2014

Legal professional privilege confers a unique degree of secrecy over the communications between lawyers and their clients....

It is therefore an extremely powerful right that has been recognised as a fundamental common law and human right: quite right, as it is central to everything that lawyers do. Privilege has been around for over 500 years, so one might have thought that the rules on privilege are fairly clear. But the extraordinary thing is that privilege generates huge numbers of disputes around the common law world every single year. I have been a student of the subject for over 20 years and it never ceases to surprise me how such a huge variety of challenges to privilege crop up in our courts on such a regular basis.

I sometimes wonder if this is because litigants – or even, dare I say it, their lawyers - do not always fully understand the scope, reach and limitations of privilege; whether it is because sometimes we forget to accord privilege the respect that it deserves (being such a fundamental right), or whether challenges are taken to privilege because it is thought it is being used as a cloak to hide something really interesting or evidentially relevant.

I will explore some of these issues in a regular monthly blog that I am beginning now. I shall do so around the cases as they come out each month. This will not be an in-depth study of the law of privilege but it will just take a quick look at some of the more interesting cases that come to light and will examine why they are interesting.

The first case that I thought I would comment on is the recent Judgment of Blair J in Rochester Resources Limited -v- Lebedev [2014] EWHC 2185 (Com). The important thing coming out of this case concerns the appropriate law to apply when dealing with privilege issues. Here, the claimants sought to use material covered by the WP privilege in pursuing an anti-suit injunction application against the defendants. The document concerned was a draft complaint – stamped “FOR SETTLEMENT PURPOSES ONLY” - prepared by the defendants’ New York lawyers for use in a complaint which, when subsequently filed, was different in material respects from the draft. The claimants asserted this had a bearing on their injunction application. 

One question which arose was the extent to which New York law applied. The claimants argued that where the disputed communication arises in the context of foreign litigation, the question is whether there is a relevant public policy for exclusion: there would be no English public policy justification for exclusion if the communication was not privileged from production in the New York proceedings. Quite rightly, Blair J rejected this:

“Public policy has to be determined on the basis of English law. I do not think that if the draft Complaint is privileged under English law it ceases to be privileged on the ground that it would not be privileged from production in the New York proceedings. This is because … the question whether or not a document is privileged is to be determined by English law, for reasons which are partly practical (see Bourns Inc v Raychem Corp, ibid). The position might be different if the New York courts had themselves decided that the draft Complaint was not privileged from production, and it had entered into the public domain, because in those circumstances confidentiality would have been lost. However, that is not the case here.”

So, an important re-affirmation of the principle that before the English courts it is English law as the lex fori of the proceedings which determines a document’s privileged status. One might suggest that the claimants cannot have been overly surprised by this outcome, but this is a good example of a challenge to privilege where the prize would have been access to forensically useful documents.