A privileged position

The key advantage of litigation privilege is that it applies to third-party documents, unlike legal advice privilege, which is restricted to lawyer/client communications. To have the benefit of the privilege, a party must establish that when a document was created: (i) litigation was in reasonable prospect; and (ii)
the document was prepared
for the dominant purpose of that litigation.

In Starbev GP Ltd v Interbrew Central European Holding BV [2013] EWHC 4038 (Comm), the Commercial Court held that litigation was not in reasonable prospect at the time a third-party bank’s reports were prepared.

The bank had been instructed to investigate what were mere suspicions on the part of the defendant; unless and until that investigation confirmed there was substance to the suspicions, there was no real reason to anticipate litigation.

That contrasts with previous authorities where the court was prepared to find that litigation was in reasonable prospect
when a report was prepared even though, depending on its conclusions, a dispute may
or may not ultimately arise
(for example Westminster International BV v Dornoch Ltd [2009] EWCA Civ 1323). It seems to come down to the likelihood, at the time the report was obtained, that its conclusions would lead to a dispute.

Also, in Starbev, it was noted that the defendant’s lawyers had not yet advised of the need to preserve disclosable documents. That was relevant in light of the e-disclosure practice direction (CPR 31BPD), which states
that “as soon as litigation is contemplated”, the parties’ legal representatives must notify their clients of the need to preserve disclosable documents.

In theory, there is no requirement that litigation was ever commenced, so long as it was reasonably in prospect at the time in question. However, it seems in practice, the court
may be more sceptical where proceedings are not commenced for some time.

In Rawlinson and Hunter Trustees SA & Ors v Akers & Anr [2014] EWCA Civ 136, the court said the fact that no proceedings had been initiated almost three years after the date of the report pointed strongly against the suggestion that litigation was reasonably in prospect when it was prepared.

Even if the court is satisfied that litigation is in reasonable prospect, a party must still establish that the document was prepared for the dominant purpose of litigation. This is notoriously difficult. In Rawlinson, the Court of Appeal said the judge was right to emphasise that the mere fact a document is produced for the purpose of litigation is not sufficient to found a claim for litigation privilege.

The court also rejected a claim to litigation privilege for reports obtained by liquidators because “in circumstances which call for clarity and precision” they “made no effort to grapple with the obvious need to establish which of dual or even multiple purposes was dominant if a plausible claim to privilege was to be made out”.

Contemporary indications of a document’s purpose are also likely to be highly relevant. In Starbev, for instance, it was significant that there was no mention of anticipated litigation in the third party’s retainer letter or instructions.

The Irish courts have recently gone a step further. In University College Cork v Electricity Supply Board [2014] IEHC 135, the High Court found that the principle “once privileged, always privileged” did not apply to litigation privilege, so that the privilege would not automatically extend beyond the final determination of the litigation.

The court adopted the approach taken in Canada and departed from English authority, in particular the Court of Appeal judgment in The Aegis Blaze [1986] 1 Lloyd’s Rep 203, which the judge said did not distinguish between the policy underlying litigation privilege as distinct from legal advice privilege.

SJ

Julian Copeman is litigation partner at Herbert Smith Freehills and a member of the London Solicitors Litigation Association Executive Committee