Privilege: when is it waived and when does litigation privilege apply?

The latest case on privilege sets out the options available if the court is not satisfied with an assertion of privilege. In this instance, the High Court ordered the claimant to reconsider its claim for litigation privilege, on the basis that it may be claimed only for documents produced when litigation was in reasonable contemplation. The court also dismissed an allegation that privilege had been waived in relation to documents mentioned in the witness statement but withheld from disclosure. In doing so, the case provides a useful summary of the latest law on privilege and confirms the relevant legal tests.

Background

Kyla Shipping Co Ltd v Freight Trading Ltd and others [2022] EWHC 376 (Comm) is an interim decision in an alleged mispricing claim, where the claimant contends that forward freight agreements were concluded at its expense and without the relevant authority.

The issues

In response to pre-trial disclosure, the defendants challenged the claimant’s claim to litigation privilege over documents concerning its investigations and the instruction of an expert prior to the crystallisation and discovery of the mispricing claim.

The defendants also contended that the claimant waived privilege by referring to the expert report and underlying documents in the context of describing in a witness statement the circumstances in which the mispricing fraud was discovered. The defendants argued that if there had been a waiver, it extended to collateral documents on the same issue and would therefore encompass internal communications and communications with the claimant’s legal advisers.

Litigation privilege

There was no dispute about claims for legal advice privilege (namely confidential communications between the lawyers and their clients for the purpose of giving or receiving legal advice).

To make good its claim for litigation privilege, the claimant needed to show that the documents in question were created for the dominant purpose of conducting litigation in reasonable prospect. It is established law that “in reasonable prospect” means more than a mere possibility, but not necessarily a 50% or greater chance.

In his judgment, Charles Hollander QC (sitting as deputy judge) confirmed that the burden is on the party claiming privilege to prove it, and a mere assertion of privilege and a statement of the purpose of the communication over which privilege is claimed in a witness statement is not determinative. If it is not satisfied as to the assertion of privilege, the court has four options:

1) to conclude that the evidence does not establish a legal right to withhold inspection and order inspection of the documents;

2) to order a further witness statement to deal with matters which the earlier witness statement did not cover or on which it was unsatisfactory;

3) to inspect the documents; or

4) to order cross-examination on the witness statement.

In this case, the claimant was ordered to reconsider its claim to litigation privilege, on the basis that it could only claim privilege over documents when “litigation was in reasonable contemplation in respect of the mispricing claim.” At the time the claimant instructed the expert, whose findings helped to uncover the mispricing claim, the investigation was merely a fishing expedition conducted in the hope of finding some “ballast for correspondence” in respect of a pre-existing claim involving different parties. Documents produced before the discovery of the mispricing claim could not be covered by litigation privilege.

Waiver of privilege

The test for whether privilege has been waived is whether there has been reliance on the contents or effect of the privileged material – only reliance on the contents can give rise to a waiver. The Deputy Judge acknowledged that this was not an easy test to apply and in fact gave rise to two questions:

1. Had there been a waiver in relation to the document in question?; and, if so,
2. Does the waiver give rise to a collateral waiver in other documents on the same issue or ‘transaction’?

It was held that the claimant’s solicitor had not waived his client’s privilege in relation to the documents mentioned in the witness statement because he did not refer to them expressly, nor had he relied on them. He had merely referenced these documents in general terms to go through the various steps taken by the claimants which led to the discovery of the mispricing fraud.

Comment

The law on privilege is one of the most complex and developing areas of English law which attracts particularly careful examination by judges. This is, in part, because the lawyer claiming privilege for their client inevitably becomes a judge in their client’s cause. Great care needs to be taken when both protecting and asserting privilege.

In particular, regard should be had to the risk of waiver of any privilege that might otherwise attach to relevant documents. The potential for a waiver to extend to collateral documents emphasises the importance of limiting any waiver that is made to what is necessary. It is common for references to be made to documents in inter-partes correspondence and in witness statements. The conclusion reached by the court in this case indicates that a general reference (as opposed to reliance upon specific documents) does not constitute an automatic waiver of privilege.

See some of our previous Law-Nows on the subject of privilege here:

Purpose, not labelling is key to determining whether privilege has been waived

Waiver of privilege – the “transaction” and scope of waiver revisited

No litigation privilege for consultants’ advice on tax structure despite expectation of regulatory action

Article co-authored by Dominika Gasiorowski, Trainee Solicitor at CMS