Privilege - the key developments in 2022

Privilege is a fundamental right in English law. It enables parties to seek legal advice and to communicate confidentially in the context of litigation without having to disclose those communications to the court or to a third party. Without Prejudice Privilege also allows parties to try to settle disputes in the knowledge that concessions made in negotiations cannot be used against them in later proceedings.

The scope of protection provided by privilege can be difficult to determine and is frequently the subject of litigation. Court decisions provide important guidance and it is vital that both lawyers and their clients keep up-to-date with developments in the law. Decisions made at the time that communications are sent may affect whether or not a document is protected much further down the line.

In this briefing, we look back at some of the most important judgments about privilege from 2022 and consider the practical lessons to be learned from these cases.

For a summary of the different types of privilege please see our “Guide for in-house lawyers” here.

Litigation privilege (1) Why clients can’t (usually) use litigation privilege to hide their identity

One of the most widely discussed privilege cases of the year - Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securites (Europe) [2022] EWCA Civ 1484 (10 November 2022) - went all the way to the Court of Appeal. The Court held that the identity of those instructing lawyers is not inherently privileged. Acknowledging that there was no authority on the issue, Lord Justice Males confirmed that the correct test is whether or not the disclosure of their identity would “inhibit candid discussion” between the lawyer and their client (or the person giving instructions on the client’s behalf). If disclosure would have that effect, then the identity of those persons would be privileged. However, if disclosure of their identity would not inhibit candid lawyer / client discussion it would not be protected. The Court held that extending privilege to cover the identity of the client where their ability to speak candidly to their lawyer would not be affected was “unnecessary” and would deprive the Court of relevant evidence needed to arrive at a just determination of litigation.

Males LJ also acknowledged that, in rare circumstances, the identity of the person giving instructions to the solicitor could reveal aspects of the content of those instructions (which would be privileged) and possibly, litigation strategy. However, he considered this likelihood to be “far-fetched” and confirmed that, in those circumstances, the party would need to provide a convincing explanation as to why there was a good claim for privilege.  A cautionary tale, perhaps, for high-profile clients who wish to hide their role in litigation.

Litigation privilege (2) – more on the dominant purpose test

In Kyla Shipping Co v Freight Trading [2022] EWHC 376, the Commercial Court rejected a claim for litigation privilege. The claimant asserted privilege over an expert report. Charles Hollander QC, a leading commentator on the law of privilege who in this case was sitting as a Deputy High Court Judge, found that the dominant purpose of the report was not for litigation in reasonable prospect. The Court held:

• there was an internal mismanagement issue between the co-owners of the claimant and there was no contemporaneous evidence suggesting that litigation was envisaged in relation to the mismanagement issue for which the report was produced; and
• a witness statement provided by the claimant’s solicitor had referred to the purpose of the expert’s instruction being to provide “ballast in the correspondence” between the arguing co-owners and it was was difficult to square that with the claim for litigation privilege.

This judgment is a reminder of the complexity facing businesses wishing to conduct internal investigations when litigation is not clearly in reasonable contemplation and / or where there may be several reasons for commissioning them. Investigations are sometimes necessary to establish facts or meet regulatory or other requirements. However, this needs to be carefully balanced with the knowledge that privilege may not attach to the associated work product or communications surrounding the investigation. If a business may seek to assert litigation privilege over an investigation there needs to be clear contemporaneous evidence that litigation is considered to be in reasonable prospect at the time the investigation is commissioned and that the contemplated litigation is the dominant purpose doing so. If litigation privilege is not available, it may be possible to protect the investigation by commissioning a solicitor to carry it out by virtue of legal advice privilege. Seeking early legal advice will help clarify the type of privilege that may be available and will help ensure the best possible protection.

No retrospective legal advice privilege

A judgment of the Employment Appeal Tribunal confirmed that legal advice privilege should be judged at the moment a document is created and that a document cannot later acquire privileged status if it becomes the subject of legal advice. In University of Dundee v Chakraborty [2022] EAT 150, the Tribunal rejected the claimant’s claim for privilege over the original version of a report which was later amended by the claimant’s solicitors. The claimant accepted that the report was not privileged at the time it was prepared but argued that it became privileged retrospectively because, if it was disclosed and compared with the final version, it would reveal aspects of their solicitors’ advice. Lord Fairley rejected these arguments, confirming in so doing that there was no difference between the Scottish and English approach to legal advice privilege; the dominant purpose test should be applied to determine whether a document is privileged at the point of its creation.  This decision suggests that there are some exceptions to the well-established principle that a document will be covered by legal advice privilege to the extent that it betrays the content or trend of legal advice.

Don’t confuse privacy with confidentiality

It is well established that, in order to attract legal professional privilege, communications must be confidential. In Jinxin Inc v Aser Media PTE Ltd and others [2022] EWHC 2856 (Comm) the Commercial Court reiterated this requirement but went a step further, clarifying that privacy and confidentiality should not be equated.

The issue centred on documents held on a company’s computer system. The parties asserting privilege over the documents were employees or officers of the company. The claimant challenged privilege on the basis that the employees had no reasonable expectation of privacy against the company regarding information stored on its servers, particularly since the company’s employee handbook gave the company the right to monitor material on its systems “where necessary”. The claimant argued that since a reasonable expectation of privacy was the touchstone of confidentiality, the employees could not assert confidentiality as against the company and the material was therefore not privileged.

Deputy Judge Simon Salzedo KC disagreed. He confirmed that privilege was a substantive right that was rarely overridden. In this case, a “reasonable person would assume that the [company’s] right to monitor and access data on its servers would not extend to locating and exploiting otherwise privileged material”. The employees were therefore entitled to assert the confidentiality of the material as against the company and the material remained privileged.

Disclosure lists – the devil is in the detail

Following the permanent adoption of the Disclosure Pilot Scheme in the Business and Property Courts, it is not surprising that we are starting to see more decisions relating to the application of CPR PD51U (now CPR PD57AD). The case of Tonstate Group Ltd and others v Wojakovski [2022] 2 WLUK 193 is one such decision. This case provides some helpful guidance on the level of detail that should be included in a disclosure list. Solicitors responding to a pre-action disclosure order had made a general statement that some documents were withheld on the basis of “legal advice and / or litigation privilege” but did not specify which documents privilege applied to. Norris J held that the solicitors had not been detailed enough. He referred to the duty on legal representatives set out in CPR PD 51U 3.2.3 (now set out at PD57AD 3.2.5) to satisfy themselves that claims to privilege are properly made and to ensure that the reasons for such claims are properly explained. The solicitors in Tonstate were ordered to further itemise the allegedly privileged documents by stating, in relation to each category of document, the precise ground of privilege being asserted.

English privilege prevails, even when a document has already been obtained abroad

The case of Suppipat v Siam Commercial Bank Public Company Ltd [2022] EWHC 381 (Comm) considered the interesting question of what happens when a document that would be privileged under English law is lawfully obtained through a foreign disclosure process, in this case in Thailand. The Court decided that the documents would remain privileged because, among other reasons, in English litigation all questions of privilege ought to be resolved by applying English law. The key test is whether documents contain information that is “not properly available for use” in the English proceedings. In this case, the documents in question did contain such information and privilege was not lost in the English proceedings simply because the Thai Court decided that it had been in Thai proceedings.

The Court emphasised that in English law, legal professional privilege is a fundamental principle and that courts would not interfere with it lightly.

Without prejudice privilege: broader protection than you may think

In Sportradar AG v Football Dataco Ltd/Betgenius, [2022] CAT 29 of 1 July 2022, the Competition Appeal Tribunal (“CAT”) considered whether privilege should apply to an allegedly “without prejudice” email that had been accidentally disclosed. Betgenius argued that parts of the email were privileged and that it should be replaced with a copy in which the privileged parts were redacted. Sportradar disagreed, arguing that without prejudice privilege could not apply in circumstances where the email also referred to a number of non-privileged commercial issues. The CAT confirmed that the purpose of without prejudice privilege is to exclude from admissibility all negotiations genuinely aimed at settlement. It reminded the parties that without prejudice privilege did not only apply to protect negotiations in relation to legal issues. Provided that the negotiations were “genuinely aimed at settlement”, the nature of the proposals put forward was irrelevant.  In this case, the CAT found that the entire email was covered by without prejudice privilege. There was no case law to support a test to identify the “essential aim” of alleged without prejudice negotiations and it would be impracticable and artificial to separate the commercial matters in the email from the items in dispute.

Whilst this decision may provide some reassurance about the scope of without prejudice privilege, it is important to remember that labelling a communication as “without prejudice” does not necessarily make it so. Courts will always look to the substance of a communication to determine whether without prejudice privilege properly applies.

Watch out for waiver

Waiver is always a matter requiring care from lawyers and parties alike. Several judgments last year confirmed that we should continue to be wary of the potential pitfalls.

In Henderson & Jones Ltd v Ross and others [2022] EWHC 2560 (Ch), the Court declined to order disclosure of certain communications referred to in a witness statement. The witness statement referred to the role of a firm as his employer’s legal adviser and referred to an email of advice from a solicitor at the firm. The statement said that the email was privileged but denied the claimant’s assertion that it referred to balance sheets that were relevant to the dispute and stated that there was “nothing to put [the witness] on alert” in relation to allegations made against his employer. Unsurprisingly, the claimant sought disclosure of the privileged advice, arguing that privilege had been waived. Mr Recorder Richard Smith disagreed with the claimant, stating that waiver of privilege was an acutely fact-sensitive exercise and that the witness’s words, when viewed fairly, objectively and in the proper context, did not constitute a waiver of privilege over the contents of the legal advice.

In other cases, parties were not so lucky. Collateral waiver, or the so called “cherry picking rule” (which provides that a party who relies on privileged material to support its position may be required to disclose other privileged material relating to the same issue) can be particularly problematic. For example, in Clements v Frisby [2022] EWHC 3124 (Ch) the High Court decided that there was collateral waiver of privilege when a claimant referred to the reasons for his solicitors taking time to progress his claim against the defendants. Equally, privilege was found to have been waived in Thomas and others v Metro Bank plc and others (Re Ilya Yurov) [2022] EWHC 2112 (Ch) where a trustee in bankruptcy summarised a Russian legal opinion in a witness statement. The Court ordered that the opinion, the instructions leading to it and all other communications in connection with it should be disclosed. Beware the perils of summarising legal advice.

Perhaps the biggest cautionary tale of them all comes from the case of Pickett v Balkind EWHC 2226 (TCC) in which the High Court refused to grant an application for an injunction to restrain the use of privileged documents that had been disclosed in error. In support of an application for adjournment, the claimant filed a witness statement from his solicitor which explained that an expert was unavailable. The witness statement exhibited a letter from the expert which not only explained the reasons for his unavailability but also referred to preparation of the joint memorandum in the claim, including comments made by the claimant’s counsel. The defendant subsequently pointed this out and the claimant refiled the original application, removing reference to the letter. In considering whether to grant the injunction, HHJ Matthews considered whether privilege in the letter had been waived. One of the key questions raised, which was not the subject of earlier authority, was whether it was significant that the issue to which the disclosed privileged material was relevant went only to interlocutory matters rather than the main issues for trial. The judge concluded that it was not. The claimant had deliberately employed the expert’s letter against its opponent. As a result, confidentiality, and therefore privilege, had been lost. This is an important reminder to check exhibits before serving witness statements, and to redact any privileged material.

High thresholds for iniquity

Finally, a couple of judgments last year considered the “iniquity exception” which provides that privilege may be lost where documents came into existence for the purpose of furthering a criminal or fraudulent purpose. We were once again reminded that the bar to establishing iniquity is high.

In Candey Ltd v Bosheh  EWCA Civ 1103, the Court held that the claimant firm of solicitors could not rely on the iniquity exception to disclose otherwise privileged documents in a claim against a former client. The documents consisted of communications containing legal advice in relation to a fraud claim in which the solicitor firm had defended the former client. The Court of Appeal confirmed that the iniquity exception did not apply because the communications fell squarely within the solicitor-client relationship. The communications did not constitute an abuse of this relationship and the solicitors owed a duty to their former client to keep the information confidential.

In December, in Lakatamia Shipping Company Limited and other v Nobu Su and others [2022] EWHC 3115, the High Court held that the iniquity exception did apply to documents obtained pursuant to a search order, some of which were communications between Mr Su and his lawyers. The issue for the Court was whether the disputed communications were part of the professional engagement of the solicitor or whether there had been an abuse of the solicitor-client relationship such that privilege would not apply. It held that there had been an abuse of the solicitor-client relationship. In contrast to Candey, where the solicitors were advising Bosheh on his defence to a fraud claim, in Lakatamia a judgment had already been obtained against Mr Su who had engaged in a campaign over a number of years to hide his assets and prevent enforcement.

If you require further information about anything covered in this briefing, please contact Ben Longworth, Henrietta Richards, Hoi-Yee Roper or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2023