Litigation privilege: reminder of issues to consider (High Court)

The claimant, acting as an investment vehicle, had acquired a brewing business from the defendant for investment funds.

When the claimant entered into an agreement to re-sell the business, this resulted in litigation as to whether and to what extent the defendant was entitled to a share of the proceeds. In the litigation, the defendant sought to withhold inspection of two categories of documents on the ground of litigation privilege. These were:

With reference to the authorities, Hamblen J summarised the legal requirements to a claim to litigation privilege as follows:

Hamblen J also summarised the options available to the court when it was not satisfied on the basis of the affidavit and other evidence before it that the right to withhold inspection was established. These were:

The judge further noted that whilst in certain circumstances, a court can order cross examination of the person who had sworn an affidavit, the weight of authority was that this should not be ordered in the case of an affidavit of documents (Frankenstein's case, Birmingham and Midland Motor Omnibus Co Ltd v London and North Western Railway Co and Fayed v Lonrho). Where the issue is whether the documents exist, this is likely to be an issue at the trial and there is a particular risk of a court impinging on that issue at an interlocutory stage.

Applying these considerations to the privilege claim in the case, the judge concluded that the claim for litigation privilege had not been made out and the documents could therefore be disclosed.

In relation to the Barclays documents, Hamblen J was not satisfied that the evidence showed that the dominant purpose of the defendant instructing Barclays was in connection with anticipated litigation. He considered the effect of the defendant's witness evidence to be that there was a suspicion concerning the re-sale of the business by the claimant and that Barclays were asked to investigate this suspicion. Unless and until they confirmed that there was substance to the suspicion, there was no reason to anticipate litigation. That Barclays role was investigatory was borne out by a number of contemporaneous documents which referred to their role as one of checking the position and calculating the payment that might be likely to come to the defendant as a result of the sale. Further, as other contemporaneous documents showed, the defendant had good and independent reason to have the checks and calculations made because of earlier public statements made to the effect that additional payments might be received in the future from the claimant.

In relation to the KPMG documents, Hamblen J also was not prepared to accept that the evidence showed that litigation became the dominant purpose of instructing KPMG. He noted that the retainer letter confirmed that KPMG's retainer covered audit work under clause 3.3 of the CVR, that the next stage contemplated was seeking 'agreement' with the claimant, that KPMG would report in writing and that no mention was made of any anticipated litigation. Subsequent emails from the defendant to KPMG also made no mention of anticipated litigation. If litigation had been anticipated, the defendant's lawyers would have been bound to advise the defendant about the need to preserve disclosable documents and there was no evidence of any discussion about this in relation to Barclays' documents at the relevant time. Even if KPMG's retainer changed because litigation became contemplated, there was no record of this. The authorities required him to subject the evidence to anxious scrutiny and they indicated that it was desirable that the party claiming privilege should refer to such contemporary material as it was possible to do. Here, the contemporaneous documents were not addressed by the defendant in its witness evidence. It may have been the case that litigation did become anticipated and had become a purpose for instructing KPMG. However, it had not been established by the evidence that it was the dominant purpose for doing so.

Hamblen refused the defendant's suggestion that he inspect the documents asserted to be privileged. As the authorities made clear, that was a matter of last resort, it was generally undesirable for the court to consider material not shown to the other party and he was not persuaded that it was appropriate in this case. If the defendant had a good claim to litigation privilege, it should have been able to make it good without reference to privileged material.

The case provides a useful reminder that succeeding with a claim to litigation privilege requires good witness evidence consistent with relevant contemporanous documentation. Retainer letters and other correspondence concerning third parties' instruction are particularly important and will be scrutinised very carefully by the court looking to find whether the dominant purpose of the instruction was litigation. To avoid the difficulty of subsequently proving dominant purpose and maximise protection for fact-finding investigations undertaken before it is clear that litigation will be in prospect, it may be sensible to involve lawyers and have them as author of written reports. If lawyers are involved, legal advice privilege may apply. That can apply whether or not litigation is pending or contemplated. For more on privilege, see Practice note, Privilege: an overview.