Court of Appeal provides useful reminder on narrow application of litigation privilege

by Reed Smith


In the case of Rawlinson & Hunter Trustees SA v Akers & Another1 the Court of Appeal considered the parameters of litigation privilege, providing a useful reminder of how narrow the protection is and the care that must be taken in relation to the production of documents by third parties where a dispute is, or may be, on the horizon.

The particular issue was whether reports produced by liquidators, and shown to the Serious Fraud Office before they applied for search and seizure orders against the Tchenguiz brothers, were protected from disclosure on the grounds of litigation privilege. The liquidators refused to disclose these reports on the basis of litigation privilege protection.

Disclosure was sought by the Tchenguiz brothers in the context of pursuing their substantial claims against the SFO for the action taken against them. The Commercial Court’s decision that none of the reports in question were subject to protection from privilege was upheld by the Court of Appeal.

Principles of litigation privilege

Unlike legal advice privilege, which applies to communications between lawyer and client for the purposes of obtaining legal advice, litigation privilege applies to communications between lawyer or the client and third parties, i.e. non-lawyers.

In that sense it is wider in scope than legal advice privilege and will, for example, attach to witness communications in the context of litigation, or communications with experts.

For a communication to be subject to litigation privilege it must have been made with “the dominant purpose” of being used in aid of or for obtaining legal advice from a lawyer about actual or anticipated litigation. Where litigation has not yet been commenced it must be “reasonably in prospect”, which has been determined to mean that litigation is “more than a mere possibility”.

Conclusions from the case

The reports in question over which privilege was claimed were accompanied by a witness statement from a solicitor on behalf of the liquidators. Tomlinson LJ explained in the leading judgment that ”it was the identification of dominant purpose which here presented the biggest challenge” from this evidence.

The key points from the judgment are as follows:

  • The party claiming litigation privilege must provide evidence to the Court that they were aware of the real likelihood of litigation with “particular persons or class of persons”.
  • In this case the language of the witness statement did not meet that threshold. Phrases such as “potential causes of action” and “possible claims” lacked specificity, as did vague allusions to “varying scenarios”, “broader implications” or “civil recovery opportunities”.
  • When creating a document it is important to consider whether it has more than one purpose. If so, it is vital that it is made clear in contemporaneous evidence that the contemplation of litigation is the real and dominant purpose. Here the court identified multiple purposes “independent” of litigation for the commissioning of some of the reports. One report was stated to be required in order to “identify all inter-company balances that should be reversed”. Another was to help solicitors “fully understand the accounting treatment of the loan transactions”. The court decided that both reports would have been commissioned in any event, regardless of any contemplated litigation and therefore did not attract litigation privilege.
  • One report had existed for three years and another for two and a half years without litigation ever materialising. Tomlinson LJ stated that this “points strongly against any suggestion that litigation was reasonably in prospect”. He asserted that without an adequate explanation being provided for such pause this “deprives the claim to privilege of plausibility”.
  • Similarly, where reports had never been provided to counsel this made it harder to demonstrate that litigation was reasonably in prospect.

Key lessons

The court’s conclusion is unsurprising given the evidence before it, but it provides a useful reminder to clients who are commissioning reports by third parties in a potentially contentious situation. The following lessons in particular can be drawn:

  • Litigation must be reasonably in prospect at the time a document is produced for it to be covered: this is a relatively high threshold.
  • If there are multiple purposes for commissioning a report to be produced by a third party, then it is unlikely that the document will be immune from disclosure to an opponent in litigation on the grounds of privilege; use in litigation won’t be the dominant purpose.
  • Approach any instructions and communications with third parties carefully, and any internal client communications with a view to laying a contemporaneous paper trail to establish that action was genuinely contemplated at the relevant time.
  • The evidence provided in support of the claim, and indeed contemporaneously, should explain why litigation was properly contemplated even though it may never have eventuated.
  • Documents that are stated to be for the purposes of litigation should be provided to lawyers charged with advising on the litigation.
  • If in any doubt, seek legal advice on the issue before any third party communications take place to ensure that matters are managed to enhance the prospect of protection.

1. [2014] EWCA Civ 136, [2014] All ER (D) 200 (Feb)


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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