European Disputes
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The doctrine of legal professional privilege is a cornerstone of the English legal system. One aspect of this doctrine, litigation privilege, exists to protect confidential communications or documents between a lawyer and client (or a lawyer and third parties) where: (i) the document has been created by or on behalf of the client or lawyer; (ii) it came into existence once litigation is contemplated or has commenced; and (iii) it is for the dominant purpose of use in litigation.

The use of privilege is often highly contested, as was the case in the recent High Court judgment in Kyla Shipping Co Ltd and another v Freight Trading Ltd and others [2022] EWHC 376 (Comm). As a part of his judgment, Charles Hollander QC (sitting as a deputy judge of the High Court) provides useful guidance on the application of litigation privilege.

This case originated with a separate dispute between the shareholders of the first claimant over a dividend payment. As part of this, various allegations of mismanagement were made in relation to forward freight agreements (“FFAs”) between the claimant and first and second defendant. This led the claimant to instruct an expert to audit the FFAs, which the claimant’s solicitor described in a witness statement as being “for the sake of providing ballast” in the correspondence between the shareholders. Following this, the claimant issued proceedings against the defendants alleging mispricing fraud identified in the expert report. The claimants asserted litigation privilege over the documents relating to the investigations, and in doing so relied on their solicitor’s considerable experience. The defendants, however, argued the mispricing claim had not been in reasonable prospect at the time the expert report was commissioned and the claimant’s solicitor’s description of “providing ballast” was not enough to warrant the protection of litigation privilege over the documents.

The Judge agreed with the defendants that litigation was not in reasonable prospect at the time the expert was instructed, and even if it had been, the claim would have been between the shareholders of the claimant and not the present parties. The evidence provided by the claimants was inadequate to demonstrate a claim for privilege, although the Judge noted this may have been intentional on the part of the claimant’s solicitor so as not to waive privilege. As part of his judgment, he set out some useful principles concerning litigation privilege:

• The party claiming privilege must prove that it applies. A mere assertion of privilege in a witness statement is not enough. The court, if it so desires, is able to inspect the document itself, order further clarification and order cross-examination to conclude whether privilege does apply.

• The document must be created for the “dominant purpose of conducting litigation in reasonable prospect”. That threshold must be more than a “mere possibility” but does not need to meet or exceed a 50% mark.

• Legal advisers must act as “judges in their own client’s cause”, meaning they must pay attention to their duties to the court when determining and advising clients whether there is a valid claim for litigation privilege.

The defendants also argued that the claimants had waived privilege by their explanation in a witness statement of the discovery of the mispricing fraud in the expert report, suggesting that this waiver would include the claimant’s internal communications and communications with their legal team. The Judge disagreed, and found no waiver, noting that there was no reliance on any particular document in the witness statement and no express reference. Instead the claimants had merely summarised the circumstances surrounding the instruction of the expert and the steps leading to the discovery of the mispricing fraud in general terms.

This case serves as a useful reminder of the high threshold that must be satisfied when seeking to assert litigation privilege in English proceedings and, in particular, the duty on solicitors to properly advise their clients on the availability and operation of the doctrine. An incorrect reliance on the principle could be detrimental to a party’s case and could force disclosure of documents that they wish to protect. Parties should also pay close attention to the dominant purpose rule and ensure that any document they are seeking to claim privilege over will satisfy this test.