In two recent cases, Starbev GP Ltd v Interbrew Central European Holding BV  EWHC 4038 (Comm) ("Starbev") and Rawlinson and Hunter Trustees SA v Akers  EWCA Civ 136 ("R&H"), it has been held that professionally prepared correspondence and reports were not protected by litigation privilege.
In this note we briefly consider these cases, in the context of the requirements to be met for a successful claim to litigation privilege.
In Starbev, it was held that the defendant had failed to demonstrate that certain correspondence, created during investigations carried out by a bank (B) and a firm of accountants (A), on behalf of the defendant, Interbrew, were protected by litigation privilege. The Court found that litigation had not been reasonably anticipated at the time of the correspondence and, therefore, had not been the dominant purpose behind its creation.
In R&H it was held that a third party firm of accountants (F), could not withhold disclosure of five reports which it had prepared for a financial institution (K) which had provided funding to a group of BVI companies. Partners in F had subsequently been appointed as joint receivers and thereafter joint liquidators of the companies and their appointment had been recognised in England and Wales by order of the English Court pursuant to the Cross Border Insolvency Regulations 2006.
The Court found that the reports either did not satisfy the dominant purpose test because they were prepared as much for summarising and assessing the financial condition of the companies as for litigation, or because they were prepared so long before litigation (as long as two and half years) that litigation could not be said to have been reasonably in prospect.
Litigation privilege is important because it is the only way of obtaining legal professional privilege outside the context of solicitor-client communications. These cases demonstrate the dangers of assuming that, because litigation is "in the air", a party will be able to rely on litigation privilege. For litigation privilege to apply, a communication must have been created for the dominant purpose of litigation and the relevant litigation must be "reasonably in prospect" at the time the document was created. These tests have a high threshold and the burden of proof will be on the party seeking to claim privilege.
The dominant purpose test may be more difficult to satisfy if the relevant document is commissioned to obtain information or establish facts, which the person who commissioned the document would need in any event to perform his/her other, non-litigation related, functions and whether or not litigation subsequently ensued. In some circumstances, it may be better to produce two documents which cover broadly the same ground: one for use in the litigation and one for more general purposes. The contents of the different documents can then be tailored accordingly. Any additional expense and/or inconvenience is likely to be a price worth paying if this avoids the need to disclose damaging documents in the litigation.
Conversely, there will be situations where the only purpose for commissioning the production of documents will be for use in connection with possible litigation. However, even in those circumstances, the relevant documents may not attract litigation privilege. This is because litigation must be more than a mere possibility; it must be "reasonably in prospect". In Starbev, for example, part of the problem was that documents were created to investigate the defendant's suspicions (which, if substantiated, might lead to litigation), rather than to provide evidence in actual or contemplated litigation.
In view of these difficulties, it is important, at the time documents are commissioned/produced, to:
- record the fact that a document is being/has been created for use in litigation on the face of the relevant document and in instructions to the persons responsible for producing the document; and
- identify the litigation, in respect of which documents are being produced, with as much specificity as possible. If a number of different claims are contemplated, they should all be identified.
If it is not possible to do both these things, that is likely to be a good indicator that it will be difficult to substantiate a claim to litigation privilege in any future litigation.
If that is the case, consideration should be given either to not recording the findings of the relevant investigation in writing or to involving internal and external counsel in a way which would result in the relevant document being covered by legal advice privilege.
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