Written communications and privilege?

(i) Disclosure: that is the obligation of parties in proceedings to disclose all relevant documentary evidence in their possession, both supporting and detracting from their case; and

(ii) Privilege: that is the right not to have to disclose confidential communications between (i) a lawyer and their client for the purpose of giving or receiving legal advice; and (ii) a client/lawyer and third parties created where litigation is contemplated, or has started, and where the dominant purpose of the communication is for use in that litigation (or arbitration).

Unsurprisingly, the dividing line between these two principles, and later attempts by one party to obtain disclosure of potentially damaging documents held by the other, is a fertile and continually evolving ground for satellite disputes.  Two recent cases provide good illustrations.

In Sothebys v Mark Weiss Limited 2018, Sothebys had been appointed by Weiss to privately sell a painting. It sold the same in June 2011. Sothebys’ contract with the buyer could be rescinded and the purchase price reimbursed, if the buyer subsequently provided written evidence questioning the authenticity of the painting and Sothebys also determined it was a counterfeit.

The buyer of the painting provided Sothebys with an expert report saying it was a counterfeit. Sothebys’ expert agreed with this finding and Sothebys rescinded the contract and reimbursed the buyer their money. Sothebys in turn then sought to recover the purchase monies it had paid to the seller. Within these proceedings, Weiss applied for disclosure of correspondence between Sothebys and the two experts, which Sothebys withheld on the grounds of privilege.

In what on the face of it may seem a surprising judgment, the Judge rejected Sothebys claim to privilege. In particular, the Judge held that, looked at objectively, the dominant purpose of the correspondence at the time it was obtained was to enable Sothebys to decide what action it was going to take, not for use in any litigation, and it was therefore disclosable.

The case of UK Holding Limited v E20 Stadium LLP 2018 involved West Ham and its landlord, E20, in a dispute over the number of seats it was entitled to use at the Olympic Stadium in London.

The issue of privilege concerned emails passing between the E20 Board members and its stakeholders, drafted for the purposes of discussing a settlement proposal for a dispute where litigation had not yet started, but was contemplated.

At the first High Court Hearing, the Judge upheld E20’s claim to privilege. However, this was overturned on appeal.

The Court of Appeal Judges stated privilege was only engaged (i) where litigation is in progress or reasonably contemplated; and (ii) the communications have been made for the sole or dominant purpose of conducting the litigation; and (iii) the conduct of litigation included deciding whether to litigate itself, or to settle a dispute giving rise to the litigation. Further (iv) documents that otherwise revealed, or could not be disentangled from, the giving of information or advice, were also covered by privilege.

Applying these rules to the facts, the Judges reiterated that internal communication, which did not comply with the second of the above rules, was not entitled to the protection of privilege. Further, the Judges stated they could not see any justification for covering all internal corporate communications with the blanket (protection) of litigation privilege.

The outcome of these cases shows that where a dispute appears on the horizon it is crucial to manage all communications, particularly internal exchanges. Simply assuming that privilege will apply, or adding this term to the header of a document, is not sufficient. Rather, investing a little time/£ to get advice from your solicitor at an early stage can be a very prudent and worthwhile investment when putting in place an early and effective dispute management strategy.

For more information or to discuss how to resolve your dispute, please contact Tim Toomey.