The extent of litigation privilege

Nicola Sharp of Rahman Ravelli assesses a case that examined whether documents produced by an expert or third party instructed in preliminary investigations are protected by litigation privilege.

The application of litigation privilege was recently considered in the case of Kyla Shipping Co Ltd and another v Freight Trading Ltd and others [2022] EWHC 376 (Comm).

This was an interim decision in an alleged mispricing fraud, where the High Court considered whether the claimant could claim litigation privilege over certain documents which were produced by an expert who was instructed in the course of preliminary investigations. 

Legal professional privilege

The doctrine of legal professional privilege was recognised in common law centuries ago. The earliest recorded instance of the principle dates from the 16th century in the case of Berd v Lovelace. Legal professional privilege is aimed at protecting all communications between a lawyer and their clients from being disclosed and used, whether in or out of court. The basic position is that a document can be withheld from third parties if it is privileged.

Privilege is a right that attaches to the client and may only be waived by the client. There are two main types of privilege:

• legal advice privilege
• litigation privilege.

Legal advice privilege can apply to communications between a lawyer and a client whether or not litigation is pending or contemplated. Litigation privilege, however, can apply to communications between a client or a client’s lawyer and a third party only when litigation is pending or contemplated.

Case summary

The claim in this case arose out of 41 forward freight agreements (FFAs) entered into in 2007 and 2008 between the first claimant (Kyla) and the first defendant (FTL), or in one case between Kyla and either FTL or the second defendant (CTP). FFAs are legal agreements that allow shipping market participants to buy or sell a particular commodity at a predetermined price at a specified time in the future.

The claimants alleged there had been a mispricing fraud, as the FFAs had been conducted in a way that would enrich FTL or CTP at the expense of Kyla.

Kyla claimed that certain documents were protected by litigation privilege as litigation in relation to the FFAs had been in contemplation since at least November 2018. The defendants argued that the evidence presented by the claimants, namely correspondence between shareholders and a witness statement from the claimants’ solicitor, did not support a claim of litigation privilege as litigation was not a reasonable prospect at the time of instructing that expert. They asserted that the instruction of the expert was merely a “fishing expedition”.

The Decision

The High Court agreed with the defendants, stating that the evidence provided by the claimants in support of their claim for privilege was not sufficient - nor did it support the assertion that the documents were created for the dominant purpose of a dispute regarding the mispricing of the FFAs. Separately, the judge held that references in the claimant’s solicitor witness statement to the circumstances in which the mispricing fraud was discovered did not amount to a waiver of privilege, contrary to the defendant’s assertions.

The judge cited the following principles concerning the concept of litigation privilege:

• The party asserting a claim for privilege must show that the document in question was created for the dominant purpose of conducting litigation in reasonable prospect.
• The burden of proof is on the party claiming privilege to establish it.
• An assertion of privilege and a statement of the purpose of the communication over which privilege is claimed in a witness statement are not determinative and are evidence of a fact which may require to be independently proved.
• The party claiming privilege must establish that litigation was reasonably contemplated or anticipated – a mere possibility of litigation is not sufficient.
• It is not enough for a party to show that proceedings were reasonably anticipated or in contemplation. The party must also show that the relevant communications were for the dominant purpose of either (i) enabling legal advice to be sought or given, and/or (ii) seeking or obtaining evidence or information to be used in or in connection with such anticipated or contemplated proceedings.
• The assessment of evidence in support of a claim of privilege is subject to “anxious scrutiny”.

The judge held that the claimants had not discharged their burden of proving their claim for litigation privilege. To this end, the judge laid down the four options available to the court when it is not satisfied that the claim for litigation privilege is made out on the basis of the affidavit or witness statement. These are that the court may:

• Conclude that the evidence does not establish a legal right to withhold inspection and order inspection.
• Order a further witness statement to deal with matters which the earlier witness statement does not cover or on which it is unsatisfactory.
• Inspect the documents.
• Order cross-examination on the witness statement.

Conclusion

The case shows that the party making a claim for litigation privilege must ensure that the dominant purpose for producing the relevant documents was for conducting litigation in reasonable prospect. It also demonstrates that the court will scrutinise the evidence carefully: the mere assertion of privilege and a statement of the purpose of the communication over which privilege is claimed is not sufficient.

The outcome also indicates that the court will look at whether litigation was in reasonable prospect for the matter in question, at that particular time  - and this does not extend to claims which arose out of the initial investigations but were not in the claimant’s contemplation at the time of the expert’s or third party’s instruction.

This case has clarified the set of principles concerning the concept of litigation privilege as laid out in the case law in England and Wales. It also emphasises both the high threshold that must be met by the parties seeking to rely on litigation privilege in relation to certain documents and the importance of the solicitor’s duty to properly advise their clients regarding the scope and availability of this principle.