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When in doubt keep it out? When is it safe to refer to privileged documents?

  • Legal Development 26 May 2020 26 May 2020
  • UK & Europe

  • Insurance & Reinsurance

TMO Renewables -v- (1) Desmond George Reeves (2) Maxwell Charles Audley [2020] EWHC 789 (Ch)

When in doubt keep it out? When is it safe to refer to privileged documents?

In granting the appeal in this recent case, the High Court has provided an important reminder of the principles involved when determining whether legal professional privilege will have been lost as a result of the mention of a privileged report in proceedings.

Relevant background facts

The Claimant company alleged that breaches by the Defendant directors had caused it to suffer £19.5 million in losses, which had led to it entering insolvency proceedings.

In the context of a security for costs application, the Fourth Defendant's solicitor stated that "the sum alleged to be the loss and damage in this case (i.e. £19.5 million) is an unexplained and unsupported figure which the liquidators cannot possibly believe". The liquidator, regarding this as a slur on his "professional competence", filed a witness statement responding to the criticism. Crucially, that statement referred to a privileged valuation report by EY (the "Valuation Report"), and stated that the £19.5 million figure had been derived from a comparison between the values of the Claimant in liquidation and the company which had acquired its assets.

Order for disclosure

Later, in preparation for the CMC, two Defendants sought the production of the Valuation Report. They argued that it had been deployed at the security for costs hearing by reason of the liquidator's witness statement and, as such, was disclosable under CPR 51U paragraph 21, which deals with 'Documents referred to in evidence' as follows:

"21.1    A party may at any time request a copy of a document which has not already been provided by way of disclosure but is mentioned in … (2) a witness statement…

21.2     Copies of documents mentioned in a statement of case, witness evidence or an expert’s report and requested in writing should be provided by agreement unless the request is unreasonable or a right to withhold production is claimed.

21.3     A document is mentioned where it is referred to, cited in whole or in part or there is a direct allusion to it(emphasis added)

21.4     Subject to rule 35.10(4), the court may make an order requiring a document to be produced if it is satisfied such an order is reasonable and proportionate..."

This provision is largely aimed at ensuring fairness by discouraging parties from cherry picking from otherwise privileged documents. For paragraph 21 to bite, there needs to have been a deployment of the document's substance. On the other hand, in cases where the document's use is for a limited purpose and/or where reference to it is made without quotation or summary, there will have been no deployment (and so privilege in the document will persist).

At first instance the Deputy Master agreed with the Applicants/Defendants that the Valuation Report fell within CPR 51U paragraph 21.3, and therefore ordered its disclosure. This was on the basis that the Deputy Master found that:

  • the liquidator's witness statement had referred to certain contents of the Valuation Report;
  • the liquidator had overtly tied his confidence in the £19.5 million figure to the contents of the Valuation Report, and had thereby relied on its substance (thus waiving privilege);
  • the witness statement's express claim to maintaining privilege was held to be ineffective.

The appeal

The Deputy Master's ruling has been overturned with this decision.  

Although the Court has not accepted all of the Claimant's submissions, it has agreed that the Deputy Master's analysis should have taken into account the following criteria:

  • the reference to the Valuation Report was made for the narrow purpose of rebutting the criticism of the liquidator's professional competence;
  • the Valuation Report was obtained for the purposes of settling the pleadings only and was not intended for use at trial, e.g. as an expert witness's report would be;
  • the witness statement had been deployed for a security for costs application which would not normally engage the underlying merits of the claim.

With that in mind, the Judge has ruled that:

  • identifying the name and qualifications of the Valuation Report's author went no further than to identify the source of the liquidator's belief, as required by the CPR in 32PD.18; and
  • the use of two sentences referring in broad terms to the Valuation Report's methodology did not mean that the liquidator had referred to the content rather than merely the effect of what was, clearly, a complicated document.

Comment

This decision is a toolkit for ensuring that privileged documents are not deployed by accident and equally for deciding whether a document has been deployed versus merely referenced.

It also serves as a poignant reminder of the dangers of referring to privileged materials – not just in proceedings but also in open correspondence. Expressly claiming that privilege over a document is maintained will not in itself suffice to prevent that document's disclosure whether as result of falling foul of CPR 51U paragraph 21 or otherwise. What matters is the purpose and the context within which the reference is made. If a document is referenced for a narrow purpose, in relation to the document's effect or to explain the source of a witness's belief, this should avoid amounting to deployment but in any event particular care should be taken.

Factors which support the view that the reference in question does not engage the substantive merits of the dispute (e.g. an interlocutory hearing that does not normally engage the merits, or a document conceived for a purpose other than a trial of the issues) are also potentially significant for the Court's assessment of whether a document has been deployed.

End

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