Legal Privilege: Why You Can't Have Your Cake and Eat It

Recently I wrote about disclosure in commercial litigation and how privilege can be a means of withholding a document back from the eyes of the opposing side. You can read that article here. 

Legal professional privilege is one of the most important protections available to anybody involved in a legal dispute. It allows clients to communicate openly with their lawyers, safe in the knowledge that those communications will not ordinarily have to be revealed to their opponents.

There is a catch - nothing is ever that simple.

Privilege can be lost. In attempting to use one piece of privileged material to gain an advantage in litigation, a party can inadvertently expose a much wider collection of documents than they ever intended.

This is where the concept of collateral waiver comes into play.

What does legal professional privilege actually protect?

Broadly speaking, there are two principal forms of legal professional privilege.

Legal advice privilege protects confidential communications between lawyers and their clients made for the purpose of seeking or providing legal advice.

Litigation privilege can protect confidential communications involving lawyers, clients and third parties where adversarial litigation is underway or reasonably contemplated, and the dominant purpose of the communication is conducting that litigation.

The distinction matters, but the underlying principle is straightforward. Clients must be able to seek legal advice without fearing that their confidential communications will subsequently be used against them.

Privilege belongs to the client, not the lawyer. Generally speaking, it is the client who decides whether to waive it.

The difficulty comes when that decision has consequences which extend beyond the particular document the client wanted to reveal.

The problem with selective disclosure

Imagine a company is accused of deliberately breaching a commercial agreement.

Its defence is that it acted reasonably, having taken advice from its solicitors before making the decision in question.

The company has a letter from its solicitor which appears to support its position. Naturally, it wants to show the judge.

So far, so good.

Suppose, however, there were other communications with those solicitors. Perhaps the initial advice was considerably more cautious. Perhaps the company had been advised against taking a particular course of action before providing further instructions. Perhaps the letter being relied upon was based on an incomplete account of the facts.

Can the company disclose the helpful letter and refuse to produce everything else?

Not necessarily.

The courts recognise that allowing a party to rely selectively on privileged material can create a misleading impression. It would be unfair to allow somebody to present favourable legal advice as evidence supporting their case while concealing other advice concerning the same issue which might undermine it.

This is the principle behind collateral waiver.

What is collateral waiver?

Collateral waiver arises where a party waives privilege over particular material in circumstances which, as a matter of fairness, require the waiver to extend to other privileged material.

It does not mean that disclosing one privileged document automatically opens up every communication between a client and their solicitor.

The court must identify the relevant issue or transaction to which the waiver relates. The scope of any further disclosure is assessed by reference to that issue and the need to avoid an unfair or incomplete picture.

The boundaries can become contentious.

One party may argue that its waiver concerns a single piece of advice. The other may contend that the advice cannot properly be understood without examining the instructions, earlier discussions and subsequent communications.

That can create a significant tactical problem for the party which initially decided to deploy the material.

What happens when you mention a document in court proceedings?

There is another potential trap for parties to litigation, and it arises from something as seemingly innocent as referring to a document in a statement of case or a witness statement.

Under CPR 31.14, a party is generally entitled to inspect a document mentioned in another party's statement of case, witness statement, witness summary or affidavit.

In proceedings governed by Practice Direction 57AD, which applies to many cases in the Business and Property Courts, paragraph 21 provides a separate mechanism for requesting documents referred to in pleadings and evidence.

The principle is straightforward. If you refer to a document when advancing your case, your opponent may be entitled to see it, and that can extend further than you might initially expect.

Suppose a director gives evidence that a particular commercial decision was discussed at a board meeting and that the minutes of that meeting record the reasons for the decision.

The other side may be entitled to inspect those minutes, even if the director hasn't exhibited them to their witness statement.

Or perhaps a company alleges in its Defence that a particular agreement was varied by an exchange of correspondence. Its opponent may be entitled to inspect the correspondence being referred to.

The point is that you cannot necessarily avoid producing a document simply by referring to its contents without exhibiting it.

But what happens if the document is privileged?

That is where things become more interesting - and potentially dangerous.

Mentioning a privileged document does not automatically waive privilege.

The Court of Appeal confirmed this distinction in Expandable Ltd v Rubin [2008] EWCA Civ 59. The mere fact that a privileged document is mentioned in a witness statement or statement of case does not necessarily mean that the document must be produced for inspection.

The question is whether the party has gone further than acknowledging the existence of the document and has actually deployed its contents as part of its case.

There is a potentially significant difference between saying:

'I sought legal advice before making that decision.'

And saying:

'I made that decision because my solicitors advised me that I was legally entitled to do so.'

In the first example, the witness may simply be describing the chronology of events. In the second, the witness is potentially relying upon the substance or effect of the advice to justify their conduct.

That distinction can determine whether privilege remains intact or whether it has been waived.

And where privilege has been waived, the question may then arise whether the waiver extends to other communications dealing with the same issue.

This is why the drafting of statements of case and witness statements requires careful thought.

A sentence included to make a party appear reasonable, diligent or commercially responsible might introduce a disclosure issue that did not previously exist.

Sometimes the most dangerous document in litigation is the one you didn't intend to disclose.

When referring to legal advice becomes dangerous

An interesting illustration of these principles can be found in PCP Capital Partners LLP v Barclays Bank plc [2020] EWHC 1393 (Comm).

The case arose from Barclays' fundraising arrangements during the financial crisis.

In defending allegations concerning certain advisory agreements, Barclays relied on evidence referring to legal advice it had received about those arrangements.

The question was whether those references amounted to a waiver of privilege and, if so, how far the waiver extended.

The Commercial Court examined the distinction between simply referring to the existence of legal advice and actually relying upon that advice to advance a party's case.

There is an important difference.

A witness saying that they consulted their solicitor before entering into an agreement does not necessarily waive privilege.

Where that witness goes further, for example by explaining that they proceeded because their solicitor advised them that the agreement was lawful, and rely upon that advice to support their defence.

Now the legal advice is being used for an evidential purpose.

The court held that Barclays had waived privilege in relation to the relevant legal advice and ordered further disclosure. The scope of that disclosure extended beyond the particular material to which Barclays had referred.

The decision demonstrates that waiver is not simply a question of whether a privileged document has physically been handed over. The way legal advice is deployed in witness evidence, pleadings and submissions can be equally important.

Why this matters in commercial disputes

In commercial litigation, the temptation to rely upon legal advice can be considerable.

Directors may want to demonstrate that they acted responsibly. Shareholders may want to justify decisions taken during a breakdown in relationships. Businesses facing contractual claims may wish to establish that they took professional advice before acting.

Sometimes that evidence may be useful.

The question is whether the benefit of relying on the advice outweighs the potential consequences of doing so, and that assessment needs to be undertaken before privilege is waived, not afterwards.

The risks are not limited to producing an embarrassing document. Other communications may reveal the client's understanding of events, the factual instructions provided to lawyers or inconsistencies between what was said privately and what is now alleged in the proceedings.

A party might therefore strengthen one aspect of its case while damaging another.

Privilege as part of litigation strategy

This is why privilege should not be treated as a purely technical question for the disclosure stage of proceedings.

It is something that needs to be considered when preparing the case itself.

Before referring to legal advice in a witness statement, for example, I would want to understand precisely what purpose that reference serves.

Is the witness simply explaining the sequence of events? Or are they inviting the court to conclude that their conduct was justified because their solicitor approved it?

If it is the latter, we need to consider the wider body of privileged material that might be brought into play.

There may be an entirely different way to advance the same argument without relying upon the privileged advice at all.

That may be preferable to winning a relatively minor evidential point at the cost of exposing communications which would otherwise have remained confidential.

The same strategic thinking applies from the other side of the dispute.

If an opponent relies upon privileged advice to justify its conduct, it is worth examining exactly what has been put in issue. There may be grounds to challenge the extent of the material being withheld.

The danger of winning one point and losing another

Litigation is rarely about individual documents considered in isolation.

Evidence has to be understood in context. A statement which appears compelling on its own may look rather different when the surrounding communications are examined.

That is particularly important where a party is relying upon its own legal advice as evidence of the reasonableness, legitimacy or consistency of its conduct.

The law does not prevent parties from waiving privilege where they consider it advantageous to do so. Nor does every reference to legal advice trigger a wider obligation to disclose.

But it does place limits on the ability to use privileged material selectively, whichbrings us back to the central point.

You cannot necessarily rely upon the helpful parts of your legal advice while keeping the inconvenient parts hidden.

In commercial litigation, knowing when not to deploy a document can be just as important as knowing when to use one.