Out-Law Legal Update
High Court guidance will reassure banks acting to freeze accounts suspected of holding proceeds of crime
Out-Law Analysis | 16 Sep 2013 | 1:15 pm | 2 min. read
An organisation's documents must be made available to other parties in litigation, unless they are protected from disclosure because they relate to the litigation process itself or to legal advice that should remain secret. This protection is called privilege and it comes in two main forms, litigation privilege and legal advice privilege.
Litigation privilege is usually seen as the easier of the two to qualify for. However, such privilege can no longer be taken for granted in the aftermath of a recent High Court ruling which reinforced the "relatively high threshold" for keeping documents under wraps. In that case, two liquidators could not claim litigation privilege over reports about a liquidated group of companies, which were then laid open to scrutiny.
The case involved Oscatello Investments, a group of companies involving retail and property investors Robert and Vincent Tchenguiz, and the liquidators appointed to handle Oscatello's liquidation. It follows a ruling earlier this year which restricted the application of legal advice privilege.
Whilst the ruling arguably makes it harder to use the protection afforded by litigation privilege, it does clarify exactly when that privilege will apply. Organisations now have a clearer than ever set of instructions on how to ensure a document is covered by litigation privilege and kept away from prying eyes.
The crucial factor in determining whether a document is protected by litigation privilege is the original purpose behind that document, the court said. Documents will only secure protection if their main, or "dominant", purpose is the litigation itself. Therefore, if a document has been created for more than one purpose, for example where the document's creator has other obligations to fulfil, it may well not satisfy the strict test laid down by the courts.
Contemporaneous evidence that clearly shows that whoever asked for or created the document did so for the purpose of litigation will be powerful evidence in keeping that document out of the hands of other parties.
For example, if a document is a fact finding report, it would be helpful to record on its face that it has been created to assist in litigation. The more specific you can be the better. Stating that a document is being created in relation to 'potential claims' is unlikely to secure the protection of privilege. However, stating that it is being created in relation to claims by or against specific people, companies or activities is much more powerful. The judge in the Tchenguiz case was clear that generic assertions about a document being connected to potential litigation would not be enough.
The final lesson to be learned from the ruling is a tactical one. If you are in court trying to make a case that the document should be protected, then make sure the person giving evidence to the court is someone who was personally involved in the document's creation.
The liquidators asked the court to rely on a statement by a solicitor about the purpose of the reports in question. The judge said that this would have been far more persuasive had the evidence come from the liquidators themselves, since they were the ones who had commissioned the reports in the first place and were therefore best placed to answer questions about their purpose.
The judge was clear that it is not enough simply to claim that a document was created for litigation when there were clearly other reasons behind the document such as, in this case, to comply with the obligations on liquidators of insolvent companies. Where documents have a dual purpose such as this, claims of litigation privilege are unlikely to succeed unless compelling evidence can be put forward.
Anthony Rance is a litigation expert at Pinsent Masons, the law firm behind Out-Law.com
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