2017 has been an annus horribilis when it comes to privilege. Companies and their lawyers have been perturbed by the courts’ narrow approach to privilege in recent cases, with particular concern directed towards the status of lawyers’ notes of interviews with employees. The Court of Appeal has granted ENRC permission to appeal in Director of the Serious Fraud Office v Eurasian Natural Resource Corporation Ltd
but we could be waiting for more than a year before we get the judgment.
The other question when it comes to privilege, and one about which there is almost as much confusion, concerns what actions will result in the loss or waiver of privilege. This question was recently discussed in ‘D’ Cash & Carry Ltd v HM Revenue & Customs
. We take a look at some of the most common scenarios in which issues about loss or waiver of privilege come up.
Reliance on legal advice or its absence
Privilege raised its head in ‘D’ Cash & Carry Ltd v HMRC
in the following circumstances. ‘D’ Cash & Carry (‘D’) made an unsuccessful application to HMRC under the Alcohol Wholesaler Registration Scheme. It wanted to appeal against the decision but failed to meet the 30 day deadline for lodging an appeal with the First-tier Tax Tribunal. It applied for acceptance of an out of time appeal on the ground that it had not had legal advice from its solicitors about the deadline.
HMRC were not happy with the assertion about the absence of legal advice and applied for disclosure of the advice given to ‘D’. HMRC contended that ‘D’ had waived privilege over any advice given to it by its lawyers when it relied upon the absence of advice in support of its application.
This argument was upheld by the Tribunal. Some contradictory evidence from ‘D’ led the Tribunal to conclude that the integrity of the basis of the application was questionable. Since ‘D’ had described the nature of the discussion with their solicitor and relied on the absence of advice, it had waived privilege in any communication about the need to appeal and the procedure and time limits for an appeal. Fairness required disclosure of relevant information and documentation, subject to any redactions acceptable to the Tribunal.
Once the court has decided whether the party has done more than merely refer to the existence of privileged advice, it has to decide whether it would be unfair to allow the party making disclosure not to reveal the whole of the relevant information. While a party who chooses, in effect, to waive privilege by relying on legal advice (or its absence) can decide to what extent they do so, the court will not allow them to cherry-pick. When deciding how wide the waiver extends, the court has to identify the transaction in respect of which the waiver has been made – in ‘D’ Cash & Carry Ltd v HMRC
this was the need to appeal and the procedure and time limits for an appeal.
References to privileged advice in correspondence ‘D’ Cash & Carry Ltd v HMRC
concerned reliance on the existence of legal advice in the context of an application to a tribunal. Do the same principles apply where, as often happens, litigants or their solicitors refer in general terms in correspondence with the other side to the gist of counsel’s opinion?
References in correspondence with the other side cannot amount to a waiver of privilege since the rules of privilege are concerned with the process of putting evidence before a court. References usually occur in without prejudice correspondence which creates another obstacle to the argument there has been a waiver of privilege in the original advice. The disclosure of lawyers’ or experts’ opinions on a without prejudice basis does not result in a general waiver of privilege.
It is dangerous, even so, to refer to the content of privileged advice in correspondence. If the reference is made in what is in fact open correspondence, the advice may lose its confidential status and so no longer be privileged for that reason. The reference may also lead to a waiver of privilege if the correspondence is subsequently included in the court bundle and read to the judge. The judge might conclude that the full advice should be disclosed in these circumstances.
Sending privileged advice to an interested third party
Parties often want or need to show legal advice they’ve received to another adviser or interested third party but they don’t want to lose privilege in the document. There should be no danger of losing privilege as long as the document is provided in confidence and without the intention of abandoning the privilege. Ideally this should be stated expressly. Even better, the recipient should be asked to acknowledge that they are accepting the advice on this basis.
The courts have quoted the following passage from Style and Hollander on Documentary Evidence
with approval on several occasions:
“If A shows a privileged document to his six best friends, he will not be able to assert privilege if one of the friends sues him because the document is not confidential as between him and the friend. But the fact six people have seen it does not prevent him claiming privilege as against the rest of the world”.
Circulation of privileged advice within an organisation
The same approach applies to the circulation of privileged legal advice within an organisation. Circulation of privileged legal advice, whether given by external or in-house lawyers, among employees, whether in its original form or in summary, will not in itself have the effect of losing or waiving privilege. If this were not the case, the policy behind the privilege would be frustrated. By and large companies and organisations seek legal advice to help them make decisions and those involved need to understand the legal advice in order to implement those decisions.
At first glance, the discussion above sits rather awkwardly with guidance routinely given to companies and other organisations advising them not to summarise legal advice and to restrict its circulation. What’s the problem if the courts tend to uphold privilege when it’s been sent to those interested, whether inside or outside the organisation?
There is a practical problem because those disseminating privileged advice may not say that it is confidential and that there is no intention to waive privilege generally. Once privileged advice is emailed onwards, problems are likely to arise. The wider the dissemination of the advice in various forms, the greater the likelihood that it will get into the wrong hands and cease to be confidential, and the harder it is to identify the advice itself when it is reworded. Privilege will be lost where the information has entered the public domain.
Problems can also arise with the circulation of privileged legal advice to employees. Keeping references to legal advice discrete in any communication will help preserve privilege but in practice employees may have a hand in drafting a report that goes further than summarising legal advice given by an external or in-house lawyer. It can be difficult to claim privilege over such a document. Although the legal advice would be privileged, the authors’ presentational advice, made taking into account the legal advice, would not be.