The law relating to legal professional privilege repeatedly made headlines last year as the House of Lords ruled on the long-running Three Rivers case. Earlier this year, that law was again under scrutiny as an interim issue to be dealt with in the commercial court by Mr Justice Aikens in the multi-party TAG litigation.
Three Rivers caused consternation among practitioners when it appeared the Court of Appeal had drastically curtailed the scope of privilege attaching to communications passing between clients and their legal advisers in non-litigious circumstances — so-called ‘legal advice privilege’.
The defendant to the action, the Bank of England, had been required to provide information to an independent inquiry, ordered by Parliament, into its supervision of the failed Bank of Credit and Commerce International (BCCI). The Court of Appeal held that the advice given to the bank by its solicitors — concerning what were dubbed "presentational" aspects of the information provided to the enquiry — was not privileged from inspection by the claimants, creditors of BCCI.
The Lords subsequently reversed this decision, affirming to a large degree what may be viewed as the traditional position concerning legal advice privilege, namely that it attaches to advice given by lawyers as to "what should prudently and sensibly be done in the relevant legal context", notwithstanding that the advice may not strictly have been limited to advice on the law itself.
The case made for the claimants in Three Rivers did not depend on any prior relationship between them and the bank. Their interest in the documents sought was as outsiders who hoped to derive information to aid their own claim. But sometimes the party seeking disclosure will already have been involved in the creation of the documents sought. A common example is where an insurer is funding an action on behalf of an insured and reserves to itself rights over how the litigation is to be conducted, as is the position in TAG.
What is to happen when a conflict arises between parties concerning disclosure of documents where they have been jointly involved in the creation of those documents? The claim in TAG arises from a scheme for the provision of ‘after the event’ (ATE) legal expenses insurance to claimants in a large number of personal injury actions. The claim arose after many of the actions failed, with indemnity claims being made by the unsuccessful claimants under their policies. The insurer alleges that, among other things, the claims were inadequately conducted by the panel solicitors appointed to manage them and sought early disclosure of the solicitors’ files relating to the personal injury actions. The solicitors asserted privilege as against the insurer, arguing that this privilege belonged to their former clients and that the files could not be released in the absence of a waiver from those clients.
Among other arguments deployed by the insurer was one based on the concept of common interest. It was argued that, after the ATE policies came on risk, there existed a ‘community of interest’ between the insurer and the insured, which extended to all documents produced on behalf of the latter for the purposes of the pursuit of the personal injury claims. That gave rise to common interest privilege.
The effect, it was argued, was that the insured could not assert privilege in the documents as against the insurer. It was submitted further by the insurer that this privilege, once established, continued in existence even after the reason for its arising in the first place — the personal injury litigation — had ended.
The judge analysed the concept of common interest privilege in some detail, both in its genesis and subsequent developments. He noted its early formulation in Buttes Gas & Oil Co v Hammer (No 3) [1982] as existing where "two parties with a common interest and a common solicitor exchange information for the dominant purpose of [assisting one another]… in respect of contemplated or pending litigation, the documents or copies containing that information are privileged from production in the hands of each".
The then restrictions on the privilege are notable: a requirement of a common solicitor was specified in addition to the common interest and the effect of the privilege was purely protective — to prevent third parties from having access to documents in the hands of either party sharing the common interest. Moreover, it appeared that the privilege was not a free-standing one but was necessarily dependent on the prior establishment of litigation privilege, existing when documents are created for the purpose of obtaining legal advice in relation to current or pending litigation.
The current position, as summarised by Justice Aikens in TAG, is far less restrictive. The only requirement now, it would seem, in order for the privilege to arise is that there is a common interest in either the subject matter of the communication or the litigation, based on the interest of both parties in keeping the communication confidential. Gone is the requirement for a common solicitor. The privilege, he said, no longer depends specifically upon the existence of litigation but can also be based on the legal professional privilege attaching to legal advice in a non-litigious context.
Most vitally in the TAG case, it can operate not merely as a ‘shield’ to protect against disclosure to third parties but also as a ‘sword’ to entitle one of the parties with a common interest to compel the production of documents by the other for the first party’s use, even though the document would be privileged from production as against a third party.
These were precisely the principles relied on by the insurer in its claim for production of the panel solicitors’ files. The solicitors accepted, in principle, that common interest privilege can be used as a ‘sword’ but argued that, this principle notwithstanding, the files should not be disclosed because the particular relationship of the ATE insurer and insured gave rise to an inherent tension which prevented a common interest from existing at all.
The insured, it was argued, would wish to advance its case, while the insurer would wish to minimise its liability. Further, it was argued that even if the entitlement to documents on the insurer’s part did arise, this was subject to their use being restricted to the purposes connected with the reason for their creation i.e. the pursuit of the original personal injury actions. That would rule out their being made available for the litigation against the panel solicitors.
Neither argument succeeded. The judge rejected the suggestion that there was a necessary tension between the insurer and the insured, preferring the view that their interests largely coincided. Moreover, he upheld the orthodox view of ‘once privileged, always privileged’ and declined to concur with the submission that the privilege should only extend as far as the reason for its existence continued. The important point is whether the community of interest existed at the time the documents were created, not whether it exists at the time disclosure is sought.
Aikens would not be prescriptive about the categories of relationship which give rise to a common interest in documents. However, it is clear that the relationship of insurer and insured is an archetypal one; in fact it was the only example of such a relationship cited by the judge.
It is notable, moreover, that the considerations which weighed with the judge in holding that there was a sufficient community of interest between the insurer and their insured were largely such as would be typical of any insurance relationship: mutual obligations of the utmost good faith and the insurer’s practical interest in seeing the insured’s claim (or defence) succeed.
The conclusion must be that, in the majority of situations, an insurer will be entitled to access documents created on behalf of its insured in the context of litigation which it is funding.
This article first appeared in Legal Week
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