Litigation Review 2003: The litigation situation


The meaning of legal advice privilege was considered by the Commercial Court and the Court of Appeal in Three Rivers District Council v The Governor and Company of the Bank of England (2003) and some surprising conclusions were reached. In April 2003, the Court of Appeal handed down a judgment which defines the scope of legal advice privilege more narrowly than had been assumed previously and held that documentation and internal memoranda prepared by employees was not protected by legal advice privilege.

Following on from this, in November 2003 Judge Tomlinson in the Commercial Court determined that communications between solicitor and client on presentational matters (where litigation is not in contemplation) will have to be disclosed if they are relevant to subsequent litigation.


Two cases confirmed the principles of confidentiality and privacy of the arbitral process. In AEGIS v European Reinsurance Company of Zurich (2003), the Privy Council confirmed the confidentiality of arbitration but considered that, for enforcement purposes, the award may need to be disclosed. However, in Department of Economics Policy and Development of the City of Moscow v Bankers Trust Company (2003), the High Court ordered the earlier Section 68 Arbitration Act judgment of the court to remain private, acknowledging and affirming the private nature of arbitration.


The Court of Appeal in October 2003 handed down judgment in the case of Somatra Ltd v Sinclair Roche & Temperley (2003) and upheld the trial judge’s award for damages for the loss of chance to achieve a higher settlement. Judge Morrison had held that Sinclair Roche had been negligent in its conduct of a marine insurance claim brought by Somatra against the insurers of its supertanker. The trial judge had quantified Somatra’s damages as the difference between the 66.6 per cent settlement it achieved and the 75 per cent settlement it could have achieved but for the negligence of its solicitors (which amounted to approximately $5m (£2.9m)).

Failure to mediate

In Leicester Circuits Ltd v Coates Brothers Plc (2003), the Court of Appeal emphasised the importance that courts now place on the use of mediation wherever possible, providing another timely reminder about the adverse costs consequences that may result from failing to mediate, even when a party is ultimately successful in its litigation.

Funding litigation

Matters surrounding the interpretation of the regulation of conditional fee arrangements continued to occupy significant court time during 2003. There has been much satellite litigation in relation to technical challenges, but it is anticipated that these challenges will now reduce following the decision in Hollins v Russell (2003), which indicated that technical challenges on the minutiae of compliance with regulations will no longer be entertained unless there is a good reason for such a challenge.

Costs capping

In a groundbreaking decision in June 2003, the High Court ordered a costs cap both retrospectively and prospectively up to the end of the trial in the Nationwide Organ Group litigation: AB & ors v Leeds Teaching Hospitals NHS Trust (2003). The judge held that in group litigation there is a clear risk that costs may become disproportionate and excessive, and therefore the costs cap was necessary to keep them within bounds. In November 2003, in Smart v East Cheshire NHS Trust (2003), the High Court confirmed that it also had jurisdiction to make a costs cap order in non-group litigation. More developments in this area seem likely.

Money laundering

2003 saw the implementation of Part 7 of the Proceeds of Crime Act, which creates offences in relation to money laundering and which repealed the existing provisions in the Criminal Justice Act 1988 and the Drug Trafficking Act 1994. The Proceeds of Crime Act introduced for the first time an offence of failure to disclose the laundering of the proceeds of all crimes, where the firm is engaged in carrying out a business in the regulated sector (the definition of which is similar to the definition in the Money Laundering Regulations 1993).

Preview of 2004
Money laundering

On 1 March 2004, the Money Laundering Regulations 2003 will come into force. On the basis of the draft regulations, the requirement to have certain procedures in place in relation to anti-money laundering controls will be extended to solicitors who are participating in financial or real property transactions or providing services in relation to the formation of a company or the formation, operation or management of a trust. Although solicitors are already subject to the existing Money Laundering Regulations in relation to certain types of business, this expands their responsibilities.

Constitutional reform
New Supreme Court

The Government has proposed a new Supreme Court, which will involve legislation to abolish the jurisdiction of the House of Lords within the UK’s judicial system. This will result in a Supreme Court that is independent from Parliament. A summary of the results of the consultation paper will be published in early 2004.

Abolition of Queen’s Counsel

A consultation paper has been issued during 2003 on whether the rank of Queen’s Counsel should continue to exist in its current form. The consultation period has ended and the results will be published in the spring of 2004.

A new way of appointing judges

Consultation has taken place in 2003 on the form and responsibilities of a new independent Judicial Appointments Commission for the selection of judges in England and Wales. Various models have been considered. The results of the consultation will be known in 2004.

Court dress

There has been consultation during 2003 about the changing of court dress in the future, with the proposal that judges, court clerks, ushers and barristers wear less formal clothes. Wigs and gowns may be completely abolished.

Professional conduct and ethics

The Law Society is rewriting the Professional Conduct and Ethics Rules and a working draft is now available. A consultation on the proposed new rules will take place in early 2004.

Freedom of information
The Freedom of Information Act 2000 will be implemented fully in January 2005. 2004 will see public authorities preparing for compliance with the Freedom of Information Act, which is aimed at making the process of government at every level open and accountable.
Commercial Court
The long-awaited modernisation of the Commercial Court is still being debated. Recent developments show some cause for optimism that a plan will be agreed with the Government for the provision of a new Commercial Court building within the Royal Courts of Justice site.

Anna Pertoldi is a partner at Herbert Smith. She was assisted in this article by litigation professional support lawyer Simone Pearlman