Courting confidentiality

The question of legal privilege has come up several times in UK courts in recent months. Colin Hutton and Gemma Lampert dissect the decisions.

In the UK the past 12 months have seen legal professional privilege and without prejudice protection stand strong, even where the case for divulging communications has been apparently compelling. In Europe, following a recent decision, the news is less positive.

The ethos of Woolf pervades the UK courts’ approach to privilege. The courts remain of the opinion that litigants must be able to take independent legal advice without fear of having to disclose the contents of their discussions to ensure that parties take proper legal advice on the merits of their disputes, avoid unnecessary litigation, or at least narrow issues.

Equally parties are encouraged to make every attempt to settle disputes out of court, without fear of comments made in a genuine attempt to reach settlement subsequently being held against them.

In Imerman v Tchenguiz (2009), the High Court confirmed that legal professional privilege would not extend to pre-existing documents simply provided to lawyers for the purpose of advice or litigation. However, it also found that annotations such as underlining or highlighting, which might point towards the advice being given, might well attract privilege.

In Arroyo v BP Exploration Co (Colombia) Ltd (2010), the court held it had no jurisdiction to order disclosure and inspection of an after-the-event insurance policy obtained by claimants in group litigation. The insurance policy was privileged; it was produced for the purposes of litigation, its terms had been individually negotiated and reflected the legal advice given as to the risks of the litigation.

In Dore and others v Leicestershire County Council and others (2010), the court looked at the extent of waiver of privilege in a dispute relating to access to community facilities in a school. The court found that a limited express waiver by the council disclosing some reports did not automatically result in an implied waiver of other documents.

The trend of upholding privilege has remained clear in some recent without prejudice cases, although in Oceanbulk Shipping & Trading SA v TMT Asia Ltd (2010), the Supreme Court held that evidence of without prejudice negotiations in relation to forward freight agreements was admissible as an aid to the construction of the terms of a settlement agreement reached during the course of those negotiations.

Employing the law

Case law suggested that employment disputes might form an exception to the general rule on without prejudice, but the recent Employment Appeals Tribunal (EAT) decision in Woodward v Santander (2010) limits this expectation. Mrs Woodward made two complaints to her employer and sought in the second to refer to discussions leading up to the settlement of the initial claim. The EAT was clear that employers should seek to settle disputes with staff and that any exception to the “without prejudice” rule should only apply where there has been clear impropriety.

Certainly it remains true that the court or tribunal’s decision will depend on the individual circumstances of each case, as confirmed by the Court of Appeal decision in Westminster International BV v Dornoch BV (2009).

However, where legal professional privilege and without prejudice protection can be demonstrated to be applicable, they are likely to be upheld. In these circumstances the importance of properly marking documents to maintain privilege protection should not be underestimated. Incorrectly labelled documents will not gain an unjustified shield, but the presumption of protection offered by the wording, when used correctly, is likely to be hard to overturn. The “umbrella” of protection referred to by the House of Lords in Ofulue v Bossert (2009) is bearing up against the gales of litigation.

Another interesting development over the last few months in relation to legal professional privilege and without prejudice, has included the decision on the recent appeal hearing in the R (on the application of Prudential plc and another) v Special Commissioner of Income Tax privilege (2009) case.

In R v Special Commissioner, accountants sought to have privilege extended to the tax advice that they give. This was firmly resisted by the Law Society on the basis that extending the special status of the lawyer/client relationship to other professionals could have a floodgate effect. The extension of privilege to accountants was refused by the court.

In Europe, however, the 14 September 2010 decision of the European Court of Justice in the case of Akzo Nobel Chemicals Ltd and Ackros Chemicals Ltd v European Commission means that communications with in-house lawyers will not enjoy the protection of privilege in European competition investigations. This decision continues to limit the scope of privilege in Europe. In-house lawyers will need to take a cautious approach to privilege on European wide matters and may need to involve external counsel where document protection is a key concern.

Colin Hutton is a partner and Gemma Lampert a senior associate at Dundas & Wilson