On 5 June 2024, Nicholas Trompter KC and Simon McLoughlin of Selborne Chambers, Joel Seager and Rosalind Hetherington of Fladgate LLP and Aakash Brahmachari of Control Risks Group gathered for an engaging panel discussion on aspects of privilege including a debate on the iniquity exception. This article sets out a summary of their interesting discussion.
Understanding Privilege
Simon McLoughlin, Selborne Chambers, opened the discussion by outlining the landscape of privilege, distinguishing between the two broad categories: Legal Professional Privilege (LPP) and Without Prejudice (WP) communications.
He explained that LPP can be further divided into:
- Legal advice privilege – which applies to confidential communications between a lawyer and their client whether the advice is in relation to contentious or non-contentious matters. The communications must be for the dominant purpose of seeking and receiving legal advice.
- Litigation privilege – which protects communications between lawyers and their clients or any third party for the dominant purpose of obtaining advice or information in connection with existing or reasonably contemplated litigation.
Simon noted that the policy behind legal professional privilege is rooted in public interest and is an absolute right that is not easily overridden.
As explained by Bingham LJ in Ventouris v. Mountain, The Italia Express (1991) 1WLR 607,
“Actual and potential litigants should be free to unburden themselves…without fear that these communications may be relied upon by an opposing party if the dispute comes before the court for decision.”
Simon contrasted LPP with WP communications where the application of privilege is different. It is not so much a fundamental right as it is primarily based on express or implied agreements between parties that their communications should not be included as evidence in court. Unlike LPP, WP is not as absolute and can be overridden when the court considers it just, for instance, as an aid to construction or when an allegation of fraud is made.
Nicholas Trompeter KC, Selborne Chambers, provided a practical analogy, suggesting it might be helpful to view privileged documents as locked in a box. Once a document is deemed privileged, only the person with the key (the holder of the privilege) can, subject to limited exceptions, access it.
When Do You Need to Worry About Privilege?
Rosalind Hetherington, Fladgate LLP, explained the risk of accidental loss of privilege and how damaging it could be when parties disseminate information without view of the consequences.
She commented that ‘Quite a lot of problems stem from clients not being properly advised about what privilege means. Clients need that advice in order to make informed decisions. In practice, there are also assumptions about privilege that need to be challenged. For example, clients might think copying their lawyer into communications makes them privileged. This is not the case’.
It is essential to properly advise clients on what privilege means and how to protect that privilege. Legal advice privilege does not protect communications involving third parties so if a document is passed on by a client, to a close friend with a similar issue for example, the document may lose its privileged status.
Joel Seager, Fladgate LLP, warned that solicitors should never assume that the confidentiality of communications with clients will always be maintained. For instance, in personal or corporate insolvency, trustees, receivers, or officeholders can compel production of documents from insolvent party or third parties, some of which may be privileged. Whilst there are protections which prevent the recipient from using the information, that recipient can nonetheless read and know what privileged advice the bankrupt or insolvent company has received. Similarly, if a client ceases to instruct a firm, the firm is obliged to hand over the client’s file to another law firm, who is of course under a duty to protect the client’s confidentiality. Therefore, it is important for practitioners to consider what they write, what advice they give and how to run their files.
Third Party and Multi-Party Complexities
The introduction of third parties does not always mean that privilege is lost. Litigation privilege affords the ability to maintain privilege when communicating with third parties, and unlike legal advice privilege, does not require the involvement of a lawyer.
Joel pointed out that the recent decision in Al Sadeq v Dechert LLP may have increased the scope of litigation privilege as the Court seems willing to take a broad view as to the protection of privilege where third parties are seeking to take advice or gather evidence in support of actual or contemplated litigation.
Joint Interest Privilege applies to protect privileged documents which are shared where there is a joint interest in the underlying subject matter of the advice. This joint interest can arise by virtue of the relationship between two or more parties such as between a shareholder and company, a partner and an LLP or between trustees and beneficiaries. Alternatively, two parties can choose to share privilege by jointly instructing the same lawyer. Rosalind said the key in that latter scenario is setting very clear boundaries in the joint engagement letter, explaining how joint interest privilege works, how privileged advice will be treated in the event of a dispute and who the law firm will (or can) continue to act for if there is a dispute. Parties with a common interest such as companies in the same group, or an insurer and the insured, may also pass privileged communication to the other without losing the right to assert privilege in a way that they would if that information was disclosed to a third party.
Misapplication of Privilege
Given the subtleties surrounding privilege, a misunderstanding of the rules can often lead to misapplication. For example, communications marked as ‘without prejudice’ when there is no dispute are sometimes wrongly thought to attract protection. Lawyers also often make the mistake of labelling emails ‘CIP’ despite clearly recording in those communications that they do not have the same interest. To avoid this mistake, parties should record what makes their interest ‘common’ before any dispute arises.
The Iniquity Exception
During the event, Nicholas raised a thought-provoking point on whether it is accurate to call the iniquity exception an exception. Juristically, the answer is no explained Simon. Documents tied to iniquitous activities are not inherently privileged. The roots of the principle date back to historic cases where it was established that there should be no confidence in iniquitous transactions. If a lawyer is employed in a manner that compromises public welfare, those communications should not enjoy legal protection.
He explained the background to the truly extraordinary facts in Al-Sadeq in which the former Deputy Chief Executive Officer of the Ras Al Khaimah Investment Authority brought a claim against Dechert LLP, an international law firm and three of its former partners. The High Court in Al Sadeq held that the exception was not engaged because there was not at least a ‘strong prima facie case of iniquity’. However, the Court of Appeal lowered this threshold to a prima facie case on the balance of probabilities that the iniquity exists.
Simon noted that sometimes iniquity can be blatant, but there are also more subtle activities to watch out for. It could range from breaches of good faith to instances where solicitors are instructed to set up corporate structures which allow employees to carry out iniquitous activities or the removal of a managing partner from firm of financial advisors in iniquitous circumstances. When thinking about what type of documents would be caught, it is necessary to consider whether a document was created "as part of or in furtherance of the iniquity". Part of means documents which report on or reveal the iniquity in question and documents brought into existence in preparation for the iniquity. If a document was made for the purpose of obtaining legal advice, it would not be caught by the exception.
Practical Insights from Investigations
Aakash Brahmachari, an investigator at Control Risks Group, shared practical insights from his experience, emphasizing the importance of transparency in handling documents. In high-stakes disputes, it's crucial to instruct an investigator as soon as practicable. He provided a case study of how to gather information from jurisdictions that are opaque without compromising both the legal and ethical duties in which context the iniquity exception regarding the provenance of documents provided to an investigator is highly relevant.
Closing
The event concluded with a Q&A enabling practitioners from different jurisdictions the opportunity to exchange ideas on how to navigate privilege in various contexts, in particular the in house and international context. The panel discussion took placed as part of London International Disputes Week, which is an annual forum for the disputes community active in London. Practitioners should look forward to its return in 2025.
