The doctrine of litigation privilege exists to protect sensitive documents that are prepared in the contemplation of litigation from being disclosed to adversaries. However, the rule provides no carte blanche, including where expert advice and reports are concerned. The recent decision handed down in the Commercial Court on 30 July 2021 in State of Qatar v Banque Havilland SA & Ors[1] offers a stark reminder of the limitations of litigation privilege and the dangers of relying on the same where proceedings have not been issued. In such instances any claim that the sole or dominant purpose of such document is for litigation will likely be subject to considerable scrutiny.

Background

The substantive issues in the claim involve the Bank’s alleged involvement in a conspiracy to harm the Qatari economy by way of strategies to manipulate the currency and bond markets. Those allegations followed a presentation prepared by a former employee of the Bank, detailing plans to manipulate trading, being leaked to the press.

The Bank notified its regulators in Luxembourg and London and instructed advisors Pricewaterhouse Coopers (“PWC”) on 17 November 2017 to conduct a forensic investigation into how the presentation was created, how it ended up being leaked to the press and to enable the Bank to respond to questions by its regulators. The PWC report was produced in June 2018. In the intervening period, Qatar’s lawyers sent a letter to the Bank in December 2017 requesting that it put a “litigation hold” over its documents.

In the subsequent litigation, Qatar demanded disclosure of the PWC report. The Bank resisted on the basis that the PWC report was subject to litigation privilege.

The law

The starting point is that the burden of proof is on the party claiming privilege over a document to satisfy to the Court that privilege exists. In Qatar v Banque Havilland, the judge’s consideration was focussed on the three part test summarised the case of Three Rivers District Council v Governor and Company of the Bank of England[2] (“Three Rivers”) that: -

  1. Litigation must be in progress or in contemplation – in this regard there must be a “real likelihood rather than a mere possibility[3]
  2. The communication must have been made for the sole or dominant purpose of conducting that litigation – a dual purpose was not considered sufficient and what matters is the state of mind of person instructing the report, not the person undertaking it[4]
  3. The litigation must be adversarial and not inquisitive or investigative [5] - an inquisitorial/investigatory process may develop into an adversarial one, and it will be a case of identifying the “tipping point”[6]

The decision in Qatar v Banque Havilland

The Court found that the evidence presented by the Bank was insufficient to establish a right to withhold the presentation on the grounds of litigation privilege and the document was ordered to be produced for inspection.

The Court considered the three part test set down in Three Rivers, as follows:

1) At the point the PWC report was commissioned, no proceedings had been threatened, but the Bank had notified its regulators in Luxembourg and London. There was nothing to suggest that, when PWC were appointed (and indeed at the point the report was produced), the position with the regulators was “hostile” or that adversarial regulatory proceedings were, at that stage, in reasonable contemplation[7]. Although the Bank had received a letter from Qatar’s lawyers in December 2017 in relation to preserving documents, there was also no evidence to show that Bank actually anticipated a claim.

2) The Court confirmed that the Bank’s state of mind was what is important in determining the dominant purpose of the report and that, absent evidence that the purpose of the report had changed, its purpose remained as at the date it was commissioned in November 2017.

While the Court acknowledged that there was a belief by the bank that the legal and regulatory consequences of the presentation could be significant, that concern alone was insufficient and too generic to prove actual contemplation. There needed to be a “more concrete” basis to establish the same.

An important consideration was that, whilst matters in the regulatory investigations may have transpired to be adversarial, the purpose of satisfying the regulator that the Bank had acted appropriately, was not in itself a litigation purpose to satisfy the test.

Despite the Bank claiming that the contemplated litigation was the sole purpose of the report, the Court was not persuaded that litigation was even the dominant purpose of the report. Instead, the Court found that the purpose of the report was purely investigatory and to satisfy its regulators that it had not acted inappropriately.

In reaching their decision, the Court found that the letter received from Qatar’s lawyers did not to alter the dominant purpose of the PWC investigation.

3) At the point that the PWC report was commissioned the Luxembourg regulator had not progressed beyond the investigation stage and the FCA similarly were only at an information gathering stage[8]. Matters had not reached “tipping point” into adversarial proceedings[9].

The Court also considered the involvement of the Bank’s lawyers in retaining PWC on behalf of the Bank, in order to support the Bank’s claim that litigation was contemplated. The Court noted that the Bank had actually decided to instruct PWC before it instructed its lawyers. The Court noted that it appeared the Bank had arranged the instruction in this way to improve its chances of its claim to litigation privilege over the report.

Commentary

This decision offers a useful summary and refresher on the law of litigation privilege and its pitfalls, particularly when seeking early expert input to assist with responding to a regulator. It also reinforces the importance of ensuring that expert instructions specify the purpose of the instruction where appropriate. Where there is no singular purpose, great care must be taken to ensure it is evident that litigation is the dominant purpose of such report/advice. A dual purpose will not suffice. These are matters that ought to borne in mind when seeking expert advice where there is any concern of a potential claim and steps are taken to fulfil regulatory concerns/obligations. If litigation is not the sole or dominant purpose of the advice, care should be taken to consider the scope of the instructions, mindful that, in any subsequent litigation, such advice may be discloseable.

Careful consideration also ought to be given to the timing of expert instructions. Where expert input is sought in contemplation of proceedings, a clear paper trial of the reasons for the instruction should be kept. In this case, there was a lack of evidence to support the Bank’s concerns, with something “more concrete” required to back up those concerns.

If at any stage the purpose of any instruction changes, for example due to a threat of proceedings, or where regulatory investigations transpire to be adversarial, such instructions ought to be updated, and the purpose of the advice/report updated.