In two recent decisions, the High Court has considered the extent to which a party can provide privileged documents to a third party for a particular purpose without resulting in a wider waiver of privilege. The decisions illustrate the importance, in these circumstances, of making clear any intended limits on the use of the privileged material.

In FM Capital Partners Ltd v Marino & ors [2017] EWHC 3700 (Comm) the court found that a company had waived litigation privilege in an investigation report because, before the proceedings had commenced, it had provided a copy of the report to one of the defendants (its former CEO) for the purposes of a disciplinary hearing against him. The company had not imposed an express restriction on the use of the report. In the absence of such a restriction, and given that the report was prepared for the purposes of potential litigation including litigation against the defendant, the natural inference was that the defendant would be free to use the report for that litigation.

In Belhaj v Director of Public Prosecutions [2018] EWHC 513 (Admin), in contrast, the government had shared its privileged advice with the police, the Crown Prosecution Service (CPS) and Director for Public Prosecutions (DPP) subject to a clear express limitation on its use. In those circumstances, the court found privilege had not been waived for the purposes of a subsequent judicial review application. It rejected the claimants’ argument that the judicial review was so closely linked to the review for which the advice had been shared that there was an inferred waiver for the purposes of the judicial review. The contrary conclusion would mean that, in almost any case where one government department waived privilege to assist another, privilege might be lost for the purpose of a subsequent judicial review, and this would be strongly against the public interest.

The FM Capital decision also contains interesting comments on the dominant purpose test for litigation privilege where a company is facing serious potential claims against it as well as dealing with disciplinary proceedings against an employee. Although each case will turn on its facts, the decision suggests that a court might readily accept that the company’s greater concern will be preparing for the litigation, rather than disciplining its own employee, potentially making it easier to establish a claim for litigation privilege in these circumstances.

FM Capital Partners v Marino

The claimant, an asset management firm, received a letter from one of its clients complaining about the way its assets had been managed and making allegations of breaches of duty and unlawful conduct against the claimant’s CEO, Mr Marino. Immediately on receipt of that letter, solicitors instructed by the claimant instructed an accountancy firm, BDO, to conduct an investigation.

Shortly afterwards, Mr Marino was suspended from his position as CEO. He was interviewed by BDO as part of its investigation and a copy of BDO’s interim report was provided to him in anticipation of a disciplinary hearing, which he failed to attend. The claimant dismissed him for gross misconduct and issued the present proceedings against him alleging dishonest breaches of duty (to which other defendants were later added).

The claimant asserted privilege over various documents relating to the investigation. The third defendant disputed the claim to litigation privilege and, in relation to the interim report, argued that any privilege had been waived by providing it to Mr Marino.

The High Court (Leggatt J) held that the documents were covered by litigation privilege, but that privilege in the interim report had been waived.

Litigation privilege

The claimant’s solicitors gave evidence that, at the time BDO were instructed and carried out their investigation, various forms of litigation were seriously contemplated, namely: litigation by the claimant’s client (as threatened in the letter of complaint referred to above); litigation against Mr Marino (as ultimately brought in the current proceedings); and potential proceedings by Mr Marino in relation to his suspension. The evidence given was that the dominant purpose of BDO’s instruction was to ascertain the rights and liabilities of the claimant and find out the facts in connection with those potential proceedings.

Leggatt J said he saw no reason to doubt that evidence, or to conclude that litigation was not the dominant purpose of the BDO investigation. He rejected the suggestion that the disciplinary process pursued against Mr Marino was at least an equal purpose of the investigation, commenting:

“For what it is worth, I would have thought it inherently less likely that a company faced with serious allegations and a serious potential claim against it from one of its clients would be predominantly or even equally concerned with disciplining its own employee as opposed to preparing to defend litigation being threatened against it and to pursue a claim potentially against its employee.”

Waiver of privilege – implied restriction on use?

Leggatt J agreed that the claimant had waived privilege in BDO’s interim report by providing it to Mr Marino. Referring to authorities including Berezovsky v Hine [2011] EWCA Civ 1089 (considered here), he accepted that the mere provision of a privileged document by A to B does not necessarily amount to a waiver of privilege. The extent to which there is any such waiver depends on to what extent there is an express or implied restriction on subsequent use of the document.

In Berezovsky, the Court of Appeal held that privilege had not been lost as a result of Mr Berezovsky providing draft witness statements to a third party, Mr P, to assist Mr P with a claim for asylum. The court held that it was implicit in the circumstances in which the draft statements had been provided to Mr P that they could be used only for the purposes of his asylum claim, and not subsequent litigation against Mr Berezovsky.

In the present case, there was no express restriction imposed on the use of the interim report by Mr Marino. The claimant’s case was that there was an implied restriction on use of the document other than for the purpose of the disciplinary proceedings. Leggatt J said he was not able to infer that there was such an implied restriction. He accepted that “it could not reasonably have been supposed that Mr Marino was free to make whatever use he chose of the document for any purpose whatsoever”. However, in circumstances where litigation, including against Mr Marino, was the dominant purpose of the report, the natural inference (in the absence of any statement to the contrary) was that Mr Marino would be free to use the report not only for the disciplinary process but for the litigation against him which was likely to follow.

Accordingly, Mr Marino was entitled to deploy the document in the present proceedings, including to disclose it as part of his own disclosure. As a result, privilege had been lost as against the other parties to these proceedings for the purposes of these proceedings.

Belhaj v DPP

The underlying action was a judicial review against the DPP alleging that she had erred in her decision not to prosecute for alleged involvement in the claimants’ unlawful rendition to Libya.

Privileged material had been communicated by the government to the Metropolitan Police Service and to the Crown Prosecution Service (CPS) and DPP, and was further transmitted within the CPS, when the Victim’s Right to Review (VRR) took place.

The information was communicated subject to a limited waiver in the following terms:

“Legal Professional Privilege

There are some documents provided to the investigation that may be subject to legal professional privilege. The FCO provides these papers for the sole purpose of assisting with this investigation and do not consider to have waived legal privilege for any other purpose, including any future prosecution or civil claim. By convention the FCO would not confirm nor deny publicly whether the advice of the Law Officers has been sought.”

The claimants argued that, once the government had waived privilege, it must be taken to be waived in respect of judicial review proceedings as well as the process for which an express limited waiver had been given. Although they accepted that a limited waiver might be effective in other circumstances, they argued that the close relationship between, on the one hand, the advice by counsel to the DPP, the decision by the DPP and the VRR and, on the other hand, the judicial review, meant that the expressed limit on the waiver was not effective.

The Administrative Court (Irwin LJ and Green J) held that the waiver was limited and did not extend to the present proceedings.

Waiver of privilege – effect of express limitation?

In the court’s view, the terms of the waiver were clear and unambiguous; the waiver was limited to specific expressed purposes and could not be read as a general waiver.

The court considered the case of Scottish Lion Insurance Co Ltd v Goodrich Corp [2013] BCC 124, which was relied on by the claimants. In that case, the court considered a question that had arisen on an application to sanction a scheme of arrangement between a petitioner and its creditors under section 899 of the Companies Act 2006, following a creditors’ meeting. The creditors’ votes in relation to the scheme were given a weighting according to the value of their claims against the petitioner, and for the purpose of that valuation exercise the creditors were invited to submit documentation supporting the valuation of their claims. The application for sanction was opposed by the respondents on grounds relating in part to the valuation process. The court ordered the production of the documentation that had been submitted to the petitioner in support of the valuation of the creditors’ claims. The question was whether the creditors were entitled to object to production of some of that documentation on grounds of privilege. The court held that they were not: the application for the creditors’ meeting, the voting at the meeting, and the application to the court to sanction the scheme were all part of a single process. When the creditors submitted privileged documents for the purposes of valuing their claims, they must be taken to have done so in the knowledge that the documents might have to be considered by the court so that it could be satisfied that it had jurisdiction to sanction the scheme.

In contrast, in the present case, there was no inevitable or necessary nexus between, on the one hand, the advice to the DPP, the decision on prosecution and the VRR and, on the other, a subsequent judicial review of the decision arrived at. They were discrete processes, not one composite process, and therefore there was no inferred waiver extending to the judicial review. In the court’s view, Scottish Lion identified “what is, or is near to, the outer limits of inferred waiver”, and the present case fell well beyond its outer perimeter.

The court also commented that , as judicial review is a generic remedy available to supervise all decisions of the executive, a finding that there was an inferred waiver extending to the judicial review process would have “profound” consequences. It would mean that, in almost any case where one government department waived privilege to assist another, that limited waiver might inferentially be extended to cover subsequent judicial reviews. As the court put it, “That would be a remarkable consequence, and strongly against the public interest.”