A recent decision of the English Court of Appeal shows the ease with which control of privileged material can be lost once shared with others.

Berezovsky v. Hine and others1

Boris Berezovsky is currently involved in:

  • the action against Roman Abramovich under way at the new Commercial Court facility on Fetter Lane (the Commercial Court Action); and
  • actions in the Chancery Division (the Chancery Actions) against the surviving family and principal beneficiaries of the estate of the late Arkadi “Badri” Patarkatsishvili (the Family Defendants).

There are several issues that overlap between the Commercial Court Action and the Chancery Actions (the Overlap Issues). Mrs Justice Gloster is trying the Overlap Issues as part of the Commercial Court Action and also as preliminary issues in the Chancery Actions.

Sharing Privileged Material

Messrs Berezovsky and Patarkatsishvili appeared to have been on “friendly and mutually cooperative” terms before the latter’s death. They had a similar history of exile from Russia.

Cadwalader, Wickersham & Taft (Cadwaladers) acted for Mr Berezovsky in the Commercial Court Action. Cadwaladers prepared draft witness statements (the Statements) for Mr Berezovsky and Mr Patarkatsishvili in support of the Commercial Court Action. In early 2008, Cadwaladers sent the Statements to solicitors at Gherson & Company (Gherson). Gherson was acting for Mr Berezovsky on his tax affairs and asylum status. Gherson was also acting for Mr Patarkatsishvili on his asylum status.

Cadwaladers initially sent the Statements to two solicitors at Gherson, both of whom were acting for Mr Berezovsky. One of these solicitors was also acting for Mr Patarkatsishvili. The Statements were later sent to other solicitors within Gherson who were also acting for Mr Patarkatsishvili (but not Mr Berezovsky) (attached to the Second Email).

At the time that the Statements were shared under the Second Email, the Chancery Actions had not been issued. The issue was whether the Family Defendants could use the Statements in dealing with the Overlap Issues. Mr Berezovsky was concerned that, if the Statements could be used in this way, then they would become available to Mr Abramovich in the Commercial Court Action.

The Issue for the Court

The Court of Appeal agreed with Mr Justice Mann that disclosure was not the issue here. A party must still disclose privileged documents though they can withhold inspection. Inspection was also not the issue as Gherson still held copies of the Statements, which were available to the Family Defendants. The issue was the extent to which the Family Defendants, as successors to Mr Patarkatsishvili, were free to make use of the Statements.

Common interest privilege does not provide an answer to this point, so was not relevant to the analysis. The judgment records that the parties agreed that: (i) the Second Email did involve a waiver of privilege; and (ii) the extent of the waiver was to be determined by reference to all the circumstances.

The Decision of the Court

At first instance, Mann J decided that Mr Patarkatsishvili was not free to use the Statements in any way he wanted. However, the sending of the Second Email to Mr Patarkatsishvili’s legal team did allow Mr Patarkatsishvili to use the Statements in actions between the two men. The Family Defendants could therefore use the Statements in dealing with the Overlap Issues.

The Court of Appeal took a stricter view of the implicit restrictions under which Cadwaladers had provided the Statements. The Master of the Rolls, giving the leading judgment of the Court, accepted that Cadwaladers had provided the Statements for two limited purposes. These were to: (i) help Mr Patarkatsishvili with his asylum claim; and (ii) avoid conflict between the evidence of Mr Patarkatsishvili in his asylum proceedings and the evidence of the two men in the Commercial Court Action. Any other use of the Statements, absent the consent of Mr Berezovsky, was prohibited. In particular, there was a clear inference that Cadwaladers did not intend the Statements to be disclosed to Mr Abramovich, as they would be if they ended up being used in determining the Overlap Issues. On that basis the Court of Appeal reversed the decision of Mann J.

Interestingly, the Master of the Rolls left undecided whether the Statements might also have been used in limited circumstances despite Mr Berezovsky’s objections. The Master of the Rolls thought it arguable that the Family Defendants could use them where they would not damage Mr Berezovsky’s interests. This was provided that the Statements were not shared further beyond Messrs Berezovsky and Patarkatsishvili, their successors and advisors.

Lessons Learned

While this may be an unusual example, the decision clearly shows the potential dangers of hasty sharing of privileged material. What can seem like a simple expediency at the time may turn out to be an ill-considered decision because of later developments. Although on this occasion the Court of Appeal decided Cadwaladers had provided the Statements for limited purposes, similar facts could easily have led to a decision the other way.

It follows that, in sharing privileged material with others, it is prudent to:

  • Consider the reasons for sharing privileged documents. Expressly record those reasons in relevant correspondence. Keep the purpose for which you agree to provide the material as narrow as possible.
  • Ensure that you expressly preserve confidentiality when sharing documents. Although confidentiality alone does not establish or preserve privilege, it helps bolster the argument that you only intend the recipient to use the material for limited purposes. Also, although labels are not determinative, clearly mark all privileged documents as such.
  • Although it was not relevant in this case, it is prudent not to assume that common interest privilege will apply, even if you share some community of interest with the proposed recipient. This is relevant to some clearly defined relationships (for example, between insurer and insured, or agent and principal). But in other circumstances its scope is not clear cut.
  • Consider the extent to which parties’ interests may change as time goes by, as documents in the hands of current allies may reappear in an altogether more unhelpful context.
  • Be aware that limited waivers over selected privileged documents can unravel if not handled with care. The courts are reluctant to allow a party, with the benefit of the privilege, to "cherry-pick" the documents (or parts of documents) that he relies on while withholding the balance.