In a recent Irish High Court case, Artisan Glass Studio Limited v The Liffey Trust Limited and others  IEHC 278, the Plaintiff challenged a claim to privilege asserted by a Defendant in respect of two expert engineering reports obtained.
A fire broke out on 2 November 2002 at a premises in Dublin city centre. The First Named Defendant, the Liffey Trust Limited, owned the premises. The Plaintiff (Artisan Glass Studio Limited) and the Second Defendant, Slovak Limited (“Slovak”) both had units at the premises, which were extensively damaged by the fire. Slovak operated a bakery at its unit, with Aovens in 24 hour use. The Plaintiff alleged that the fire started in Slovak’s unit, escaping into the Plaintiff’s nearby unit, causing substantial damage. There was particular focus in the pleadings on a gas oven and flue located at Slovak’s unit and the Plaintiff’s discovery application sought documents and engineering reports relating to the inspection of that oven and flue.
Slovak’s fire insurance apparently covered third party damage and its insurers appointed independent loss adjusters on 4 November 2002 to investigate the loss on its behalf. A firm of engineers was appointed on the same date, to assist the loss adjusters and to conduct forensic enquiries. The engineering firm received their instructions from the loss adjusters. The engineering firm in carrying out their investigations produced (a) a record of inspection dated 15 November 2002 and (b) a report dated 20 March 2003. The application brought by the Plaintiff challenged the privilege asserted over these two documents. Privilege was claimed by Slovak’s insurers on the basis that these documents came into existence in contemplation of litigation.
In determining whether the documents were protected by privilege, the court applied the following principles derived from case law:
(a) Whether litigation was reasonably apprehended at the time the documents in question were brought into being;
(b) Whether the documents in question were brought into being for the purpose of that litigation;
(c) If the documents were created for more than one purpose, the documents would be protected by litigation privilege in the event that the litigation was the dominant purpose;
(d) The party claiming privilege has the onus of proving that the documents are protected by privilege.
Whether litigation was reasonably apprehended
In deciding (a), the court looked at the chronology of events derived from the pleadings and Affidavits. The court noted that Slovak’s insurers opened two files after the fire, one relating to potential third party claims and a second relating to the claim brought by its own insured under the policy, in respect of material damage and business interruption losses. The court came to the conclusion that litigation was reasonably apprehended by the time both engineering documents had been created. It held that litigation was reasonably apprehended when the record of inspection dated 15 November 2002 was created, as insurers had formally instructed legal advisors on 16 November 2002 and had discussions with their legal advisors prior to that date on the potential for third party claims to be brought. Letters of claim had been served by the time the report was created on 20 March 2003, which left no doubt that litigation was contemplated by this date.
The court held that the existence of an endorsement on the loss adjuster’s report stating “Private & Confidential – Privileged made in the contemplation of legal proceedings. For insurer’s legal advisors only” was not determinative in deciding whether the document was privileged. The engineering documents did not have this heading.
Created for the dominant purpose of that litigation
The fact that litigation was apprehended at the time of creation of the reports, was not of itself conclusive that they were protected by litigation privilege. Whilst the apprehension of litigation was an essential element when seeking to establish litigation privilege, this was not the end of the analysis if it transpired that the reports in question were created for more than one purpose.
The court found that the engineers were retained for more than one purpose, aside from the litigation. One reason for this was the use of the word “dominant” in the Affidavits filed on behalf of the insurer, which immediately suggested that litigation was not the sole purpose of the report. In examining the relevant case law, the court held that it was necessary for the party claiming litigation privilege over a discoverable document to prove that the dominant purpose for which the document was created was the litigation. A bald assertion in an Affidavit that litigation was the dominant purpose of a document was not sufficient to establish that litigation was the dominant purpose. The question of dominant purpose was a matter for objective determination by the court. In looking at this issue, the court had to assess whether Slovak’s insurer had demonstrated that the dominant purpose of the engineer’s report and the record of inspection was apprehended litigation by third party claimants against Slovak.
The court considered that it was not satisfactory that no attempt had been made in the Affidavits to explain what was (or were) the other purpose (or purposes) of the engineering report and record of inspection. It held that it was essential that a party claiming privilege over a discoverable document should place before the court sufficient explanation, or sufficient materials, to identify all of the purposes of the document, with a view to assisting the court in its assessment of whether or not it might properly be said that apprehended litigation was the dominant purpose. An example of material which might enable it properly to assess whether litigation was the dominant purpose was the instructions to the engineers or the loss adjusters. However, the only material made available to the court on this occasion was the two engineering documents.
In examining the record of inspection, the court noted that Slovak’s insurer’s enquiries seemed to be directed towards the character of its insured, Slovak. The court therefore concluded that at the time of the record of inspection, Slovak’s insurer was still considering its own potential liability to its insured. In those circumstances, the court held that Slovak’s insurer was not entitled to claim privilege over this document, as it was not created for the dominant purpose of apprehended third party litigation.
The court concluded that the engineering report of 20 March 2003 was protected from disclosure by litigation privilege. The court held this report did not contain any material which suggested that the issue of liability to its own insured was still under active consideration by Slovak’s insurer. The report appeared to comprise a careful analysis as to the cause of the fire, which would be necessary in order for Slovak’s insurer to form a view as to whether third party litigation, which was then threatened against Slovak, was capable of being defended. Accordingly, the court held the 20 March 2003 report was protected by litigation privilege.
This case is of interest to insurers and to the experts and solicitors they instruct. It emphasises that merely labelling a report as having been prepared in contemplation of litigation will not be sufficient to ensure that the document is legally privileged. Insurers and their solicitors when instructing experts should bear in mind that depending upon the particular circumstances of the case, expert reports may be deemed not to be privileged.
This case should also serve as a reminder to solicitors when preparing interim applications to have due regard to their paperwork. A court can only consider the material and information placed before it and with any interim application, it is essential that the court has sufficient to assist it in deciding whether to grant the relief sought. A court should not be expected to consider whether expert repots are legally privileged in isolation from the circumstances in which they were obtained. Consideration of whether such a document should attract privilege necessarily requires that the document be set in context, such that the court is able to consider whether an assertion that the document is privileged is meritorious. If a document has more than one purpose, each of those purposes should be addressed and explained, by a party who is in a position to make the averments. In default of sufficient information being made available to it, the Court may be more likely to conclude that litigation is not the dominant purpose of the document and that it is not legally privileged.