High Court takes expansive view of when reference to legal advice may result in broader waiver

The High Court has held that a bank waived privilege in all contemporaneous communications with its lawyers relating to particular transactions that were alleged to be a sham, as the bank had deployed the lawyers’ advice that the transactions were lawful in order to support its case on the merits. That was regardless of whether the particular documents relied on had already lost privilege by the time the bank had deployed them: PCP Capital Partners LLP v Barclays Bank Plc [2020] EWHC 1393 (Comm).

This is an application of the principle of collateral waiver, or the “cherry picking rule”, which says that a party who relies on privileged material to support its claim may be required to disclose other privileged material relating to the same issue or transaction. The principle is designed to avoid the unfairness which might result if the court were denied the full picture.

The decision is of particular interest for two reasons:

1. In many previous cases the court has held that privilege will not be waived if a party relies on the “effect” of privileged material rather than its “content” – though the dividing line in practice has been far from clear. The court in this case equates the “effect” of legal advice with its conclusion or outcome, but says the distinction cannot be applied mechanistically. Instead, the question of whether privilege has been waived depends on an “acutely fact-sensitive exercise” as to whether there is reliance, the purpose of that reliance and the particular context. It’s clear that, if this approach is followed in other cases, a waiver may result even if only the conclusion of legal advice is relied on. But beyond that, the decision arguably makes it no easier to draw a line between references that will result in a waiver and those that will not.
2. Unusually for cases involving waiver, the documents relied on in this case had already lost their privileged status by the time the bank deployed them, as they had been provided to the SFO under a limited waiver of privilege and relied on by the SFO in criminal proceedings. The court rejected the argument that, because of this, reliance could not result in a waiver. The bank had provided the documents to the SFO knowing they might be deployed at the criminal trial. The decision leaves open whether the position might have been different if the bank had had no involvement at all in their deployment.

Background

The underlying claim relates to the defendant bank’s capital raisings following the 2008 financial crisis. The claimants allege that the bank made knowingly false representations as to the terms on which the claimants’ investment was being made, and in particular how those terms compared with the terms offered to other investors, namely the state of Qatar and related entities and persons (“the Qataris”).

Central to the claims are allegations that certain advisory services agreements (“ASAs”) entered into between the bank and the Qataris were shams, as no real advisory services were ever intended to be provided.

The SFO brought criminal charges in relation to these matters against the bank and certain of its senior executives. The charges against the bank were ultimately dismissed and the senior executives acquitted. However, as part of its criminal investigation, the SFO sought disclosure of certain documents over which the bank claimed legal professional privilege. The bank agreed to provide the documents under a “limited waiver of privilege”, so that the SFO could use them solely for the purposes of its investigation, prosecution and related criminal proceedings.

The SFO subsequently used a number of the bank’s documents in the criminal trial. It was common ground that the documents referred to at trial, referred to as “the Open Documents”, lost the privilege previously attaching to them at that point.

In the bank’s witness statements and opening statement in the present proceedings, there were a number of references to legal advice received by the bank. The claimants alleged that the bank had thereby waived privilege and must therefore disclose any contemporaneous documents which relate to the ASAs and which the bank had previously withheld from disclosure on the ground of privilege.

The bank argued that there had been no waiver on a number of grounds, including that:

• the nature of the references to the legal advice did not give rise to a waiver (the “Basic Point”); and
• all of the references were to the Open Documents which were no longer privileged because of their use in the criminal trial (the “Timing Point”).

If there was a waiver, the question would then arise as to its scope (the “Scope Point”).

Decision

The High Court (Waksman J) held that there had been a waiver of any privilege in contemporaneous documents relating to the ASAs. The bank would therefore have to disclose all of the documents sought, unless it withdrew its reliance on the privileged material.

The legal principles

The judge noted that it is “not easy to find a succinct and clear definition” in the case law of when a party has waived privilege, but said that on any view:

1. the reference to the legal advice must be sufficient; and
2. it must be relied on in some way to support the relevant party’s case on an issue the court has to decide.

A mere reference to the fact of legal advice would not be a waiver, for example: “My solicitor gave me detailed advice. The following day I entered into the contract”. In contrast, he said, it would be a waiver to say: “I entered into the contract as a result of that legal advice”.

The judge referred to the “vexed question which still confounds the law of privilege”, namely the distinction between a reference to the “effect” of the legal advice and a reference to its “contents”, with only the latter giving rise to a waiver.

The distinction was applied by the Court of Appeal in Marubeni v Alafouzos [1986] WL 408062, where on an ex parte application for leave to serve out of the jurisdiction, in deposing to the merits of the proposed claim, the claimant’s solicitor said: “The plaintiffs have obtained outside Japanese legal advice which categorically states that this agreement does not render performance of the sale contract illegal in any way whatsoever.” The Court of Appeal said there was no waiver, as the claimant was relying on the effect of the document rather than its contents.

Waksman J noted that, in that case, there was a clear reference to the legal advice and its conclusion, though not the underlying reasoning or any detail as to its contents. He said that by the “effect” of the advice, the court must have meant its conclusion or outcome. However, if the distinction is between a reference to the conclusion of legal advice and its detailed contents, it is “then very difficult to understand how that distinction works if applied mechanistically and without any reference to context and purpose”.

He commented that the distinction might have some superficial attraction, as generally a party won’t refer to large sections of legal advice unless it is being relied upon in some way, whereas a reference to the effect or outcome may (perhaps) indicate something different. In Marubeni, for example, the solicitor had to depose to the advice received because it was a procedural requirement under the rules for service out, but once that was done the legal advice had no further relevance.

Waksman J concluded that the content/effect distinction cannot be applied mechanistically to determine whether there has been a waiver. Instead:

“Its application has to be viewed and made through the prism of (a) whether there is any reliance on the privileged material adverted to; (b) what the purpose of that reliance is; and (c) the particular context of the case in question. This is an acutely fact-sensitive exercise.”

He emphasised that, applying that approach, a waiver may arise even if only the conclusion of the legal advice is referred to as opposed its detailed contents.

If there is a waiver, the question arises as to its scope. It was common ground that, in essence, the court has to decide the issue or “transaction” with which the waiver was concerned. All privileged materials falling within that issue or transaction must then be produced. He added:

“The transaction analysis itself is driven by the concept of fairness. It is why one has to ascertain the transaction, because then that establishes the playing field, as it were. If the playing field is in truth wider than the documents which have been referred to so far, then it is not level as far as the non-waiving party is concerned because disclosure has in truth been only partial.”

The Basic Point

In the present case, Waksman J found that the statement in one witness’s evidence that he “took comfort from and adhered to the lawyers’ advice in these matters” amounted to a general statement that the lawyers advised that what he did was lawful. It was more than a mere reference to the fact of advice. Although in a sense the reference was only to the effect of the advice, if “effect” meant conclusion, that could still be sufficient for waiver.

With regard to reliance, Waksman J found that the witness was relying on the advice because he was saying he followed the advice in connection with the ASAs alleged to be shams. The purpose of that reliance was, essentially, to support the bank’s case as to the proper characterisation of the ASAs, in that if the lawyers advised they were lawful, it is less likely they should be regarded as shams.

Other references to the advice in the various witness statements and in the bank’s opening were held to be to similar effect.

Accordingly Waksman J held that, subject to the Timing Point, it was plain that waiver had occurred.

The Timing Point

The bank’s essential point was that all of the references to legal advice concerned the Open Documents, which were no longer privileged, so deploying them did not involve waiver at all.

Waksman J did not, however, accept that a once-privileged document which has lost that status has therefore become irrelevant from a privilege point of view. The claimants pointed out that, if that were the case, a party could avoid the consequence of any waiver by deliberately making the documents open beforehand (eg by putting the documents in the public domain).

The bank argued that the present case was different, as the Open Documents had not lost their privileged status because of steps taken by the bank, but rather because the SFO had deployed them in the criminal proceedings. The judge rejected that argument. While it was true that the documents had been deployed by the SFO, the privilege had belonged to the bank and the bank had given a limited waiver in the full knowledge that some of the documents would be used at trial. Therefore it could not be said that the bank had nothing to do with their deployment.

The Scope Point

Waksman J went on to determine the transaction in relation to which waiver had occurred. He concluded that considerations of fairness plainly dictated that the relevant transaction was the legal advice in relation to the ASAs, and so any privileged material relating to the ASAs had to be disclosed.

He rejected the bank’s submission that the court should examine each reference to legal advice which constituted waiver and consider the particular transaction to which that relates. The bank was relying on all the references to legal advice to make its point about the lawfulness of the ASAs, and therefore could not argue for some narrower transaction.

In the judge’s view, the witnesses could not be properly cross-examined about their belief that the lawyers approved the transaction unless the claimants had the full picture regarding the advice given on the ASAs, including the instructions given to the lawyers.