Court of Appeal finds waiver where privileged document provided for inspection and mistake not obvious

The Court of Appeal has granted claimants permission to use privileged documents which had been disclosed inadvertently by the defendant (the SFO) in the course of litigation, reversing the decision of the Commercial Court: Rawlinson and Hunter Trustees SA v SFO [2014] EWCA Civ 1129. It held that any privilege that existed in the documents had been waived when they were inspected by the claimants, as it was not obvious that a mistake had been made.

The first instance decision had suggested it might be easier to preserve privilege where inadvertent disclosure took place in the context of a very large or particularly complex disclosure exercise, since in that context it is more likely that mistakes might be made. That reasoning was however rejected by the Court of Appeal.

The present judgment emphasises that to prevent an opponent relying on privileged documents where there has been inadvertent disclosure, it will not be enough just to show that the documents were obviously privileged; the question is whether it is obvious that they were disclosed by mistake. The two are not the same, since a party can always choose not to assert privilege. The latter may well be more difficult to establish than the former, though in some cases the sensitive nature of a document may be enough to show it was an obvious mistake. Merely flagging to your opponent that some of the documents you are providing for inspection may be privileged will not be enough to prevent privilege being waived, if the error is not obvious.

The Court of Appeal's approach in this case underlines the importance of ensuring that a thorough privilege review has been conducted in respect of any documents provided for inspection to ensure nothing is missed.

The decision also establishes that the above approach to waiver of privilege does not apply to public interest immunity (PII). Where a document to which PII properly attaches has been disclosed by mistake, regardless of whether or not the mistake was obvious, the court must weigh the public interest in maintaining confidentiality against the public interest in the due administration of justice. The below focuses on the court's approach relating to privilege. 

Background

Where a party allows its privileged material to be inspected by an opponent in litigation, it will normally be taken to have waived privilege in the material in question. The court will not normally intervene to grant an injunction unless there has been a fraud or obvious mistake. (This is in contrast to the position where privileged documents are inadvertently disclosed outside the litigation process, where the starting point is that the court will normally intervene unless the document has entered the public domain.)

Civil Procedure Rule 31.20 provides that where a party inadvertently allows a privileged document to be inspected, the party who has inspected the document may use it or its contents only with the permission of the court. That rule has not however led to any change in the court's approach where there has been inadvertent disclosure of privileged documents. As confirmed by the Court of Appeal in Al-Fayed v Metropolitan Police Commissioner [2002] EWCA Civ 780, the court should adopt the same approach in exercising its discretion to grant an injunction or to make an order under CPR 31.20.

In the present case, the claimants applied under CPR 31.20 for permission to use certain documents that the defendant said had been disclosed inadvertently. The defendant resisted the application on the basis that four of the documents in question were subject to legal professional privilege and their disclosure had been an obvious mistake (though it was accepted that the lawyer who reviewed the documents believed the documents had been disclosed intentionally). A fifth document was said to be subject to PII.

At first instance, the judge (Eder J) held that there had been an obvious mistake; even though it was not apparent to the in-house lawyer who read the document, the judge found that it would have been obvious to a reasonable solicitor in the same position. In general terms an inspecting party is entitled to rely on the opponent's legal team to conduct the disclosure review properly. However, given the scale and complexity of the review in this case, the judge said, it would be wrong for anyone to assume that the review would be infallible. On the contrary, it seemed almost inevitable that some mistakes would or at least might occur, and the SFO was not intending to waive privilege in documents which might be inadvertently disclosed. He refused permission under CPR 31.20 in respect of all of the documents, upholding the claims to both privilege and PII.

Decision

The Court of Appeal allowed the appeal in respect of the privileged documents, finding that privilege had been waived, but dismissed the appeal in respect of the document subject to PII.

It noted that a party is not bound to claim privilege; it can choose to waive privilege and allow the other party to inspect the material. Accordingly, the fact that a privileged document has been produced for inspection does not necessarily mean it was inadvertent.

The Court of Appeal was critical of the judge's apparent assumption that if a document is obviously privileged, it is obvious that it was disclosed by mistake. That confuses two things: whether the document is privileged and whether, even if privileged, it was obviously disclosed by mistake.

"It is only if the court is satisfied of the latter that it will consider whether to prevent the use of the document in the litigation. No doubt in some cases the sensitive nature of the document will be enough to make it obvious that it has been disclosed by mistake, but often that will not be the case."

The Court of Appeal commented that, once it is accepted that a qualified lawyer inspected a document and did not realise it had been disclosed by mistake, it is a "strong thing" to hold that the mistake was obvious. General assertions in correspondence that the defendant did not intend to waive privilege, including a statement that it had been unable to undertake the desired level of quality control in relation to certain tranches of disclosure due to time constraints, did not make it obvious that any privileged documents must have been disclosed by mistake.

It is also worth noting that, in respect of one of the documents, the Court of Appeal rejected the claim to privilege in any event. The nature and contents of the document tended to suggest that it was created both for the purposes of reviewing the effectiveness of the SFO's investigation procedure and (but to a lesser extent) to provide information for use in connection with the judicial review proceedings. To establish litigation privilege, therefore, it was not enough to assert that the document was created for the dominant purpose of litigation; there had to be material before the court to show that that claim was well founded. In the present case there was no such evidence.