Disclosure Pilot: High Court clarifies transitional operation and considers privilege claims

The High Court has confirmed that the Disclosure Pilot operating in the Business and Property Courts since 1 January 2019 applies to all proceedings currently on foot in those courts (apart from those specifically excluded), regardless of whether orders for disclosure were made prior to that date. Accordingly, any applications for further orders regarding disclosure will be dealt with under the new rules contained in Practice Direction 51U (PD51U): UTB LLC V Sheffield United Ltd & others [2019] EWHC 914 (Ch). 

With regard to privilege challenges, the decision suggests that the wording of the new rules gives added force to the general rule that judges should be cautious about agreeing to inspect documents in order to test whether privilege has been properly asserted (although in some cases, such as here, it may still be considered appropriate).

The decision is also an interesting example of a case where privilege was claimed in respect of communications with a lawyer who was also acting as the client's "man of business", alongside his legal role. It illustrates that the existence of such dual roles will not preclude claims of privilege over those communications that satisfy the test of having been made in a relevant legal context. However, it will be necessary to satisfy the court that those carrying out the disclosure review exercise were astute to the need to distinguish such communications from those that took place in a business advisory context, which will not be privileged.

Background

The proceedings relate to a joint-venture dispute between Sheffield United Football Club ("Sheffield") and other entities in the Club's ownership structure, including a Saudi prince referred to in the judgment as Prince Abdullah and various corporate vehicles associated with him (together "UTB").

Orders for standard disclosure were made (under CPR Part 31) prior to the commencement of the Pilot.

In March 2019, Sheffield brought an application which, amongst other things, challenged various privilege claims asserted by UTB and sought further disclosure from UTB of certain categories of documents.

Decision

The High Court (the Chancellor, Sir Geoffrey Vos), refused the application for further disclosure, upholding UTB's claims to privilege.

Application of the Disclosure Pilot

Both parties had originally approached the application on the basis that the new provisions in PD51U did not apply, given that the original disclosure order was made under Part 31.

The Chancellor noted that PD51U states (at paragraph 1.3) that the pilot "shall not disturb an order for disclosure made before [1 January 2019]” and the 2019 White Book commentary states (at 51.2.10) that “The Pilot does not apply to any proceedings where a disclosure order had been made before it came into force unless that order is set aside or varied”.

However, as the Chancellor also noted, paragraph 1.2 of PD51U makes it clear that "the pilot applies [from 1 January 2019] … to existing and new proceedings in the Business and Property Courts". A statement that the pilot will not disturb pre-pilot orders is not the same as saying that the pilot does not apply to proceedings in which pre-pilot orders have been made. The court therefore confirmed that the pilot does apply in all subsisting proceedings in the Business and Property Courts, regardless of when those proceedings began and whether disclosure orders had been made prior to the pilot's commencement. The White Book statement to the contrary is incorrect.

The Chancellor took the opportunity to stress that "parties to cases like this, who want to apply to the court for Extended Disclosure under PD51U, should give detailed thought to the new rules and specifically to the way in which they will affect their application".

As the court noted, this creates some difficulties, given that the new rules in PD51U refer to concepts that did not previously exist under Part 31, including the List of Issues for Disclosure and the various different models for Extended Disclosure. However, the Chancellor indicated that the court and the parties would need to be pragmatic in their approach to cases such as this, so as to enable the court to deal with such applications under the new rules. The judgment does not set out any general rule as to what that will require in practice (and, in particular, whether a Disclosure Review Document will need to be prepared where further disclosure orders are sought) but it does appear that in this case, the parties negotiated a List of Issues for Disclosure to enable the court to deal with the application.

The judgment makes it clear that is not only the new procedures in PD51U that will need to be taken into account in any application for further disclosure but also the principles underlying the new regime. The judge emphasised the culture change intended to be introduced by the pilot, driven by reasonableness and proportionality, and the fact that, under the new provisions, the court should only order Extended Disclosure where that is appropriate to resolve fairly one or more of the Issues for Disclosure. In this case, the court concluded that none of the categories of further disclosure sought by Sheffield met that test.

Privilege - Judicial inspection of documents

The court was asked to inspect two of the documents that had been redacted for privilege, as a sample to test the approach taken to the claims. The present application was listed before the Chancellor rather than the trial judge for this reason.

The court referred to various authorities confirming that the question of whether to inspect documents for this purpose was a matter of broad judicial discretion but that judges should be cautious about doing so and should be alive to the dangers of looking at documents out of context.

In the context of the disclosure pilot, judicial inspection is dealt with expressly in PD 51U, which states (at paragraph 14.3) that the court may inspect documents if this is “necessary” to determine whether the claimed right or duty to withhold disclosure exists, or to determine its scope. The Chancellor observed that this requirement of necessity meant that the warnings to exercise caution applied with even greater force in cases under the Disclosure Pilot.

However, while he was for this reason initially very reluctant to inspect the proposed sample, he ultimately concluded it was necessary to do so in order "to cut the gordian knot" and avoid delaying the imminent expedited trial. Inspection here was necessary for the just disposal of the proceedings, and reviewing the sample (which he was satisfied would be a useful indicator for the wider category of documents) was a reasonable and proportionate course to adopt.

Privilege – Where lawyer is also a "man of business"

Sheffield's challenge to UTB’s claims to privilege centred on certain communications with a Mr Giansiracusa, who was a US qualified lawyer and a partner in an international law firm's Riyadh office. He was instructed by Prince Abdullah in that capacity, as well as having been a director of the joint-venture ownership company during some of the relevant period. It was accepted by UTB that Mr Giansiracusa had communicated with Sheffield about corporate and/or commercial matters and there were aspects of his work that meant certain of his communications did not attract privilege.

A partner in the law firm's London office gave detailed evidence in support of the claim to privilege, describing how the team reviewing documents were well aware of Mr Giansiracusa's role as director of the joint-venture company and were therefore cautious in assessing privilege, separating out communications depending on the capacity in which they were made and disclosing those that had been made in a purely commercial capacity.

The Chancellor accepted that Mr Giansiracusa was acting both as Prince Abdullah's lawyer and as his “man of business”. Accordingly, applying the test endorsed in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2004] UKHL 48, it was necessary to decide in respect of individual communications whether they took place in a relevant legal context – that is, "whether the advice relates to the rights, liabilities, obligations or remedies of the client either under private law or under public law". If so, the communication would be privileged, but not otherwise.

The court was satisfied by the evidence from the London partner and the inspection of the sample documents that the disclosure exercise had been conducted properly applying this test. In respect of the inspected documents, the Chancellor agreed that, without seeing the redacted material, the documents did indeed look as though they related to business decisions and business relationships. However, upon inspection of the unredacted documents, he was satisfied that the claim to privilege was valid, noting: "Lawyers frequently draft letters and evaluate legal options for their clients as part of the continuum of their advice in relation to the assertion of rights under, and claims that there have been breaches of, legal agreements. That was the situation here."

Furthermore, it was held that the application had been "outside the spirit and letter of [the pilot scheme]" because, even if not privileged, the documents being sought would not have advanced the defendant's case: "The proportionate resolution of the pleaded issues in these claims requires a dedicated focus on what really matters".