No collateral waiver where party relied on the effect of legal advice rather than its content

The High Court has held that a claimant did not waive privilege where, in evidence filed in response to an application to strike out its claims under Dutch law, it stated that it had received Dutch law advice and had formulated its claims on the basis of that advice: KMG International NV v Chen [2019] EWHC 3634.

Where a party relies on privileged material to support its claim, whether on an interim application or at trial, the principle of collateral waiver or the "cherry picking rule" may come into play to require the disclosure of other privileged material relating to the same issue or transaction. This principle is based on fairness, so as to avoid a party being able to put forward only part of the picture.

The present case is a reminder that the court will distinguish between reliance on the content of a privileged document and reliance on its existence or effect. Only the former rather than the latter will give rise to a collateral waiver. As the judge recognised in this case, however, the dividing line between reliance on the contents of a document and reliance on its effect is by no means clear cut. In practice, therefore, parties to litigation should be very cautious in referring to privileged materials in any evidence submitted.

Background

The defendants applied for strike-out on the basis that the Dutch law claim advanced by the claimant was not properly particularised and was not supported by evidence of Dutch law.

The claimant served evidence in response to the strike-out application and in support of its intended application for permission to re-amend its particulars of claim. That evidence stated that the claimant had obtained Dutch law advice from De Brauw which had formed the basis of its formulation of the Dutch law claim, though the advice had not been made available to the defendants because it was privileged.

The claimant also introduced an expert report of Professor Veder in support of the proposed amendments. In response to the defendants' request for the instructions or materials provided to Professor Veder in order to prepare his report, the claimant produced a redacted version of a note from De Brauw (the "Note").

The defendants applied for an unredacted copy of the Note under CPR 35.10(4). This rule provides, in summary, that the material instructions on which an expert report is based are not privileged against disclosure, but the court will not order disclosure unless satisfied that there are reasonable grounds to consider the expert's statement of instructions (as contained in the expert report) to be inaccurate or incomplete.

The claimant said, in an email of 10 April 2019, that it was prepared to provide a non-redacted copy of the Note upon the defendants' agreement that they would not seek disclosure of further legal advice that was provided to the claimant but not provided to Professor Veder "whether on the basis of deployment, collateral waiver or otherwise". The defendants' solicitors responded the same day to say they agreed that the abrogation of privilege by CPR 35.10(4) was limited to documents supplied to Professor Veder as part of his instructions, and privilege was not waived over confidential documents which were referred to in such documents but were not themselves part of the instructions.

The claimant then provided a copy of the unredacted Note, and the defendants applied for an order for inspection of further De Brauw memos referred to in the Note. The defendants argued that those memos had been deployed in the claimant's evidence in response to the strike-out application, ie that they were relied on to establish that there was expert Dutch law support for its claims. The correspondence of 10 April was not, they said, an agreement that the defendants would not seek copies of the De Brauw memos. The application for copies of those memos arose solely from the claimant's prior reliance on the content of the memos, not from production of the Note.

Decision

The court (Butcher J) rejected the application for inspection of the De Brauw memos.

The judge said the defendants were "probably correct" that there was no agreement in the 10 April correspondence that they would not seek disclosure of the De Brauw memos on the basis of what was said in the claimant's prior evidence. He did however "confess to some sympathy" with the claimant's surprise that the defendants were seeking memos whose existence was only revealed by the production of the Note, when the claimant's solicitors had said they would not seek disclosure of documents referred to in the Note which contained legal advice which was provided to the claimant but not to Professor Veder.

Turning to the substance of the application, the judge referred to the decision in ACD (Landscape Architects) v Overall [2011] EWHC 3362 (TCC) (considered here). In that case the court reviewed the relevant authorities and stated a number of propositions, including that privilege will be waived where an otherwise privileged document is referred to in a witness statement and its contents are deployed for use in interlocutory proceedings or at trial, and the test of whether a document is being deployed is "whether the contents of the document are being relied upon rather than the effect or impact of the document".

A similar distinction between the contents of a document and its existence or effect is drawn in the textbooks to which Butcher J was referred (Hollander on Documentary Evidence, 13th edn, and Matthews & Malek on Disclosure, 5th edn).

As Butcher J commented: "The dividing line between reliance on the contents of the document and reliance on its effect is not necessarily easy to draw." In the present case, however, the judge was satisfied that the claimant's evidence fell on the side of reliance on the effect of the advice rather than its contents. In particular, while the evidence said that the case had been formulated having received Dutch legal advice, it did not quote from or summarise the contents of that advice.

In any event, the judge did not consider that fairness would dictate disclosure, if that were the question. He said he would regard it as unsatisfactory if, in response to an allegation that there was no foundation for advancing a plea of foreign law, a party could not respond by saying that a foundation existed in the form of foreign legal advice, without waiving privilege over that advice.

Even if Butcher J had concluded that there had been deployment, he would not have ordered inspection. Under paragraph 18 of the disclosure pilot practice direction, at PD51U, it was necessary to show that a variation of the original disclosure order was necessary for the just disposal of the proceedings, and was reasonable and proportionate. That was not the case here. The evidence which supported the amendments was the evidence of Professor Veder, not the De Brauw memos. An order for disclosure and inspection would likely lead to costs being incurred on matters which were ultimately likely to be inconsequential.