High Court concludes no waiver of privilege resulted from negative assertions relating to legal advice

The High Court has held that a party who stated in documentation before the court that a particular issue had not been discussed with its lawyers, in order to deny an assertion made by its opponent, had not thereby waived privilege as there had been no voluntary disclosure: PJSC Tatneft v Bogolyubov [2020] EWHC 3225 (Comm).

It is well established that, in certain circumstances, a party who voluntarily discloses some of its privileged material in statements of case, witness statements or other documentation used in court proceedings may be required to disclose other privileged material relating to the same issue. This is known as collateral waiver or the “cherry picking rule”. The test, as recently set out in PCP Capital Partners LLP v Barclays Bank Plc [2020] EWHC 1393 (Comm) (considered here), is whether there is sufficient reference to the privileged material and whether it has been relied on to support the relevant party’s case.

The present decision is of particular interest for the court’s discussion of whether negative assertions, to the effect that a particular matter had not been discussed with a party’s lawyers, could result in a waiver of privilege over the communications that had taken place. The court drew a distinction between a situation where a party has chosen to put forward a positive case in reliance on legal advice (which may include a negative proposition) and where the party has merely denied an assertion made by the other party. The decision suggests that no waiver of privilege will occur when a party is merely responding to an opponent’s assertion as to the contents of a privileged communication.

While the court’s willingness to uphold privilege in such circumstances may be seen as welcome, it would be dangerous to take too much comfort. Even if the same approach is followed in other cases, there may be a rather fine line in practice between a negative proposition which puts forward a positive case and one which merely responds to an opponent’s assertion.

The case of Guest Supplies Intl Ltd v South Place Hotel Ltd [2020] EWHC 3307 (QB), decided 9 days after PJSC Tatneft v Bogolyubov, provides an illustration. In that case Murray J had little hesitation in finding that a claimant had waived privilege as a result of a negative assertion regarding his communications with his lawyers. The relevant assertion was made in the claimant's evidence in response to an application for specific disclosure of the original or digital version of an important agreement, the authenticity of which was disputed. The claimant gave evidence explaining why the original no longer existed, and that he had "never said" to his solicitor that the version disclosed was the actual final version of the agreement. Murray J held that, as a result, the claimant had waived privilege in any communications with his solicitor relating to the creation, provenance and/or authenticity of the document.

Background

The claimant (Tatneft) is one of the largest oil producers in Russia. It brought proceedings in March 2016 against the four defendants alleging that they had taken part in a dishonest scheme to misappropriate substantial sums owed to Tatneft in relation to oil it had supplied to a refinery owned by a Ukrainian company. The oil had been sold by Tatneft via a “commission agent” (S-K), and the claims were brought by Tatneft as S-K’s assignee.

An issue in the proceedings was whether the claims were time barred under the applicable (Russian) law. That turned on whether S-K had actual or constructive knowledge of relevant facts more than three years before the claim was issued, ie by March 2013. The defendants alleged that Tatneft had such knowledge (as it had been able to make similar allegations to those made against the defendants in a Bilateral Investment Treaty (BIT) arbitration claim it filed in 2008, as well as certain criminal complaints made in 2008 and 2011) and that S-K must have had constructive knowledge of what Tatneft knew at the time it knew it.

The trial started in October 2020 and was due to last ten weeks. Four weeks into the trial the second defendant (“the Defendant”) applied for a declaration that Tatneft had waived privilege in communications between S-K and Tatneft (and between their respective legal representatives) and various categories of legal advice received.

The Defendant alleged that the waiver of privilege resulted from a number of statements included in Tatneft’s evidence, in which it said Tatneft had (in broad terms) relied on the privileged material to support its case on limitation, in particular S-K’s lack of knowledge of relevant matters before March 2013.

One particular issue raised in the case was the question of whether privilege could be waived in relation to a negative assertion, namely that certain matters had not been discussed or certain advice had not been sought or given. For instance, the Defendant pointed to the following statement from the deputy general director of S-K, arguing that it resulted in a waiver of privilege in the relevant discussions:

"…Ms Boulton is not correct when she says that S-K cooperated with Tatneft in relation to the BIT arbitration if she means that we did anything other than simply hand over documents when Tatneft asked us. We were not even told what use if any the documents were to be put to. There were some discussions as between lawyers of S-K and Tatneft on steps that might be available to maximise the recovery of the contractual indebtedness but these discussions did not involve any mention of the BIT arbitration, since it was out of the scope of cooperation between Tatneft's lawyers and our Legal Department."

The Defendant argued that the test for waiver was whether a party is relying on the advice and for what purpose, and that this test applied equally whether the proposition was positive or negative. Tatneft countered that it was not possible meaningfully to apply the test of whether there was reliance on privileged materials to a situation where the witness says that a particular matter was not discussed at all.

Decision

The High Court (Mrs Justice Moulder) considered in detail the various statements the Defendant pointed to as constituting a waiver, concluding that certain statements did result in a waiver and others did not. Where she found that there was a waiver, she went on to determine the extent of the waiver.

She emphasised that, as stated by Waksman J in PCP, in order to result in a waiver: first, the reference to the legal advice must be sufficient; and, second, the relevant party must be relying on that reference in order to advance its case on an issue the court has to decide.

On the question of negative assertions, Mrs Justice Moulder reviewed the authorities including the case of Mid-East Sales v United Engineering [2014] EWHC 892, which the defendant submitted was a case where a party asserted that he had not been told something by his solicitor. The judge in that case held that the assertions did “cross the line from reference to deployment”, as they made a case that the relevant party was acting on legal advice in responding to the claim form as it had, and therefore privilege had been waived.

Moulder J said Mid-East was a case where there was clearly a sufficient reference to legal advice and there was reliance on that advice. While there was reliance on the negative proposition that something did not happen, ie that the party was not given correct advice, it was not analogous to the situation where a party has merely responded to a case advanced by the other party regarding the advice.

Moulder J held that the question for the court is for what purpose the communication is being referred to. She drew a distinction between reliance on legal advice where a party has chosen to put forward a positive case in reliance on that advice (which may include a negative proposition, such as "I discussed my divorce but did not discuss the house sale"), and a situation where the party, in response to a case advanced by the other party, denies an assertion made by that other party, for example "I did not discuss the house sale with my lawyer". She concluded:

“When one considers the rationale for privilege, it must be correct that no waiver of privilege can occur by responding to an assertion by the other party as to the contents of an otherwise privileged communication.”

In such circumstances, she said, there has been no voluntary disclosure of privileged material, and therefore no waiver.

Applying this approach to the statement from S-K’s deputy general director quoted above, Moulder J said that there was a reference to discussions between the lawyers, but it took the form of a denial that the BIT arbitration was discussed. She agreed with Tatneft’s submission that it would be an “odd result” if, by responding to an assertion that a matter was discussed and denying it, this meant privilege was waived. This was an example where there was no positive case being put forward based on the legal advice, and therefore no reliance.