Take Care When Relying upon Litigation Privilege

Case update: Rawlinson & Hunter Trustees SA v Akers & Another [2014]

Background

Robert and Vincent Tchenguiz (RT and VT) were businessmen who, along with the entities through whom they carried out their business (Claimants), sought damages from the Serious Fraud Office (SFO).  This was in relation to allegedly unlawful searches and seizures that were carried out at their premises. Liquidators of companies controlled by the trustees of RT and VT’s family trust had instructed accountants to prepare five financial reports (Reports). The Claimants claimed that that Reports played a key role in the preparation of the material upon which the SFO had relied to obtain its search warrants. The SFO had been allowed to see the Reports but had not been allowed to make copies.  Therefore the SFO could not itself provide disclosure of the Reports to the Claimants. The Claimants sought non-party disclosure of the Reports from the liquidators. The liquidators asserted that the Reports were protected by litigation privilege.

The Commercial Court held that the liquidators had not shown that the dominant purpose of the Reports was to be used in actual or anticipated litigation (or for obtaining legal advice about any such litigation). The Liquidators appealed against this decision.

Decision

The Court of Appeal dismissed the liquidators appeal. The Court found that:

• the mere fact that a document/communication is produced for the purpose of obtaining information or advice in connection with pending or contemplated litigation, or of conducting or aiding in the conduct of such litigation, is not in itself sufficient to found the claim for litigation privilege. In order to sustain a claim for litigation privilege, this has to be properly characterised as the “dominant purpose”;
• a party must be able to provide evidence that there was a ‘real likelihood’ of litigation with particular persons or class of persons, rather than a mere possibility, in order to rely on litigation privilege;
• if the creation of a particular document/communication has more than one purpose, it is important to produce contemporary evidence to show that the contemplation of litigation was the real and dominant purpose;
• the difficulty in the current case was the actual identification of the ‘dominant purpose’ because the first duty of the liquidators was to obtain information simply to assess the assets or liabilities that existed and what steps, if any, were open to the liquidators to collect in the assets or reduce/discharge the liabilities; and
• if it would have been necessary to create the particular document/communication in any event, regardless of any contemplated litigation, it is unlikely that it will attract litigation privilege.

If an insolvency practitioner has any doubts as to whether a particular document/communication would attract litigation privilege, legal advice should be taken before it is created or commissioned.

For more information, help or advice please contact Claire Seddon on 0191 211 7991.