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Collateral waiver and legal professional privilege: PCP Capital Partners v Barclays Bank Plc

Overview

In this recent decision of Waksman J in the High Court, Barclays were held to have waived privilege in all contemporaneous communications with their lawyers regarding the validity of certain agreements which were the subject of the proceedings.

Prior to the start of an 8-week trial, Barclays served witness statements and made opening submissions which referred to legal advice it had received regarding agreements ("ASAs") which the claimants ("PCP") alleged were shams. PCP then made an application for disclosure and inspection of all legal advice relating to the ASAs, on the basis that the references made in the statements and submissions constituted a waiver of the legal professional privilege ("LPP") attached. Barclays argued that the mere references did not constitute a waiver of privilege over the legal advice.

The judge considered the case law and rationale for the doctrine of collateral waiver, and having done so, concluded that the references in Barclays' witness statements and openings amounted to a waiver of privilege.

The judgment helpfully distils some outstanding points relating to the issue of waiver from which practitioners can glean some guidance, especially in the context of investigations and drafting witness statements.

Reference or Reliance?

When looking at a statement which may constitute a waiver, the first distinction to be made is between a mere reference to the fact of legal advice – which would not usually waive any privilege – and a statement which demonstrates reliance on the legal advice, which would. Without something approaching reliance on, or deployment of, that advice in a party's case, there would be no waiver of privilege. Returning to a common theme throughout his judgment, Waksman J highlighted how it would be unfair to "cherry pick" – i.e. allow a party to rely on that advice and still deny inspection of its substance – depriving the court of the full picture.

While seemingly straightforward in principle, Waksman J was keen to emphasise that the answer to the question of whether a reference amounts to reliance would usually require a close analysis of the nature of the references in each individual case. References to legal advice could, on their face, appear as mere references to the advice.  However in this case, Waksman J found that the references were deployed to support the defendant's defence in respect of the ASAs. The real purpose of referring to the advice was to show that the defendant had acted on the advice which, in turn, went to the defendant's state of mind and the perceived lawfulness of the allegedly 'sham' ASAs. This was much more than a mere reference to the fact of legal advice.

Effect or Content?

Waksman J then took the opportunity to address what he thought had potentially become an overly 'mechanistic' use of a historic distinction between references to the mere effect of the legal advice and references to the content of the advice.

Past cases had suggested that a statement which alluded to only the effect or conclusion, but not the substance or content, of the advice would not constitute a waiver of privilege. Waksman J found that there was only "superficial attractiveness" in this distinction, and its utility is questionable where a closer analysis of the context is needed.

As an aside, in the context of summary judgment and other ex-parte applications, the duties of full and frank disclosure require a confirmation along the lines of "my solicitor has advised that the respondent has no defence". Such statements referring to the conclusion or effect of any legal advice do not constitute a waiver of that advice because the solicitor's reasoning is irrelevant, and the ultimate answer is for the court to determine.

Clearly, however, statements which cite or go into more detail on the content of that advice would likely constitute a waiver. In a case such as this, even when the references were couched in the vague wording of "taking comfort from" the advice, merely alluding to the conclusion of legal advice as opposed to its content would still give rise to a waiver.

Waksman J was keen to demonstrate that the distinction cannot be applied mechanistically, and a more holistic appraisal of the references must be undertaken, enquiring as to:

  • whether there is any reliance on the privileged material referred to;
  • what the purpose of that reliance is; and
  • the particular context of the case in question.

This offers a salutary lesson to lawyers drafting witness statements – a simplistic appraisal checking the form of any references to legal advice will likely not be enough. To be safe, careful thought must be given as to whether a court may deem any reference to constitute a more purposeful use of the advice.

Open Documents

An alternative line of Barclays’ argument was that there was no waiver at all because the documents referred to had already lost their privileged status. Barclays argued that the documents were already "open" on the basis that they had previously been disclosed to the SFO on a limited waiver and subsequently deployed in open court in related criminal proceedings. However, the judge held that allowing such an argument would enable a party unfairly to avoid inspection of further documents by selectively waiving privilege over certain documents but not others, even where, as in this case, the loss of privilege had already occurred. "Cherry picking" deprives the court the full picture of the advice relied upon and is inherently unfair.

Furthermore, the court found that claimants in a civil claim should not be bound by the lines of enquiry of the SFO. While the SFO had probably inspected the most important documents for its purposes, the precise arguments in the civil claim could be different and it should be open to the claimants to seek the disclosure it needed for its case.

This also provides a warning for businesses subject to investigatory proceedings and their legal advisors – Barclays had provided the SFO some documents on a limited waiver and may have assumed that to be the end of the issue going forward, but the court rejected its reliance on that waiver when it came to the civil claim.

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