Court of Appeal clarifies the ambit of litigation privilege in Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securities (Europe) Ltd

The appeal concerned two issues. The first issue was the scope of litigation privilege – the respondent defendants ("the Bank") sought to know which individuals were authorised to give instructions in relation to the proceedings on behalf of the appellant claimant ("Loreley"). Loreley claimed that this information was privileged. The second issue was whether, regardless of privilege, this was the kind of information which Loreley should be ordered to provide under CPR 18.

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Background facts

The appeal arose in proceedings in which Loreley is bringing a claim for $100 million against the Bank in respect of a sale of a CDO linked to mortgage-backed securities. The Bank is running a limitation defence – a strand of which involves asking whether the knowledge of Loreley’s creditor (a German bank, KfW) is attributable to Loreley for limitation purposes. In support of its argument on attribution, the Bank wanted to find out whether KfW was authorised to give instructions to Loreley’s solicitors in relation to the litigation. This was resisted by Loreley, on the basis of privilege.

Procedural history - High Court decision

Mr Justice Knowles held that whether the identity of the individuals who are authorised to give instructions to solicitors on behalf of a corporate client is a matter covered by litigation privilege, depends on the following two requirements:

whether the specific communication passing between the instructing individuals and the solicitors is privileged; and
if so, whether that privilege would be undermined by disclosing the identity of those instructing individuals.

Mr Justice Knowles considered that revealing the identity of those giving instructions to the solicitors in this case would not reveal anything of the contents of privileged instructions, and so the identity of the instruction givers was not held to be protected by litigation privilege. The High Court judgment also confirmed that litigation advice privilege and legal advice privilege are not mutually exclusive: both can attach to the same communication in appropriate circumstances.

Submissions on appeal

For Loreley it was submitted that:

(i) The identity of persons who are authorised to give instructions to solicitors on behalf of a corporate client in the course of ongoing litigation is necessarily covered by litigation privilege and does not depend on whether privilege would be "undermined" by disclosure of the identity. Loreley accepted that litigation privilege extends to lawyer/client communications in the course of ongoing litigation, and may therefore co-exist with legal advice privilege, but submitted that these two forms of privilege have distinct rationales and purposes.

(ii) The purpose of litigation privilege is to establish a "zone of privacy" around a party's preparation for litigation.

(iii) The identity of those authorised to provide instructions to the client's solicitors is itself an aspect of those instructions which is "paradigmatically" within the scope of litigation privilege because disclosure of this information might provide an advantage to the opposing party.

For the Bank it was submitted that:

(i) Privilege, whether litigation privilege or legal advice privilege, is concerned with communications and not merely with information or facts. Such privilege means that the content of communications is protected from disclosure, as is secondary evidence which would tend to reveal the content of such communications, but the disclosure of the identity of those authorised to give instructions to solicitors does not generally reveal such content.

(ii) The concept of a "zone of privacy" is far too broadly expressed. If there are exceptional cases where disclosure of the identity of those authorised to give instructions would tend to reveal information communicated in confidence so as to justify a claim for privilege, the basis of that claim must be explained so that the court can evaluate it.

The Bank sought: (i) a declaration that the identity of those authorised to give instructions was not privileged; (ii) provision of the relevant identities by way of a CPR Part 18 response; and (iii) removal of the redaction of part of the engagement letter showing the relevant identities.

Legal analysis

The Court of Appeal (the Master of the Rolls, Nicola Davies LJ and Males J) accepted that there was no authority addressing the precise issue in the case. However, the court noted that it was unnecessary to travel again over ground which has been thoroughly ploughed in Three Rivers (No. 6) and SFO v ENRC.

After consulting the relevant authorities, the Court of Appeal concluded that to determine whether litigation privilege extends to the identity of the persons communicating with a solicitor in relation to litigation, it is necessary to consider whether disclosure of that identity would inhibit candid discussion between the lawyer and the client (or the person communicating on behalf of the client). If so, the identity of such persons should be privileged. But if not, to extend privilege to the identity of such persons is unnecessary and may deprive the court of relevant evidence needed in order to arrive at a just determination of litigation.

The Court of Appel considered there would be no such inhibition. The content of the communications would be privileged, but disclosure of the existence of such communications or the identity of the person communicating on behalf of the client would reveal nothing about the content of those communications. Disclosure of the identity of those giving instructions would not affect Loreley's ability to prepare its case as fully as possible and would not enable the Bank to recover the material generated by its preparations.

The Court of Appeal allowed for the "possibility" that in unusual cases, identification of the person giving instructions to the solicitor may tend to reveal something about the content of the communication or the litigation strategy being discussed, but that would need to be explained as the basis of the claim for privilege. The Court confirmed that there is no support in the English authorities or in the principles underpinning litigation privilege for the concept of a "zone of privacy". Rather, litigation privilege attaches to communications (including secondary evidence of such communications) rather than information or facts divorced from such communications.

CPR 18 request

The judgment provides useful commentary about CPR 18 requests – though the information sought was not privileged, it did not follow that Loreley ought to be ordered to provide such information under CPR 18. The Court commented that "there is a spectrum of relevance" and "not everything which is relevant is the subject of a proper request under CPR 18".

While CPR 18 is expressed in wide terms, giving the court power to order a party to clarify any matter which is in dispute in proceedings or give additional information in relation to any such matter, the Court of Appeal discouraged disproportionate and unnecessary requests driven by a "scorched earth policy to the conduct of proceedings".

The Court considered that, in this case, the information requested was not strictly necessary or proportionate.

        
            Practical takeaways
        
Generally, the identity of the person giving instructions on behalf of a corporate entity will not be privileged. If a party considers that it should be privileged (i.e., it might reveal something about the content of the communication or the litigation strategy being discussed), they will need to explain why in general terms so as not to disclose the privileged information.

Even if the information is not privileged, the party seeking disclosure will need to persuade the court that it either falls within a duty of disclosure, or that the request for the information under Part 18 of the CPR is reasonable and proportionate.

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