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12 May 2020
Parties should tread carefully when considering whether and how to reference privileged documents; deployment of a document may draw back the cloak of privilege but a mere reference may not. The context will be key.
TMO was a company in liquidation. In May 2016 it was claiming against five defendants for breach of contract or fiduciary or statutory duties, which TMO alleged had caused it to enter administration and then liquidation. TMO's draft particulars of claim put the losses at £19.5 million.
One defendant, upon receiving the draft particulars of claim, queried this figure. TMO replied:
Without any waiver of privilege in the advice obtained… we confirm that for the purposes of preparing the draft particulars of claim, we have obtained advice from a reputable valuation expert with considerable experience of valuing companies in the renewable energy sector.
The claim was then issued. In the course of a subsequent dispute about security for costs, one defendant questioned the valuation, indicating that they did not believe it credible that the liquidators considered the business to be worth £19.5 million. They stated that the figure was "unexplained and unsupported".
TMO's liquidators took issue with this and in a responsive witness statement they made plain the circumstances in which the valuation had been arrived at; the liquidators had obtained a preliminary market valuation report from an accountancy firm. The paragraph named the author and gave some details of how the valuation was carried out; it noted that it was not "waiving any privilege in the report" and explained that the accountants had used a "discounted cash flow methodology" to carry out the valuation "in a range of different scenarios". It stated that the "figure of £19.5m is derived from that valuation". Therefore, the liquidator concluded that based on this report, he was confident in the valuation.
The defendants' solicitors requested a copy of the report on the basis that it had been deployed by the liquidator in his witness statement. TMO refused, stating that the passage in the witness statement was a reference, not a waiver of privilege.
Nearly nine months later, when preparing for a case management conference, the defendants renewed their request for the report for a security for costs dispute, which was again refused. The defendants applied for production of the report.
Under Paragraph 21 of Civil Procedure Rules Practice Direction 51U, unless a right to withhold production, such as privilege, is claimed, parties may require copies of documents "mentioned" in witness statements. As the report had been mentioned in the witness statement, the dispute turned on whether it remained privileged or whether the comments in the witness statement about the report had waived privileged in it.
A mere reference to a document or its effect will not waive privilege in it but deploying it in court by relying on its content or by using it to persuade the court to take a particular view of the merits of the case at any stage will do so. The question arose of whether the liquidator's witness statement had deployed the report.
The deputy master concluded that TMO had deployed the report and ordered that it should be produced to the defendants, his reasoning was that:
Accordingly, the liquidator had waived privilege by deploying part of the report.
TMO appealed on the basis that the report had not been deployed. It argued that the reference had been made purely to rebut the argument that the liquidator could not have believed the valuation and not on any wider basis related to any alleged lack of merit of the pleaded losses. The defendants argued that the liquidator had made more than a bare reference to the report, the witness statement had contained a summary of its contents and the issue (the valuation) went to the core of the damages and quantum. Instead of simply saying that a report had been obtained, the liquidator went further than needed. The liquidator had stated that the valuation was "derived" from the report.
The court did not agree with all of TMO's arguments but it did agree that the reference to the report had been narrow and for only a specific purpose. It also held that it was persuasive that the report would not be relied upon at trial and that the context in which the report was referred to (a security for costs dispute) did not engage the underlying merits of the claim. The court found that the deputy master had not taken these points into account but he should have.
Further, the court did not agree that just by naming the accountancy firm and the author of the report that this necessarily meant that the report had been deployed. The further references to methodology and the range of different scenarios "took it somewhat further" but still did not constitute deployment – it was simply the liquidator setting out the effect of the report to justify his belief in the valuation. Referring in two sentences to a complex report cannot properly constitute a reference to the report's contents.
Accordingly, the order for production was set aside.
The guidance given on the difference between references to a document's effect and a document's content is useful and demonstrates that in some scenarios it is possible to refer in limited detail to a document without waiving privilege. However, it will always be safer, if possible, to avoid going into detail in order to avoid a privilege dispute. Merely stating that privilege is not waived will not protect the document if other factors point in the opposite direction.
For further information on this topic please contact Gillian O'Regan or Davina Given by telephone (+44 20 3060 6000) or email (firstname.lastname@example.org or email@example.com). The RPC website can be accessed at www.rpc.co.uk.
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