25/01/2024

Court of Appeal hands down landmark decision on privilege

This week judgment was handed down in Al Sadeq v Dechert (and others) [2024] EWCA Civ 28, a case which raises a number of important issues about the scope of legal professional privilege. It also clarifies an important and previously undecided point relating to Ladd v Marshall applications.

The appeal arose in the context of a high-profile dispute in which the claimant (Mr Al Sadeq) is suing the law firm Dechert (and three of its former partners) for damages for serious wrongdoing alleged to have been carried out in the context of an investigation into whether Mr Al Sadeq (among others) was guilty of defrauding certain entities owned by the state of Ras Al Khaima. Mr Al Sadeq is currently in prison in Ras Al Khaima, having been convicted of the crimes for which he was being investigated, but claims that in the course of the investigation he was illegally detained, deprived of legal representation and kept in inhumane conditions amounting to torture.

Mr Al Sadeq brought a very wide-ranging application challenging the defendants’ claims to privilege, which was dismissed on every point by Murray J at first instance. On appeal, the following issues (among others) were raised.

The iniquity exception

The first question of law raised in relation to the iniquity exception was what evidential threshold must be satisfied to show that the iniquity exception to privilege applies. While there were many authorities which had previously sought to answer this question, there was nevertheless a lack of clarity as to what the answer was.

The Court of Appeal held that the relevant test is whether there is a prima facie case that the alleged iniquity exists, which the court held meant that it must be satisfied on the balance of probabilities on the basis of the material before it that the iniquity took place. The court also held, contrary to previous authority (including Kuwait Airways (No 6) [2005] 1 WLR 2743), that in an interlocutory context there is no distinction to be drawn between cases in which the iniquity is one of the issues in the proceedings, and those where it is not. The court left open the possibility that there might exist exceptional circumstances which could justify a court taking the view that a balance of harm analysis also has a part to play, but held that it was unnecessary to decide this on the facts of the case. It was held on the facts that the evidential threshold was satisfied in relation to the three iniquities which were relied on by the appellant (none of which were, for these purposes, alleged to have involved Dechert in any way).

The second question of law raised in relation to the iniquity exception was what was the legal test which must be satisfied in relation to a document in order to bring the exception into play.

On this, the Court of Appeal held that the test was whether the document had been generated as “part of or in furtherance of an iniquity”, subject to the prerequisite that the documents were created in circumstances amounting to an abuse of the solicitor/client relationship. However, the court went on to hold that a document is “part of” an iniquity if it “reports on or reveals” it. This is an important development in the law, and arguably expands the scope of the iniquity exception beyond its previous boundaries.

Applying that approach, the court concluded that on the basis of the evidence before it, it was a matter of speculation whether the iniquity exception in fact applied to any of the documents withheld on grounds of privilege.

Litigation privilege

The first issue raised in relation to litigation privilege was whether the respondents had adduced sufficient evidence in support of their assertion that litigation was in reasonable contemplation on the dates alleged.

The respondents relied on the witness statement of the partner who had responsibility for the disclosure exercise, and explained that he could not provide more evidence than he did without betraying the very privilege which was asserted. The court confirmed the well-known approach set out by Hamblen J in Starbev GP Ltd v Interbrew [2013] EWHC 4038 (Comm) and by Beatson J in West London Pipeline and Storage v Total UK [2008] EWHC 1729 (Comm). Applying that approach, the court had no difficulty in finding that the evidence was sufficient, and rejected the appeal on this point.

The second issue raised in relation to litigation privilege was whether litigation privilege can in principle apply in favour of parties who are not and do not reasonably expect to become parties to litigation where the test for litigation privilege is otherwise satisfied.

On the facts of the case, Dechert’s clients had created (or caused the creation of) documents for the dominant purpose of assisting with criminal proceedings to which they were not, and were not expected to become, parties. The question was whether those documents could in principle be subject to litigation privilege in the hands of Dechert’s clients. A number of leading textbooks had previously suggested that the answer to this was no, and in Minera Las Bambas v Glencore [2018] EWHC 286 (Comm) Moulder J had reached the same conclusion: that only actual or prospective parties to the relevant litigation can claim litigation privilege.

The Court of Appeal disagreed, upholding the decision of Murray J on this issue. It was held that, in principle, litigation privilege is available to a non-party. The court left open the question as to whether, in addition to this, there is a requirement that the non-party has a ‘sufficient interest’ in the litigation, holding that it was not necessary to decide this on the facts of the case, since Dechert’s clients plainly had such an interest.

The appeal also raised the novel question of whether the decision in Three Rivers (No 5) [2003] EWCA Civ 474 (which was a decision in relation to legal advice privilege) also applies to litigation privilege. As to this, legal advice privilege applies to communications between a legal adviser and its client for the dominant purpose of giving or receiving legal advice. It was held by the Court of Appeal in Three Rivers (No 5) that for these purposes, where the client is a company, legal advice privilege extends only to communications with individuals within the company who are authorised to seek or receive legal advice. This is a highly controversial decision, which has been criticised by the Court of Appeal in two recent decisions but is binding on the Court of Appeal. The appellants argued that despite the fact that Three Rivers (No 5) was controversial, it must be assumed to be correctly decided short of the Supreme Court, and as a matter of principle it should apply in the same way to litigation privilege. This submission was rejected by the Court of Appeal, on the basis that even on the assumption Three Rivers (No 5) was correctly decided, its reasoning and rationale did not apply to litigation privilege.

Legal advice privilege

The appellant challenged the respondents’ claim to legal advice privilege on the basis that the investigatory work carried out by the respondents was not conducted in a “relevant legal context” and therefore legal advice privilege could not in principle apply to it. This was rejected by the Court of Appeal, who held that even if some of the work might have been capable of being carried out by a non-lawyer, it nevertheless fell within the legal context in which Dechert was instructed as a global law firm.

Ladd v Marshall

The Court of Appeal has a discretion to admit new evidence on appeal under CPR 52.21(2)(b). The Ladd v Marshall test provides important, though not always determinative, guidance as regards the exercise of that discretion.

The first limb of the test requires that the evidence could not have been obtained with reasonable diligence for use at first instance. In this case, the evidence in question could not with reasonable diligence have been obtained for use at the first instance hearing, but it was obtained prior to hand-down of the judgment, and indeed prior to circulation of a draft judgment, and the appellant could therefore have applied to put the material before the judge before he made his order following judgment.

The Court of Appeal held that such material would not satisfy the first limb of the Ladd v Marshall test. A party should apply to the first instance judge to admit the evidence; it could not wait to see how things turned out at first instance and then, if it lost, seek to adduce the evidence on appeal. The court also held that the new evidence also failed to satisfy the second limb of the Ladd v Marshall test.

Result

The overall result of the case was that, save in respect of the iniquity exception, in respect of which the court ordered that the respondents had to revisit their disclosure, the appeal was unsuccessful on each of the points argued.

Philip Edey KC and Luke Pearce KC appeared on behalf of the respondents, instructed by Enyo Law.