England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Rolls Building, 7 Rolls Buildings Fetter Lane, London EC4A 1NL
		21/02/2018

Mrs Justice Moulder:

Introduction

1. This is the Claimants' application dated 10 January 2018 under CPR 31.19(5) for a determination as to whether the Defendants are entitled to assert litigation privilege in circumstances where the right is said to have arisen out of proceedings to which the Defendants are not a party. The Claimants are seeking an order for inspection of 25 documents.
2. In support of the Claimants' application I have two witness statements from Mr Hishon, partner at White & Case, acting for the Claimants, dated 10 January 2018 and 31 January 2018. In response the Defendants have filed a witness statement from Mr Carroll, partner of Linklaters, acting for the Defendants, dated 24 January 2018.

Background

3. By a Share Purchase Agreement dated 13 April 2014 ("SPA"), the Claimants purchased from the Defendants 100% of the shares in Xstrata Peru SA ("Xstrata"). At the time of the SPA, Xstrata indirectly owned the Las Bambas mining project in Southern-central Peru ("the Project"). The ownership of the Project has since been restructured. The First Claimant is now the direct owner of the Project.
4. The sale under the SPA closed on 31 July 2014. Following closing, the Peruvian tax authority, SUNAT, began an investigation into matters connected with the Project notably two VAT matters referred to as the "NFB VAT claim" and the "Third Party VAT claim". This ultimately led the Peruvian tax authority to issue a Tax Assessment under which the First Claimant's tax liability was increased. The First Claimant then commenced proceedings against the Peruvian tax authority challenging the Tax Assessment ("the Peruvian Proceedings"). The Peruvian Proceedings are ongoing before the Tax Court in Peru.
5. The SPA contained a provision under which the Defendants were entitled to, and in fact did, assume control of one of two aspects of the Peruvian Proceedings, the NFB VAT claim. In the Peruvian Proceedings, the Defendants have only ever acted in the name of the First Claimant.
6. These proceedings ("the English Proceedings") concern the question of whether, based on a correct interpretation of the SPA and a subsequent Deed of Indemnity dated 24 November 2014, the Defendants are obliged to indemnify the Claimants in respect of the NFB VAT and Third Party VAT liabilities that are the subject of the Peruvian Proceedings. The trial has been listed for five days commencing 23 April 2018.

Disclosure in the English Proceedings

7. Standard disclosure took place on 13 April 2017. The parties exchanged disclosure statements using Form N265(CC) and attaching lists of documents. The Defendants' Form N265 said the following under the heading "Documents disclosed":

"…there were 4,408 disclosable documents resulting from this review, of which 1,393 attracted legal professional privilege".

8. This was followed, in Section B of the Defendants' Form N265, with the following wording (under the heading "The Defendants object to being inspected:"):

"…2. Documents (or parts of documents) passing directly or indirectly between the Defendants and their internal or external legal advisers and other third parties (including, but not limited to, notes, memoranda, emails or other electronic documents evidencing telephone or other conversations and meetings between them, written advice and drafts of legal documents prepared for the purposes of giving legal advice or obtaining evidence), all of which are confidential and have been prepared in contemplation of litigation."

9. There were two further rounds of disclosure by letter on 29 September 2017 and 20 October 2017. Attached to these letters were further lists of documents. However, no separate disclosure statement was served on these occasions.
10. Nowhere in the 13 April 2017 Form N265, or in the attached list of documents, was there any individual mention of any one of the 25 documents in respect of which this application is made. There was no individual mention of any of the 25 documents in any of the documentation relating to the further rounds of disclosure on 29 September 2017 and 20 October 2017.
11. As matters progressed, the Claimants' solicitors (White & Case) came to understand from the Defendants' solicitors (Linklaters) that, in relation to certain documents, the Defendants were seeking to assert litigation privilege arising from legal proceedings in Peru. On 13 September 2017, White & Case wrote to Linklaters asking to which proceedings Linklaters were referring. Linklaters responded on 2 November 2017 by confirming that they were referring to the Peruvian Proceedings.
12. Meanwhile, on 20 October 2017, the Defendants had made an application for specific disclosure of documents held by one of the Claimants' third-party advisers relating to the purchase of the Project. That application came before Cockerill J on 1 December 2017. Cockerill J observed that the parties had previously adopted a broader test for standard disclosure than was necessary under CPR 31.6. The Defendants' application was refused on the basis that the documents in question did not meet the proper test for disclosure as set out in the CPR.
13. White & Case wrote to Linklaters on 11 December 2017 making clear that they did not accept that the Defendants were entitled to assert (against the Claimants) litigation privilege arising out of the Peruvian Proceedings. This, and the observations of Cockerill J at the hearing on 1 December 2017, prompted Linklaters to carry out a re-review of those documents over which they had asserted litigation privilege arising out of the Peruvian Proceedings. Upon that re-review, Linklaters formed the view that the 25 documents to which this application relates (amongst others) did not meet the test for standard disclosure. This application was made on 10 January 2018.
14. The parties continued to engage in correspondence concerning disclosure issues until the beginning of the week in which the hearing of this application took place. On 30 January 2018, Linklaters confirmed that there were only 25 documents in relation to which the Defendants were seeking to assert litigation privilege arising out of the Peruvian Proceedings. On 5 February 2018, Linklaters confirmed that some of the 1,393 privileged documents referred to in the Defendants' Form N265 were documents over which they were seeking to assert litigation privilege arising out of the Peruvian Proceedings.
15. During the hearing of this application, counsel for the Defendants confirmed (seemingly for the first time) that only some of the 25 documents to which this application relates were included within the 1,393 privileged documents referred to in the Defendants' Form N265. It remains unclear how many of the 25 documents were so included.

Submissions

16. The Defendants resist this application on four grounds:

i. The 25 documents have not been disclosed, therefore the Claimants have erred in making an application for inspection; they ought to have made an application for specific disclosure under CPR 31.12.

ii. Even if the 25 documents have been disclosed, they do not in fact meet the test for standard disclosure. Therefore, inspection should be refused under the Court's inherent jurisdiction. The Defendants rely on the decisions in Ward Hadaway v DB (UK) Bank [2013] EWHC 4538 (Ch) at paragraphs 36 to 40 and National Crime Agency v Abacha [2016] EWCA Civ 760 at paragraphs 30 to 32.

iii. In any event, inspection should be refused because the 25 documents were produced for the dominant purpose of the Peruvian Proceedings and are, therefore, covered by litigation privilege.

iv. Even if the Court is not satisfied that the Defendants are entitled to assert privilege over the 25 documents, the Court should refuse the application for inspection under its inherent jurisdiction on account of the timing of the Claimants' application. The Defendants say that this application should, at the very latest, have been made at the same time as the Defendants' application for specific disclosure. The Defendants rely on the decision in National Crime Agency v Abacha [2016] EWCA Civ 760 at paragraph 28.

17. The Claimants maintain that this is a straightforward application for inspection in respect of which the only issue for the Court to determine is whether the Defendants are entitled to assert privilege over the 25 documents (i.e. the Defendants' third ground of resistance). In relation to this issue, the Claimants say:

i. Any right to assert litigation privilege over documents generated for the dominant purpose of the Peruvian Proceedings belongs to the First Claimant and therefore it is not open to the Defendants to assert that privilege against the First Claimant.

ii. Even if the Defendants can establish their own independent right to assert privilege over the 25 documents, the First Claimant is entitled to demand inspection of those documents on the basis of the parties' joint or common interest. The Claimants rely on CIA Barca de Panama v George Wimpey & Co [1980] 1 Lloyd's Rep 598 for this proposition.

18. In response, the Defendant says:

i. The decision of the Court of Appeal in Guinness Peat Properties Ltd and another v Fitzroy Robinson Partnership [1987] 1 WLR 1027 is authority for the proposition that in a case in which a person is "in all but name the effective defendant to the proceedings" the privilege will belong to that person. The Defendants also rely on a passage from Hollander on Documentary Evidence (12^th Edition, 2015) at 18-04 in support of that proposition.

ii. If the Court is satisfied that the Defendants can establish their own independent right to assert privilege over the 25 documents, the Claimants cannot demand inspection of those documents on the basis of the parties' joint or common interest because all 25 of the documents were generated after 26 February 2016 and, by that stage, the parties were already in dispute.

Issues

19. Therefore, it is necessary for me to decide the following issues:

i. Have the 25 documents been disclosed?

ii. Are the Defendants entitled to refuse inspection of the 25 documents on the basis of litigation privilege arising from the Peruvian Proceedings?

a. To whom does the litigation privilege arising out of the Peruvian Proceedings belong?

b. Does joint interest privilege or common interest privilege assist the Claimants?

iii. Under the Court's inherent jurisdiction, should the application be refused in any event on account of either of the following:

a. The documents do not meet the test of standard disclosure;

b. The timing of the application.

Issue I: Have the 25 documents been disclosed?

20. Under CPR 31.2 "a party discloses a document by stating that the document exists of has existed". The Claimants have referred to the decision of the Court of Appeal in SmithKline Beecham Plc v Generics (UK) Ltd [2003] EWCA Civ 1109 (paragraph 29) in which Aldous LJ said: "the wide definition in CPR r 31.2 must be determinative. That states that: "A party discloses a document by stating that the document exists or has existed"… no limitation is placed on the way that the statement is made."
21. The Defendants suggest that each document must be individually mentioned in order for it to have been disclosed for the purposes of CPR 31.2. Counsel for the Defendants relies on the use of the definite article in CPR 31.2 and the need for a statement that "…the document exists or has existed…". Counsel for the Defendants submitted that normally disclosure of a document will be by a numbered item in the list of documents or documents specifically mentioned in a witness statement. Counsel submitted that "unusually" the draft order identifies the class of documents solely by reference to the fact they have been withheld from inspection on the grounds they are subject to litigation privilege arising from the Peruvian Proceedings. The Defendants in effect appear to assert that their disclosure statement was inconsistent as it referred to a more limited number of documents in the appendix than the number given in the body of the report.
22. It seems to me that the statement in CPR 31.2 must be read in the light of the rules on disclosure considered as a whole and not in isolation. The procedure for disclosure provides for a list to be provided in the relevant practice form (CPR 31.10) and the practice direction (PD 31A para 3.2) provides that where there are a large number of documents they may be listed by category rather than individually. The notes to the White Book (31.10.2) recognise that disclosure even by category may be inconvenient where there are a large number of documents. So far as describing documents in respect of which privilege is asserted, the authorities suggest that there is no need to describe the documents such that it would identify the document and thus thwart the assertion of privilege (White Book 31.10.3). It seems to me therefore that it is not a valid objection to state that the documents in respect of which privilege is claimed have not been identified by a numbered item in a list of documents but merely identified by the class of documents by reference to the Peruvian Proceedings. In this case the list was produced and a statement made that there were 4408 disclosable documents of which 1393 were privileged. There is a signed disclosure statement and a clear statement of 1393 "privileged documents". In my view it would not have been open to the Claimants to challenge the description of the privileged documents (as distinct from the current challenge to whether privilege can be claimed) and the Court would not have acceded to a request for further particulars of the documents in respect of which privilege has been asserted.

I am therefore of the view that the privileged documents comprising the 1393 have been disclosed and the question is therefore whether the claim to privilege can be maintained.

Issue II: Litigation privilege arising from the Peruvian Proceedings

23. The issue for me is whether the Defendants are entitled to assert (against the Claimants) litigation privilege arising out of the Peruvian Proceedings. In relation to the 25 documents, the Defendants are not seeking to assert i) legal advice privilege, or ii) litigation privilege arising out of the English Proceedings.
24. The Defendants' case is that each one of the 25 documents was generated after 26 February 2016 for the dominant purpose of the Peruvian Proceedings.

Whose privilege is it?

25. The Claimants say that it is an established principle that litigation privilege can only arise in favour of a person who is a party to the litigation. Counsel for the Claimants referred me to commentary (in Thanki, The Law of Privilege (3^rd Edition, 2018) at 3-80, Hollander on Documentary Evidence (12^th Edition 2015) at 18-01 and Passmore, Privilege (3^rd Edition, 2013) at 3-041) for statements of principle to that effect.
26. In response, counsel for the Defendants referred to further commentary in Hollander on Documentary Evidence (12^th Edition 2015) at 18-04:

"whose privilege is it: in Guinness Peat the privilege was held to be the privilege of insurers not the insured."

and to the decision of the Court of Appeal in Guinness Peat Properties Ltd. and another v Fitzroy Robinson Partnership ("Guinness Peat") [1987] 1 WLR 1027. It was suggested to me that this decision is binding on me and that, therefore, the Defendants are entitled to assert litigation privilege.

27. I do not accept that the decision in Guinness Peat is authority for the proposition for which the Defendants contend. The decision was principally concerned with the dominant purpose test. In Guinness Peat, property developers ("GPR") were suing their architects ("FRP") in negligence. The claim against FRP was covered by a professional indemnity insurance policy. Once FRP was notified of GPR's claim, FRP sent a "notification of claim" to its insurer pursuant to condition 4 of the policy. The notification to the insurer contained FRP's views about the merits of the claim. The question for the Court of Appeal was whether that notification was produced for the dominant purpose of litigation such that FRP was entitled to assert litigation privilege over it.
28. FRP admitted that its dominant purpose, in sending the notification, was to comply with its obligations under condition 4 of the policy. GPR claimed that FRP could not assert litigation privilege in these circumstances because it was FRP's dominant purpose, as the author of the notification, that mattered and FRP had accepted that its only purpose was to comply with condition 4. The Court of Appeal accepted the submissions of counsel for FRP that "the insurers will need to receive immediate notification … so that they can set about obtaining legal advice" and that "the letter owed its genesis to the dominant purpose that it should be used for the purpose of obtaining legal advice and in any ensuing litigation" (at 1036C and 1036D). Slade LJ (giving the judgment of the Court) went on to say (at 1037B):

"I accept that the dominant purpose of the [notification] must be viewed objectively on the evidence, particularly by reference to the intentions of the insurers who procured its genesis. Subject to what is said below, I accept that, so viewed, the dominant purpose was to produce a letter of notification which would be used in order to obtain legal advice or to conduct or aid in the conduct of litigation which was at the time of its production in reasonable prospect "

29. In other words, the Court was satisfied that it was appropriate to take into account, not just the dominant purpose of the insured who authored the document, but also the dominant purpose of the insurer on whose requirements the insured was acting in so doing.
30. Slade LJ distinguished the decision of the House of Lords in Jones v Great Central Railway Co [1910] AC 4 (a similar case in which the right to assert privilege was denied) on the basis that "[t]he relationship between the trade union and the member in that case was, in my opinion, by no means the equivalent of the relationship between insurers and insured in the present case, where the insurers will in all but name be the effective defendants to any proceedings" (at 1038F).
31. Counsel for the Defendants suggests that the fact that Slade LJ (sitting in the Court of Appeal) was willing to depart from a decision of the House of Lords in Jones because "the insurers will in all but name be the effective defendants to any proceedings" meant that it formed part of the ratio of the decision of the Court of Appeal in Guinness Peat and it was, therefore, binding on me in this case in which the Defendants are "in all but name" a party to the Peruvian Proceedings. However, in my view it is not authority for the proposition that a person controlling litigation can assert litigation privilege against the party which it is controlling and who is the party to the proceedings. I accept the Claimants' submission that it is an established principle that litigation privilege can only arise in favour of a person who is a party to the litigation in question and the policy underlying this is as stated in Hollander (12^th edition para 18 – 01) that a party should be free to seek evidence without being obliged to disclose the results to the other side. This rationale does not extend to a non-party. Accordingly, I find that any right to assert litigation privilege arising out of the Peruvian Proceedings is that of the Claimants as a party to those proceedings and, it is not open to the Defendants to assert such privilege against them.
32. Even if I were wrong on that and it is open to the Defendants as a matter of principle to assert litigation privilege where it controls litigation of a party, the Defendants have not established on the authorities before me that a claim for litigation privilege could be maintained by the Defendants in these proceedings against the Claimants where the control which is being exercised is not over a party to these proceedings and in relation to documents created for use in these proceedings but in relation to documents created in relation to other proceedings to which the Defendants are not a party and I would have held that the claim for litigation privilege failed accordingly.

Joint and common interest privilege

33. In the light of my findings above, it is not necessary for me to consider the issue of joint or common interest privilege.

Issue III: Refusal under the Court's inherent jurisdiction

34. The Defendants invite me to exercise my discretion to refuse this application under the inherent jurisdiction of the Court.

Not relevant

35. The first ground on which I am invited to exercise my discretion relates to the relevance of the documents. The Defendants confirm that, following their re-review, they are now satisfied that the documents do not meet the test for standard disclosure.
36. The Defendants rely on the decision in National Crime Agency v Abacha [2016] EWCA Civ 760. The facts, which are quite different from the facts in this case, are as follows. The National Crime Agency made an application to the High Court for the disposal of assets believed to be belonging to General Abacha and present within the jurisdiction. The application was made at the request of the US Department of Justice and the request itself was mentioned in one of the witness statements put forward in support of it. General Abacha made an application for inspection of the US Department of Justice request on the basis that it had been disclosed and under CPR31.14(1)(b) he had a right to inspect it. Laing J refused the request. General Abacha appealed to the Court of Appeal. The key question for the Court of Appeal concerned the balance to be struck between the right of a respondent to an application for disposal of his assets to inspect the request on which the application is based (on the one hand), and the confidentiality of executive state-to-state communications (on the other). The appeal was allowed in part and the Court of Appeal ordered inspection of a redacted version of the US Department of Justice request.
37. The Court of Appeal in National Crime Agency v Abacha also analysed the question of the nature of the right to inspect a document once it has been disclosed under the CPR. In doing so the Court of Appeal confirmed that the mere fact that a document has been disclosed, does not give rise to an automatic right of inspection on the part of the party to whom disclosure has been made; the Court retains a discretion to refuse inspection (paragraph 28). However, there is a general rule that a party to whom a document has been disclosed should be entitled to inspect that document (paragraph 29). The burden is on the party resisting inspection to displace the general rule with reference to the principles set out in the CPR (paragraph 30). Confidentiality is a relevant factor, but it does not (on its own) justify a refusal to inspect (paragraph 31). The question of whether inspection is necessary to dispose fairly of the proceedings is a relevant factor, but it is not "a free-standing hurdle to be considered and surmounted in isolation before inspection may be permitted" (paragraph 32).
38. I accept that the evidence before me in the witness statement of Mr Carroll is that the 25 documents do not meet the test for standard disclosure under the CPR. However, as found above, the privileged documents comprising the 1393 documents have already been disclosed. Therefore, the general rule is engaged and the burden is on the Defendants to displace the general rule. The fact that on a review the Defendants (albeit following guidance from the court) have now decided that the documents need not have been disclosed is in my view not decisive. The Defendants carried out a disclosure exercise in which for reasons of efficiency, the approach taken was to claim privilege for a class of documents rather than to assess whether individual documents in fact met the test for standard disclosure and then to consider a claim for privilege. That the Defendants adopted this procedure for their own purposes cannot affect the fact that they purported to carry out a disclosure exercise in accordance with the CPR and signed a disclosure statement. Parties cannot subsequently assert that they have approached the disclosure exercise otherwise than as strictly required by the rules such that they are entitled to revisit the matter.
39. I have not been told of any prejudice to the Defendants if inspection is ordered. There was no suggestion, in the witness statement of Mr Carroll or in the skeleton argument submitted on their behalf, that these are commercially sensitive documents or that there was an inadvertent disclosure (as was the case in Ward Hadaway v DB (UK) Bank [2013] EWHC 4538 (Ch)). This application relates to only 25 documents. Therefore, it is unlikely to take a great deal of resource for inspection to go ahead.
40. Overall, this is not a case in which the Defendants have succeeded in displacing the general rule.

Timing

41. The second ground on which I am invited to exercise my discretion relates to the timing of this application. This application is made nine months after standard disclosure took place. The Defendants suggest that the application should have been made much earlier and, in any event, no later than the Defendants' application for specific disclosure on 20 October 2017 (upon receipt of which the Claimants were on notice that further matters of disclosure were to be ventilated at a hearing). Had they done so, the parties would have avoided the costs associated with having two further hearings on disclosure as opposed to one.
42. Again, the Defendants rely on the decision in National Crime Agency v Abacha [2016] EWCA Civ 760. As I have said, I accept that the Court has a discretion to refuse inspection even after disclosure has taken place. However, the facts of that case are quite different from the facts in this case.
43. Disputes over the disclosure process ought, in the normal course of the pre-trial process, to have been resolved by now. However, I do not accept that the delays are such as to justify the denial of the Claimants' right under CPR 31.3 to inspect documents that have already been disclosed to them. I accept that it is desirable where possible for applications to be dealt with in a way which reduces the number of court hearings. However, as recently as 5 February 2018, the parties were still engaged in correspondence about such fundamental questions as whether the 1,393 privileged documents referred to in the Defendants' disclosure statement included documents over which privilege stemming from the Peruvian Proceedings was being asserted. I also note that, during the hearing itself, the Defendants appeared for the first time to give confirmation that only some (but not all) of the 25 documents to which this application relates were included within the 1,393.
44. In all the circumstances there is nothing disproportionate about an order for inspection of the documents disclosed at this stage of the proceedings.

Judgment accordingly

Addendum

After sending the draft judgment out to counsel in the usual way, queries were raised in relation to paragraphs 22 and 38 of the draft judgment. Paragraph 38 was referring back to the earlier finding at paragraph 22 and I have clarified the language accordingly. In relation to paragraph 22, the reference to "the Peruvian Proceedings" is a reference to the Defendants' submission in relation to the Claimants' draft order.