Jersey Unreported Judgments

Business - reasons in relation to whether a claim for litigation privilege can be made in respect of a report the defendant was required to obtain.

[2017]JRC026

Royal Court

(Samedi)

17 February 2017

Before     :		Advocate Matthew John Thompson, Master of the Royal Court.
Between	Suzanne Smith		Plaintiff
And	SWM Limited		Defendant

Advocate H. Sharp for the Plaintiff.

Advocate O. A. Blakely for the Defendant.

CONTENTS OF THE JUDGMENT

		Paras
1.	Introduction	1
2.	Background	2-9
3.	The parties' arguments	10-26
4.	Decision	27-49
5.	Conclusion	50-51

judgment

the master:

Introduction

1.        This judgment represents my detailed written reasons in relation to whether or not a claim for litigation privilege can be made out in respect of a report the defendant was required to obtain pursuant to powers exercised by the Jersey Financial Services Commission (the "Commission"). 

Background

2.        In summary the plaintiff's claim against the defendant is that the defendant failed to take reasonable care and skill in advising the plaintiff to enter into a particular investment product.  It is alleged that the investment made was a high risk product suitable only for experienced investors not the plaintiff.  There is a factual dispute between the parties as to the plaintiff's risk appetite and what investment risks the plaintiff was prepared to take. 

3.        It is also necessary to refer to an ongoing dispute between the defendant and the Commission which has led to two judgments of the Royal Court reported at SWM Ltd-v-JFSC and AG [2016] JRC 014 and SWM Ltd-v-JFSC [2016] JRC 094.  It is the second of these judgments that is material to the present application.  The judgment dated 11^th May, 2016, contained the Royal Court's reasons for granting a stay of a direction issued by the Commission. 

4.        At paragraph 3 of the judgment the Royal Court summarised the background to the dispute between the defendant and the Commission.  In particular, reference was made to a report that the Commission had required the defendant to obtain from Grant Thornton ('the Grant Thornton Report') on the suitability of advice that the defendant is said to have given to 42 of its clients.  According to the Royal Court judgment, the Grant Thornton Report concluded that the advice and the investments had been unsuitable.  Although I have not seen the report, advice given to the plaintiff is one of the areas covered by the report. 

5.        It is also right to record that the findings of the Grant Thornton Report are disputed by the defendant. 

6.        As a result of the Grant Thornton Report the Commission issued a direction requiring the defendant to notify its clients of the Grant Thornton Report. 

7.        Paragraph 5 of the Royal Court's judgment is material and states as follows:-

"SWM seeks a stay of direction 1.3.2.  The main basis for its application is that the direction from the Commission to SWM requiring it to write to its clients is, so SWM argues, premature.  Inevitably the letter draws upon the findings of Grant Thornton which are extensively disputed by SWM as indeed is reflected in its "management response".  If a letter is sent to clients in the terms required by the Commission at this point then, so SWM argues, inevitably clients will believe that SWM has mis-sold investment advice which is a matter that is substantially disputed by SWM.  SWM will lose the confidence of its clients, perhaps unnecessarily, and inevitably claims against SWM would be encouraged when they may not in fact be merited.  SWM's argument, in essence, is that any letters sent to clients should be balanced and therefore should await a further independent report which SWM wishes to procure but which, in effect, the Commission is preventing by refusing SWM access to its funds to pay for such a report and by requiring that the letter is sent to clients at this point."

8.        Ultimately the Royal Court granted the stay and stated at paragraph 17 and 18 as follows:-

"17.    We understand the sensitivity of the Commission in the light of the Grant Thornton report which suggests that at least eight and very possibly significantly more clients of SWM have been sold by SWM investments which were unsuitable for them.  However in our view it does not sit comfortably that SWM has effectively been blocked from seeking its own advice and counsel by the position taken by the Commission but, nonetheless, is required by the Commission to draw a damning report to the attention of its clients without the ability to challenge it. 

18.      We cannot see that there is any benefit in sending the letter required by the Commission at this stage.  As we have already noted all of the investors will be aware of the loss that they have suffered - what they may not be aware of is that there is a report that suggests that in some manner SWM may be responsible to some extent for those losses.  To send the letter now would, in our view, inevitably encourage claims against SWM where a fuller evidentiary picture may not."

9.        The position that has since developed is that the plaintiff has now brought proceedings.  The plaintiff is also aware of the Grant Thornton Report and has expressly referred to it in her pleadings at paragraph 6 (i) of her order of justice.  The existence of the Grant Thornton Report is not disputed by the defendant. 

The parties' arguments

10.      The main purpose of the hearing before me was to give directions.  However, one of the directions sought by the plaintiff was disclosure of the Grant Thornton Report. 

11.      In advance of the hearing I indicated that I was not minded to order discovery of the Grant Thornton Report, if it was discoverable at all, in advance of general discovery.  This was because firstly, I did not consider I had the power to order specific discovery of the Grant Thornton Report in advance of general discovery.  Secondly, although the defendant had admitted the existence of the Grant Thornton Report, the defendant had not otherwise referred to it in its pleading and therefore in my view the power to order discovery of a document referred to in a pleading in Rule 6/17(5) did not apply. 

12.      By the time of the hearing, what had become clear was that the real issue between the parties was whether or not the Grant Thornton Report was privileged.  Initially Advocate Blakeley had asserted this to be the case without saying what head of privilege applied.  By the time of the hearing he had limited his argument to the report not having to be disclosed because it was subject to litigation privilege. 

13.      In view of the fact that the parties had prepared arguments on the issue of privilege, I considered it appropriate to rule on whether or not the Grant Thornton Report could be withheld on the basis of litigation privilege. 

14.      Advocate Sharp argued that a claim for litigation privilege could not be sustained.  There were two elements to a claim for litigation privilege.  Firstly, litigation had to be in contemplation.  Secondly, the dominant purpose of the creation of the document had to be the obtaining of legal advice or the conduct of or aiding in the conduct of anticipated litigation. 

15.      In this case, even if the Court was satisfied that litigation was in contemplation, the defendant could not meet the dominant purpose test.  The dominant purpose of the Commission, in requiring the Grant Thornton Report, was the Commission exercising its regulatory functions.  The dominant purpose of the document was not for SWM Limited to obtain legal advice.  The only issue that arose on discovery was relevance not privilege.  This was clear from the approach taken by the Queen's Bench Division in Rocker v Full Circle Asset Management Limited, a decision of Judge Cotter Q.C. dated 1^st December, 2016.  In the Rocker judgment the sole question the English High Court had to determine was whether or not a report the FSA had required the defendant (a regulated entity) to obtain was relevant or not.  The significance of the judgment to the present application was that no question of privilege arose at all; had the report been privileged, there would have been no argument about relevance.  Advocate Sharp submitted that the position was no different in Jersey, where the Commission was exercising its powers against a regulated entity. 

16.      He therefore submitted that the defendant, being a regulated entity, had to bear the responsibilities of being permitted to carry on regulated activity which included a requirement to cooperate with any powers the Commission as a regulator chose to exercise.  The defendant was not therefore in the same position as a private individual. 

17.      Advocate Sharp further argued that the report was also disclosable because it had been referred to in open Court in the Deputy Bailiff's judgment to which reference had been made.  Any privilege could not survive the report being referred to in a public hearing. 

18.      Advocate Blakeley in response firstly pointed out that the question of the report being referred to in open Court only arose if it was found that the report was privileged and therefore some form of waiver had occurred.  He also suggested that the Commission had been wrong to refer the report to the Royal Court. 

19.      In relation to the Rocker case he argued that it was of no assistance because the question of privilege simply did not arise. 

20.      In relation to the report itself, he argued that litigation was in contemplation.  While a claim from the plaintiff was not contemplated from the outset, what was in contemplation was a challenge to the approach taken by the Commission. 

21.      It did not matter that the Commission had directed the report to be obtained.  By reference to Café de Lecq Limited v Rossborough (Insurance Brokers) Limited [2011] JLR 182, a decision which I had referred the parties to, the dominant purpose could either be that of the person who had created the document or the person at whose direction it had been created.  In this case while the Commission had directed a report to be obtained, it had directed the defendant to obtain the report.  In that sense the defendant could make a claim to privilege. 

22.      It was also important for Advocate Blakeley to review the full circumstances in which the report came to be obtained to decide whether or not a privilege could be maintained.  This might mean that some part of the report was privileged and some part was not. 

23.      He also argued that the exercise of regulatory powers by the Commission which his client intended to challenge fell within the scope of litigation and so was covered by litigation privilege. 

24.      I put to Advocate Blakeley the following which appeared in a letter written by his client to the plaintiff in relation to production of the report.  The relevant part stated as follows:-

"The reporting professional will assess whether your investment into PATF was appropriate for you and will provide the Commission with a report commenting on the suitability of the advice that you have received from SWM Synergy."

25.      Advocate Blakeley in relation to this letter indicated it was written effectively written by the Commission and his client was required to send it. 

26.      Advocate Sharp in reply referred me to Article 32 of the Financial Services (Jersey) Law 1998 which was the statutory provision pursuant to which the Grant Thornton Report was obtained.  In relation to this section he observed as follows:-

(i)        It is a section headed 'Information and Investigations';

(ii)       The report was obtained under Article 32(1)(a) and (6) which provisions contain the power to require information to be provided to the Commission including the power to require a regulated person to provide a report;

(iii)      He also due my attention to Article 32(12) which states as follows:-

"(12)    Nothing in this Article shall require the disclosure or provision by a person to the Commission, an officer or an agent of information, or documents, that the person would, in proceedings in the Court, be entitled to refuse to disclose or to provide on the grounds of legal professional privilege, except, if the person is a lawyer, the name and address of his or her client."

(iv)      In other words the defendant did not have to produce to the Commission anything where it had taken legal advice.  This however did not apply to any information not covered by the legal advice privilege.  The defendant was not arguing that the report was somehow covered by legal advice privilege but only litigation privilege which fell outside Article 32(12). 

(v)       In relation to the Commission referring the report to the Royal Court, this was permitted by Article 38(1)(a). 

(vi)      The position was not analogous with Café de Lecq where the Court was looking at the position of an insured dealing with its insurer.  The relationship between an insured and an insurer was a mile away from the Commission exercising its functions as a regulator which were in the public interest. 

Decision

27.      The starting point for my decision is what is meant by litigation privilege.  This was considered in the Café de Lecq decision. 

28.      In relation to the present case I refer to paragraphs 25 to 29 which govern the questions of what is litigation privilege, when litigation is reasonably in prospect and the dominate purpose test.  I am of course bound by these statements of law.  The relevant paragraphs provide as follows:-

"25     There are two principal forms of legal professional privilege, namely legal advice privilege and litigation privilege. Litigation privilege provides protection for a wider range of documents but only applies where litigation is in reasonable prospect. Legal advice privilege applies even if litigation is not in reasonable prospect but the range of documents to which it applies is narrower. We are concerned in this case with litigation privilege and we consider that the general nature of that privilege is accurately summarized in Phipson on Evidence, 17th ed., para. 23-89, at 688 (2010):

    "The second category of legal professional privilege is wider than the first, but arises only when litigation is in prospect or pending. From that moment on, any communications between the client and his solicitor or agent, or between one of them and a third party, will be privileged if they come into existence for the sole or dominant purpose of either giving or getting legal advice with regard to the litigation or collecting evidence for use in the litigation. This is the basis for claiming privilege for correspondence with witnesses of fact or experts, and proofs, reports or documents generated by them. The principle is that a party or potential party should be free to seek evidence without being obliged to disclose the result of his researches to the other side. In Anderson v. Bank of British Colombia James, L.J. said:

'.-‰.-‰. as you may have no right to see your adversary's brief, you have no right to see that which comes into existence merely as materials for the brief.'

    In order for litigation privilege to apply, there must be a confidential communication between client and lawyer or lawyer and agent, or between one of these and a third party made for the dominant purpose of use in litigation; that is, to seek or provide information or evidence to be used in, or in connection with, litigation in which the client is or may become a party, and when litigation is either in process or reasonably in prospect."

26       An authoritative description of litigation privilege, approved by the House of Lords in Waugh v. British Rys. Bd. (15), is to be found in the statement of Barwick, C.J. in the Australian case of Grant v. Downs (6) (135 C.L.R. at 677):

    "Having considered the decisions, the writings and the various aspects of the public interest which claim attention, I have come to the conclusion that the Court should state the relevant principle as follows: a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection."

That summary of litigation privilege is equally applicable under the law of Jersey.

(b) Litigation reasonably in prospect

27       This requires the court to consider a number of aspects. First, was litigation reasonably in prospect at the time the document was created? Some guidance on this can be obtained from two cases. In Plummers Ltd. v. Debenhams plc (11), Millett, J. made it clear that there did not need to be notification of a possible claim but there must be a real prospect of litigation which must be in the active contemplation of the party seeking advice. He said this ([1986] BCLC at 453-454):

    "If, as is clear from that case, the privilege covers documents obtained for the purpose of enabling solicitors to advise a party whether to make a claim, and that it extends to documents obtained or brought into existence before the decision to make the claim is made, then it must necessarily extend to documents obtained or brought into existence before that decision is notified to the other side. I see no good reason in logic or principle for requiring a party to warn the other side that he is contemplating making a claim, or rejecting his demand, or for restricting the privilege to documents obtained or brought into existence only after such warning has been given. There is no trace in any of the authorities of any such requirement, and I decline to introduce it. It was said that this would widen the category of legal professional privilege to an unacceptable degree, and even destroy the dividing line between the two categories of privilege described by Lord Edmund-Davies in Waugh's case, for legal advice when given will usually bear not only on the client's rights but on other parties' rights as well. I disagree. There must be a real prospect of litigation. Where it is neither pending nor threatened, it must be in the active contemplation of the party seeking advice. This is a real requirement, and it is sufficient to dispose of the more fanciful cases suggested in the course of argument."

28       In United States v. Philip Morris Inc. (14), the Court of Appeal approved the expression that the privilege applies if litigation is "reasonably in prospect" and went on to approve as another way of saying this that, as a general rule at least, there must be a real prospect of litigation as distinct from a mere possibility, but it does not have to be more likely than not.

(c) Dominant purpose

29       Secondly, the document must come into being for the dominant (but not sole) purpose of obtaining legal advice or to conduct or aid in the conduct of the anticipated litigation. The purpose may be that of the person creating the document or the person at whose direction it has been created.

29.      In exploring whether litigation was reasonably in prospect, Sir Michael Birt cited from Plummers Ltd v Debenhams plc [1986] BCLC 447 which described the privilege as covering documents obtained "for the purposes of obtaining solicitors to advise a party whether to make a claim".

30.      This implies that what is required for a claim for litigation privilege to be asserted successfully is a claim or dispute in an adversarial sense. 

31.      This issue of what is meant by litigation was explored further in Phipson on Evidence 17th Edition (cited in Café de Lecq for a definition of litigation privilege set out at paragraph 25 of the Café de Lecq decision).  Paragraphs 23-98 and 23-99 of Phipson are material and state as follows:-

"23-98

In L, Re the house of Lords held by a 3:2 majority that litigation privilege could not apply to proceedings under Pt IV of the Children Act 1989 in respect of child care orders, because the proceedings were not adversarial in nature.  In L, Re Lord Jauncey described litigation privilege as an essential component of adversarial procedure.  Lord Lloyd of Berwick and Lord Steyn agreed.  The distinction drawn by the House of Lords was thus between proceedings that were adversarial in nature, where litigation privilege might be claimed, and proceedings which were investigative or inquisitorial, for which no claim could be made to litigation privilege, albeit a claim could be made to legal advice privilege.  This distinction provided the basis of the Bank of England's crucial concession in Three Rivers that a claim for litigation privilege would not lie for documents prepared for the Bingham inquiry.

In L, Re the majority focused on the public interest nature of proceedings under the Children Act 1989.  Lord Jauncey cited Devlin J. in Official Solicitor v K.

"Where the judge is not sitting purely or even primarily as an arbiter but is charged with the paramount duty of protecting the interests of one outside the conflict, a rule that is designed for just arbitrament cannot in all circumstances prevail."

A powerful dissenting speech by Lord Nicholls might be said to be more in tune with the attitude of the courts since the Human Rights Act.  He said that clear words or a compelling context was required before Parliament can be taken to have intended that the right to rely on privilege should be ousted.  Family proceedings were court proceedings. For the purpose of deciding whether privilege had been ousted by parliamentary intention, legal advice and litigation privilege should be treated as integral parts of a single privilege.  Lord Nicholls suggested that when the ECHR became law, the availability of privilege in child care proceedings might deny a parent a fair hearing contrary to art.6.

23-99

In other respects, the attitude of the courts to statutory abrogation of privilege has to been to require express words or necessary implication.  There may be some argument, therefore, that the decision in L, Re should be reconsidered in the light of the HRA and subsequent authority on privilege.  However, whilst the correctness of the decision in L, Re was not in issue in the House of Lords in Three Rivers, nothing in the speeches casts doubt on its correctness.  But even if Re L were reconsidered, the decision merely provides that in one particular type of proceedings litigation privilege may not be claimed. If litigation privilege requires litigation to be in reasonable prospect, there still must be some form of proceedings or adversarial process.  So even if L, Re were reconsidered, it seems unlikely that reconsideration would go beyond the particular statute there in question.  It would be unlikely to change the basic distinction between "adversarial" and "non-adversarial" proceedings which is at the heart of the distinction between litigation and legal advice privilege.

Lord Jauncey drew a distinction between what is adversarial and proceedings which are "primarily non-adversarial", where "the notion of a fair trial between opposing parties assumes far less importance".  In contrast, he said that where an application is made under the Children Act 1989 the court is seeking to reach a decision in the best interests of someone who is not a direct party and is granted investigative powers to that end.  Litigation privilege is regularly claimed in disciplinary proceedings.  It can be claimed for proceedings in foreign courts even if the foreign court knows no such privilege.  So too there should be no difficulty in claiming litigation privilege for court, arbitration or employment tribunal proceedings.  Tribunals and inquiries under the Companies Act 2006 or the Financial Services and Markets Act 2000 may present difficulties.  The issue will usually be whether the proceedings were merely fact-gathering.  Where a tribunal is administrative, it is unlikely that it will be possible to claim litigation privilege.  On the non-adversarial side of the line would appear to be inquests, tax or competition investigations, and many types of proceedings involving children.  The L, Re principle has been extended to reports from experts in Children Act proceedings, and was not limited to wardship or care orders.  In these cases, litigation privilege is unlikely to be permissible."

32.      In my judgment it is clear from this extract that the exercise of powers by a regulator, such as the Commission, is not adversarial in the sense that a court is being required to adjudicate upon a dispute between rival parties.  Rather the Commission, in the public interest is exercising powers vested in it by the States of Jersey to ensure that the Island of Jersey's financial services sector is well regulated. 

33.      The fact that the Commission might exercise such powers to require a report does not mean that court proceedings against the Commission will follow.  The report may indicate there is no issue with which the Commission should be concerned.  The report might lead to an enhanced degree of supervision.  It might lead to regulatory sanction applying the Commission's decision making process (see paragraph 3 of W v JFSC [2016] JRC 231A for a summary of that process).  All such outcomes are possible consequences of an exercise of a regulatory power.  However none of these possibilities themselves amount to a dispute which the Court is required to resolve.  The dominant purpose of any report obtained by the Commission is therefore how it should then discharge its regulatory responsibilities.  The dominant purpose is not to obtain legal advice (either the Commission or the regulated entity) on any later dispute between them or relating to the conduct of any such dispute.  

34.      I also add that the fact that a regulated institution does not agree with any decision of the Commission to exercise its powers does not mean that the regulated entity is powerless.  It has rights of appeal to the Royal Court to challenge decisions that are unreasonable.  This is the protection afforded to a regulated entity if the Commission goes too far in how it exercises its powers.  The possibility of such a challenge however does not make a report produced pursuant to an exercise of regulatory powers as being in contemplation of litigation.  

35.      Absent a decision being unreasonable, any regulated entity, as part of being permitted to provide financial services, faces a risk in carrying on business that the Commission might choose to exercise its powers in order to discharge its regulatory functions and to review whether or not the particular entity is discharging its responsibilities in accordance with the standards required.  There is a strong public interest in the Commission exercising these functions.  

36.      Nor is the dominant purpose to allow the regulated entity to obtain advice on how to defend possible claims brought against it or the conduct of such claims.  The dominant purpose was that set out in the letter to the plaintiff summarised above.  Assuming the Commission required this letter to be written, the defendant did not challenge this requirement or the requirement to obtain a report.  Advocate Blakeley's complaints about it do not therefore alter the conclusions I have reached. 

37.      I accept that my conclusions mean that a regulated entity might receive a complaint from an individual about services provided, which complaint is also made to the Commission, that such a complaint could lead to the Commission exercising regulatory powers, including the production of a report, which report the regulated entity then has to disclose if it is later pursued by the complainant.  Ultimately this is a risk a regulated entity will always have to face, absent unreasonable conduct on the part of the Commission, where complaints are made and where the Commission decides to investigate those complaints.  It does not mean however that the purpose of any report the Commission requires is to enable the defendant to obtain legal advice or to conduct or aid in the conduct of an anticipated claim.  Rather the report is a fact finding exercise and an assessment of whether or not regulatory standards have been met.  It is not its primary purpose to obtain legal advice. 

38.      This conclusion applies even if a regulated entity can establish that proceedings by a former client or clients are reasonably in contemplation.  In this case I have assumed in the defendant's favour that this was the case even if strictly speaking evidence was not before me to reach a conclusion on this part of the test.  Such an assumption however does not lead to the conclusion that the dominant purpose of an exercise by the Commission of its regulatory powers is the obtaining of legal advice or the conduct of litigation.  This is a separate question. 

39.      For all these reasons I therefore concluded that the Grant Thornton Report could not be withheld on the basis of a claim of litigation privilege.  I made it clear that this ruling applied to the Grant Thornton Report only and it was a matter for Advocate Blakeley to review any other documents in his possession as to whether or not any claim of privilege could be made out in respect of those documents or whether or not they were relevant. 

40.      In light of this conclusion, it is not necessary to reach a decision on whether or not any waiver had occurred or whether or not the report had been made public.  Given there may be an ongoing dispute between the defendant and the Commission it is also not appropriate to comment on the defendant's criticisms of the Commission in producing the Grant Thornton Report to the Royal Court. 

41.      In his skeleton argument Advocate Blakeley also suggested that there was no need to produce the Grant Thornton Report on the basis that it was inadmissible because it contained opinion evidence only.  By the time of the hearing before me however he had rightly decided not to pursue this argument and accepted Advocate Sharp's submission that the only issue, apart from litigation privilege, was whether or not the report contained relevant material by reference to the issues between the parties on the pleadings.  In my judgment Advocate Blakeley was right to make this concession. 

42.      Should the defendant wish to claim privilege in respect of any other documents, the defendant should have regard to the following by reference to a judgment of Chief Master Marsh in Astex Therapeutics Limited v AstraZeneca AB [2016] EWHC 2759 (Ch). 

43.      At paragraph 15 of the judgment Chief Master Marsh stated as follows:-

"15.    During the course of the hearing of Astex's application, the form in which the claim for privilege was made by AZ was described as "conventional". I accept that the claim for legal advice privilege is described adequately. However, although it may have been conventional at one time to state that other documents are "by their nature privileged", such a statement has no place in modern litigation, let alone litigation of very real complexity. It is clearly unhelpful, without describing the documents said to be privileged, to say that 'their nature' explains why they are privileged because the recipient of the list of documents has no way of knowing which documents, or classes of documents, are being referred to."

44.      I consider this statement reflects the positon in Jersey and therefore it is not open to parties to assert a document is 'privileged' in a dispute before the Royal Court without describing the category of documents and the head of privilege claimed.  Initially Advocate Blakeley made such an assertion albeit that by the time of the hearing the issue had been limited to a question of litigation privilege. 

45.      Secondly, the judgment in Astex cited with approval a passage in Matthews and Malek on Disclosure at paragraph 16 as to how privilege should be identified.  Paragraph 16 states as follows:-

"16.The obligation under CPR 31.19(3)(b) is explained in Disclosure by Paul Matthews and Hodge Malek QC (4th Ed) Chapter 6 at page 181 in the following way:

"It is not the usual practice to individually number every document covered by legal professional privilege, although in certain cases this may be the appropriate course, particularly where there is an issue as to whether privilege is being properly claimed.

Secondly, the nature of the documents must be stated and, in the case of classes of documents, the class must be clearly defined so that it is possible to identify documents which fall within the class.

Thirdly, the ground of privilege and the documents giving rise to the claim for privilege must be clearly stated. In particular, the wording must not be so wide that it is impossible to be sure it contains no description of documents which came into existence in circumstances not attracting privilege. It is not enough to state that the documents are privileged; the factual basis of the grounds giving rise to that claim must be set out.""

46.      In considering whether or not privilege had been correctly claimed, Chief Master Marsh summarised the relevant principles at paragraph 23 as follows:-

"23.    This question has received more recent attention both at first instance and in the Court of Appeal. In West London Pipeline and Storage Ltd and another v Total UK Ltd and others [2008] EWHC 1729 (Comm) Beatson J at [86] provided a helpful summary of the principles which apply where a challenge is made to a claim for privilege. I set out that paragraph in full (excluding the authorities he cites):

"It is possible to distil the following propositions from the authorities on challenges to claims to privilege:-

(1) The burden is on the party claiming privilege to establish it: ... A claim for privilege is an unusual claim in the sense that the party claiming privilege and that party's legal advisors are, subject to the power of the court to inspect the documents, the judges in their or their own client's cause. Because of this, the court must be particularly careful to consider how the claim for privilege is made out and affidavits should be as specific as possible without making disclosure of the very matters that the claim for privilege is designed to protect: ...

(2) An assertion of privilege and a statement of the purpose of the communication other which privilege is claimed in an affidavit are not determinative and are evidence of a fact which may require to be independently proved: ...

(3) It is, however, difficult to go behind an affidavit of documents at an interlocutory stage of proceedings. The affidavit is conclusive unless it is reasonably certain from:

(a) the statements of the party making it that he has erroneously represented or has misconceived the character of the documents in respect of which privilege is claimed: ...

(b) the evidence of the person who or entity which directed the creation of the communications or documents over which privilege is claimed that the affidavit is incorrect: ...

(c) the other evidence before the court that the affidavit is incorrect or incomplete on the material points: ...

(4) Where the court is not satisfied on the basis of the affidavit and the other evidence before it that the right to withhold inspection is established, there are four options open to it:

(a) It may conclude that the evidence does not establish a legal right to withhold inspection and order inspection: ...

(b) It may order a further affidavit to deal with matters which the earlier affidavit does not cover or on which is it unsatisfactory: ...

(c) It may inspect the documents ... Inspection should be a solution of last resort, in part because of the danger of looking at documents out of context at the interlocutory stage. It should not be undertaken unless there is credible evidence that those claiming privilege have either misunderstood their duty, or are not to be trusted with the decision making, or there is no reasonably practical alternative.

(d) At an interlocutory stage the court may, in certain circumstances, order cross-examination of a person who has sworn an affidavit, for example, an affidavit sworn as a result of the order of the court that a defendant to a freezing injunction should disclose his assets: ...""

47.      Again I considered that the same summary represents the approach that should be taken in Jersey. 

48.      Finally, at paragraphs 27 and 28 Chief Master Marsh defined the court's powers as to when a party might be required to explain the basis upon which privilege has been claimed.  Paragraphs 27 and 28 again reflect the practice I consider applies in Jersey and state as follows:-

"27.    The court has power, in an appropriate case, to make an order requiring a party claiming privilege to explain in sufficient detail the basis upon which privilege has been claimed. The court will not make such an order routinely and there must be a firm evidential basis justifying it. Furthermore, the degree to which a claim to privilege must be specified will depend on the particular case; and the court should be astute to avoid making an order which either has the effect, or risks having the effect, of rendering the privilege valueless due to the level of detail which is revealed pursuant to the order. However, to my mind, it would be unusual for the fact that advice was given on a particular date, or dates, or that enquiries were made on a date or dates as a basis for giving advice, to be revelatory.

28.      I would add that the court must be careful to avoid encouraging applications challenging privilege which are purely tactical and designed to harass the opponent. Although it is not right, as AZ originally suggested, that its self-certification of a claim for privilege cannot be challenged, the court will naturally take into account assertions which appear to be made in good faith and based upon what appears to be a careful review of the documents in question, taking into account the relevant principles. Plainly, Mr Gilbert's assertion that he has considered carefully the claim to privilege must not be disregarded lightly, but it does not preclude the court from requiring further information to be provided."

49.      I set out this guidance first to assist the parties in this dispute should there be further disputes about privilege and also because I regard the comments of Chief Master Marsh as reflecting the general approach that should be taken in relation to both claims to privilege and challenges to claims to privilege in this jurisdiction. 

Conclusion

50.      For the reasons set out in this judgment, I ruled that litigation privilege could not be claimed in respect of the Grant Thornton Report.  Whether litigation privilege could be claimed in respect of other documents or whether documents were created in contemplation of a potential dispute between the defendant and the Commission is a matter for another day. 

51.      Finally, in view of the amount of compensation sought by the plaintiff, I encouraged the parties, before significant costs were incurred to progress this dispute to trial, to consider whether they can resolve their differences on an amicable basis.  This is because the costs of any dispute, if the matter proceeds either close to trial or to trial, will outweigh significantly what is at stake in the present dispute.  I also encouraged the parties specifically to consider whether, as part of without prejudice communications, they could exchange information including the views of any expert retained before the costs required to comply with the directions I had given were incurred. 

Authorities

European Convention on Human Rights.

SWM Ltd-v-JFSC and AG [2016] JRC 014.

SWM Ltd-v-JFSC [2016] JRC 094.

Rocker v Full Circle Asset Management Limited dated 1^st December, 2016.

Café de Lecq Limited v Rossborough (Insurance Brokers) Limited [2011] JLR 182.

Financial Services (Jersey) Law 1998.

Plummers Ltd v Debenhams plc [1986] BCLC 447.

Phipson on Evidence 17th Edition.

W v JFSC [2016] JRC 231A.

Astex Therapeutics Limited v AstraZeneca AB [2016] EWHC 2759 (Ch).