In the latest in our series of articles on "How to avoid..." common legal problems, Michael Axe summarises some of the steps that you can take to ensure that your confidential and privileged communications remain protected from disclosure in legal proceedings.
Key Points to Remember:
How to Avoid... Losing privilege and confidentiality:
- Ensure settlement negotiations are covered by Without Prejudice privilege;
- Be aware of the exceptions to Without Prejudice privilege;
- Protect confidentiality in mediations;
- Ensure Legal Advice Privilege is obtained;
- Ensure Litigation Privilege is obtained.
Many people who become involved in legal disputes fear that
confidential comments made "behind closed doors", or
concessions offered in the context of attempting to reach a
settlement with the other side, may be used against them once the
matter reaches court. This article looks at some simple steps
that you can take to help ensure that this does not happen.
1 – Ensure settlement negotiations are covered by Without
Prejudice privilege
Without Prejudice (WP) privilege should, generally speaking,
cover written and verbal communications between parties that
represent a genuine attempt to settle a legal dispute. The
general rule, that WP communications are not admissible in Court as
evidence, was developed as a matter of public policy to ensure that
parties were able to negotiate freely during settlement
discussions, without fearing that anything they say could then be
used against them in Court by the other side if the negotiations
broke down.
However, it is not always entirely clear where WP privilege begins
and ends; for example, while an actual settlement offer would
normally be covered by WP privilege, it is not always clear whether
an offer to meet to discuss settlement would be covered by WP
privilege. For this reason, it is always advisable to clearly
label any WP letters accordingly, and to make it clear during any
meetings or telephone conversations if you want to speak on a WP
basis.
2 – Be aware of the exceptions to Without Prejudice privilege
As with every general rule, there are exceptions where WP
communications might need to be disclosed to the Court.
Probably the most common exception is that WP communications can be
disclosed to the Court if a dispute arises over whether a binding
settlement agreement had been concluded between the parties.
This exception was historically applied very narrowly by the
Courts, but in 2010, the Supreme Court confirmed that WP
communications could also be disclosed as evidence in relation to a
dispute over the interpretation of a settlement agreement,
not just its existence. Although this decision was
undoubtedly an extension of the existing exceptions to WP
privilege, it is still a very narrow exception which is unlikely to
significantly undermine the protection afforded to settlement
discussions by WP privilege. Nevertheless, parties should be
careful in future not to include any "confidential"
information in settlement communications which they would not want
to be disclosed to the Court in the event that a settlement is
concluded, but then a dispute arises over the existence or
interpretation of that settlement agreement.
3 – Protect confidentiality in mediations
Mediation is an increasingly popular method for resolving legal
disputes on a cost effective basis, and arguably the core principle
behind mediation is that the process is confidential, allowing the
parties to negotiate freely without fear that any comments made,
special documents produced or concessions granted in the context of
attempting to reach a settlement at the mediation will later be
used against them in Court proceedings. Mediations will
normally not only be covered by WP privilege, but they will also be
governed by confidentiality provisions in the Mediation Agreement
itself, which will bind the independent Mediator as well as the
parties themselves.
However, in exceptional circumstances, it can be in the interests
of justice for the Courts to order the disclosure of confidential
information. For example, in the case of Farm Assist
Limited (In Administration) v The Secretary of State for
Environment, Food and Rural Affairs (No.2), the Court ordered
the independent Mediator to give witness evidence in relation to
allegations that the settlement agreement concluded at the
Mediation should be set aside due to serious misconduct during the
Mediation by one of the parties. The question of when it will
be in the interests of justice to "override" the
confidentiality provisions in a Mediation Agreement is,
unfortunately, not an easy one to answer and will depend on the
facts of each case.
4 – Ensure Legal Advice Privilege is obtained
Legal Advice Privilege (LAP) is another form of
privilege/confidentiality that covers communications between
clients and their lawyers relating to the seeking or giving of
legal advice, which provides clients with an absolute right to
refuse to disclose those communications in legal proceedings.
However, LAP will normally only apply to legal advice provided by
lawyers, and not to legal advice provided by any other
parties.
This was confirmed by the Supreme Court in the 2013 case of R
(Prudential plc and another) v Special Commissioner of Income
Tax, which rejected arguments put forward by Prudential and
the Institute of Chartered Accountants of England and Wales that it
should be the nature of the legal advice that determines
whether it is covered by LAP, not the status of the person
giving the advice. The Supreme Court ruled that the clearly
defined and understood principle of LAP was that it only applies to
advice provided by qualified members of the legal profession, and
stated that only Parliament could change the existing law on such a
fundamental level.
As well as considering the status of the person providing
the legal advice, it is also important to consider who is
receiving the legal advice in question. In the
so-called Three Rivers (No 5) case, the House of Lords
stated that LAP will only apply to advice provided by a
company's lawyers to the people at the company who are
specifically charged with the seeking and receiving of legal
advice. Other people at the company who are outside of that
small, defined group may not be covered by LAP if the Courts
consider that they are not to be regarded as the lawyers'
"client" for the purposes of the advice in
question. It is therefore recommended that legal advice
should not be "over circulated" within a company or
similar organisation, and that the personnel responsible for the
dealing with the lawyers on a day-to-day basis are clearly
identified.
In a wider context, the European Court of Justice (ECJ) has also
confirmed that Legal Profession Privilege (including LAP) does not
apply to advice provided by in-house lawyers to the
companies they work for, in relation to competition law
matters. This decision, coupled with the ECJ's recent
decision that in-house lawyers cannot represent their companies in
the courts of the EU, has significantly limited the role and
effectiveness of in-house lawyers in the European Courts.
5 - Ensure Litigation Privilege is obtained
Litigation Privilege is another form of Legal Profession Privilege (alongside Legal Advice Privilege), which can apply to confidential communications which relate to existing, pending or reasonably contemplated litigation. However, Litigation Privilege will normally only cover communications passing between the client and its lawyer, or between the lawyer or client and a third party (such as accountants or other professional advisors) for the purposes of the giving/receiving of advice or the gathering evidence in relation to litigation. There are also several "traps" that the unwary can fall into which may invalidate potential Litigation Privilege, and so it is important to seek legal advice as soon as litigation is "reasonably contemplated" in order to invoke Litigation Privilege as far as possible.
Summary
As the above illustrates, there are several different bases upon which documents may be considered to be confidential and/or privileged from disclosure, and by taking the steps outlined above, it should be possible to maximise your chances of preserving the confidentiality and privilege in those communications. As ever, a careful consideration of the exceptions to the basic rules will be essential.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.