Litigation privilege can provide organisations with a valuable way of carrying out investigations without having to disclose the results of those investigations.
However, litigation privilege only applies where the communications are:
- confidential written communications between client or lawyer, and a third party
- prepared when litigation is in contemplation or has commenced, and
- for the dominant purpose of litigation.
In the Court of Appeal case of Victorygame Ltd & another v Ahuja Investments Ltd  EWCA Civ 993, the Court considered whether a Letter of Claim to a third party and the corresponding Letter of Response met the “dominant purpose” test, and whether privilege was lost because the form of the letter (letter of claim) suggested that the party was requesting information to use to pursue proceedings against that party, when in fact, it was requesting information to use in the other proceedings.
The Claimant Ahuja Investments Limited’s (Ahuja) had purchased a commercial property in Middlesex from the Defendants (Victorygame Ltd and its director Mr Pandher) (collectively, Victorygame). Ahuja claimed that fraudulent or negligent misrepresentations made by Victorygame about the duration of the leases and the rental income, induced Ahuja to enter into the sale contract and related loan agreement. Victorygame accepted that there was a misrepresentation, but claimed that it was an innocent mistake. Victorygame alleged that there was not operative inducement, as Ahuja’s pervious solicitors Stradbrooks had the leases for approximately two months, and inferred that Stradbooks had reviewed the leases and discussed them with Ahuja.
Ahuja’s current solicitors, Cardium Law, sent a Letter of Claim to Stradbrooks. The Letter of Claim was stated to be sent pursuant to the Pre-Action Protocol for Professional Negligence. The Letter of Response sent by Stradbrooks’ professional indemnity insurers contained information relevant to the claim against Victorygame.
Victorygame applied for disclosure of the Letter of Claim and Response. Ajuja’s solicitors produced a witness statement which stated that the dominant purpose of the Letter of Claim was to make Stradbrooks believe that a professional negligence claim was being considered, in the hope that it would provide information relevant to the present proceedings – namely, whether Stradbrooks had reviewed the leases. The witness statement confirmed that, in fact, Aluja had no intention of actually issuing proceedings against Stradbrooks for professional negligence.
At first instance, the Court ruled that the correspondence was not privileged. The decision was challenged and came before Mr Justice Vos, sitting as a Deputy Judge of the High Court. Mr Justice Vos found that the letters were, in fact, privileged. In doing so, he referred to the passage from Lord Wilberforce's speech in Waugh v British Railways Board  AC 521 at p.531D:
"a more powerful argument to my mind is that everything should be done in order to encourage anyone who knows the facts to state them fully and candidly – as Sir George Jessel MR said, to bare his breast to his lawyer: Anderson v Bank of British Columbia (1876) 2 Ch D 644, 699. This he may not do unless he knows that his communication is privileged".
This finding was notwithstanding that Mr Justice Vos also stated that “there clearly was an element of deception in the sense that Ahuja wanted information for the purposes of the present proceedings, anticipated that it would not get that information if it was requested on that basis, and so arranged for its solicitors to write a LoC with a view to obtaining the information which it was seeking”.
Mr Justice Vos also rejected an argument that the Letter of Claim and the Response were not confidential: whilst they were not confidential between the parties, both Ahuja and Stradbrooks would have considered them confidential as against third parties.
Victorygame was granted permission to appeal on the following grounds:
- that Mr Justice Vos had erred in finding that Ahuja’s purpose in instigating the correspondence was for the dominant purpose of this litigation, and
- that, as a matter of principle, Aluja could not benefit from claiming privilege where it had deliberately misled another party as to the purpose for which the information was required.
Court of Appeal
The Court of Appeal unanimously dismissed the appeal on all grounds, and upheld Mr Justice Vos’ decision.
In relation to the first ground, the Court of Appeal held that, when determining the dominant purpose of a communication, the court is required to undertake an objective assessment, but that this does not involve the application of the objective bystander test. The Court of Appeal held that Mr Justice Vos properly concluded that, while the form of request (a letter of claim) suggested that the letter was sent to obtain information to use to pursue proceedings against Stradbrooks, the dominant purpose (as stated in Cardium Law’s witness statement) was to obtain information for use in the present proceedings.
In relation to the second ground, the Court of Appeal held that the starting point is that the documents are privileged, and the question is whether privilege was lost because of the form in which the letter was sent in. The Court of Appeal confirmed that legal professional privilege, once acquired, is absolute, subject to waiver, estoppel, and statute. The Court of Appeal confirmed that privilege cannot be lost solely due some competing public interest. Whilst in certain cases a party may be estopped from relying on privilege - for example, where a party acted in a way that would make it unfair or unconscionable for them to assert it - such actions would need to be clear, unequivocal and proven by very cogent evidence. The Court of Appeal did not consider those circumstances applied here.
The case confirms that the dominant purpose test is a critical element of litigation privilege. Parties seeking to claim or challenge litigation privilege should think carefully about whether that test is met.
However, the case leaves an unanswered question as to what level of deception as to the true purpose would “cross the line” so that privilege would be lost. As each decision is likely to turn on the facts, parties considering such tactics should proceed with caution.