Two years on from PCP Capital Partners LLP and another v. Barclays Bank Plc  EWHC 1393 (Comm), the High Court has declined to extend the scope of what constitutes a waiver of legal professional privilege. The case of Henderson & Jones Limited v. David Jason Ross & Ors  EWHC 2560 (Ch) provides a reminder of the principles set down in PCP, and provides further examples of the circumstances in which there will (or will not) be a waiver of privilege.
The main proceedings relate to the restructuring of a (now defunct) company, The Hospital Medical Group Limited (the "Company").
The Claimant, Henderson & Jones Limited, a litigation funder and assignee of the Company's claims, is pursing parties involved in the restructure, including the Company's former directors and advisors. The Claimant has brought a multitude of claims, including breaches of fiduciary duties, authorising transactions at an undervalue, and unlawful means conspiracy.
The fifth defendant, Barclays Bank plc ("Barclays"), was the Company's bank at the time of the restructure. It is alleged that Barclays dishonestly assisted in the other defendants' breaches and is also liable for unlawful means conspiracy.
During the Pre-Trial Review, ahead of the full trial which commenced on 3 November 2022, the Claimant applied for two orders against Barclays:
- Disclosure of legally privileged documents between the Bank and its legal advisers, Eversheds, in relation to the Company restructure, on the grounds that there had been a waiver of privilege by one of the Bank's witnesses (the "Waiver Application"); and
- Pursuant to CPR Part 18, that Barclays provide further information in relation an e-mail from Eversheds to one of the Bank's witnesses dated 26 October 2012, which attached various balance sheets of the Company (the "E-mail").
This article is focused on the first application, for disclosure.
A recap on the law
PCP Capital Partners LLP and another v. Barclays Bank Plc  EWHC 1393 (Comm)
According to Judge Waksman in PCP, there are two fundamental principles to establish waiver of legal privilege, although there is "no succinct and clear definition":
- There must be sufficient reference to the legal advice received.
- This includes considering what is being referred to i.e., the outcome or conclusion of the advice (the "effect") or the underlying reasons (the "content"). Although not determinative and always dependent on the particular facts of a case, it is generally considered that a waiver is more likely to arise where reference is made to the content of the legal advice.
- The reference must also be sufficient. An inferential reference will not suffice.
- The waiving party must rely on that reference in some way, in support of its case on an issue before the Court.
(the PCP Test)
In PCP, substantial references to legal advice made by the Bank's witnesses were found to give rise to a waiver because the witnesses stated that they had relied upon, and taken comfort from, this advice in concluding that the transactions in question were lawful.
PJSC Tatneft v. Bogolyubov  EWHC 3225 (Comm)
In Tatneft, a case heard less than six months after PCP, Mrs Justice Moulder held that no waiver of legal privilege would arise where a party is merely responding to a claim made by another party in the litigation, as to the contents of a privileged communication (the Tatneft Gateway).
The Waiver Application
Barclays gave disclosure on 30 July 2021, stating in its disclosure certificate that certain communications had been withheld on grounds of legal privilege.
However, a subsequent witness statement made on behalf of the Bank referred to the role of Eversheds (Barclays' legal advisers) in responding to the Claimant's allegations of dishonest assistance. The witness made the following references (author's emphasis added):
- Paragraph 119:
"I took advice from Eversheds in the period between being notified of the change in structure and my response to Gerard Barnes [the Third Defendant]. I understand that advice is subject to privilege, although it is wrong for the Claimant to assert that the advice referred to the balance sheets that I had been sent."
"I looked at this as a straightforward facility and corporate restructure. I saw the transfer of the Hospital at market value and I believed that this was being done by a professional and honest management team supported by a [sic] professional accountants and professional lawyers. The Relationship Director was very supportive of the customer. There was no immediate risk to the Bank and there was nothing to put me on alert or which meant that I suspected anything underhand. I would have been looking at the information I had at the time and whether that structure and business plan made sense to me, which they did. Because of the cash flow and profitability, there was nothing to make me suspect that this business would fail in the short term, and in fact it was successful. There was no discussion about the Company ceasing to trade. I would remember that."
"Here, there was nothing to put me on alert. I looked at the business at a high level. The business was generating cash, it was keeping up its loan repayments. The Group had Clement Keys as its accountants and The Wilkes Partnership [the Sixth Defendant] advising them, and the Bank had Eversheds. I was dealing with professional advisers, both on my side and the Company's side, and I thought that I was dealing with a competent and experienced management team."
(the Eversheds' Statements)
The Claimant argued that:
- When considered as a whole and "holistically", the Eversheds' Statements constituted a waiver of legal privilege because the witness had referred to, and relied upon, the content of legal advice received (per the PCP Test):
- Paragraph 119 expressly referred to the content of the advice (which Barclays accepted) to deny that the E-mail "referred to" the balance sheets. The reference was more than "narrative".
- In setting out his views on the restructure at paragraphs 127 and 141, the witness referred to professionals who were involved in the transaction and concluded that there was nothing to put him "on alert". Although no specific piece of legal advice was referred to, the reference to lawyers and Eversheds was deployed to support his claim that there was nothing suspicious about the transaction i.e., he had acted honestly.
The position could be likened to that in PCP, where one of the Bank's witnesses stated in evidence: "I am certain that if anything had been proposed at the meeting which created a problem from a legal perspective, [the lawyers] would have said so."
A key issue for trial was the witness's knowledge (or targeted suspicion) of the restructure at the time. Accordingly, the claim could not be determined fairly without the disclosure of the legal advice received.
Barclays resisted the application, asserting there had been no waiver by the Eversheds' Statements. In summary, the Bank stated:
- The witness was entitled to deny the various allegations of dishonesty pleaded against him and to say, without waiving privilege, that he had received legal advice.
- The statement at paragraph 119 only arose because the witness was responding to the Claimant's allegation that the E-mail "referred to" the balance sheets.
- Neither paragraph 127 nor 141 made any reference to legal advice and/or any suggestion that privilege was waived. All the witness was doing was commenting that there were professionals involved in the transaction, and it was not a "back-street" deal.
- By contrast, in PCP, clear statements were made by the Bank's witnesses that they had received legal advice and these statements were relied upon in support of their position that their actions were lawful.
The Court dismissed the application for disclosure of privileged material.
The Judge agreed with Barclays, holding that, when considered fairly, objectively, and in proper context, the Eversheds' Statements did not amount to a waiver of legal privilege.
In addition to points summarised above, the Court made the following findings:
- Preliminary points:
- The witness did refer to part of the content of Eversheds' legal advice at paragraph 119 of his evidence, and whilst the advice was expressed in negative terms, privilege was still capable of being waived.
- The distinction between "content" and "effect" is not conclusive and the matter of waiver will always be context dependent and fact sensitive.
Paragraph 119: The reference in the first sentence to the fact that the witness took legal advice was not objectionable. The second statement was made in response to the Claimant's allegation and said no more than what is contained in Barclays' Defence. Moreover, it was the Claimant (not Barclays) who sought to rely on the content of the advice. Thus, the Tatneft Gateway applied, and privilege was not waived.
Paragraph 127: Whilst it may be true that Eversheds' legal advice formed part of the information that the witness received at the time, there was no reference in paragraph 127 to that advice nor anything to suggest that the witness's reliance on the same resulted in the state of mind he described. The paragraph could not be read as referring to the limited (negative) reference in paragraph 119.
Paragraph 141: Although the witness did refer to Barclays receiving legal advice, no specifics were given. Not only was there no (or no sufficient) reference to legal advice, but there was no reliance on the contents of that advice by the witness. The witness said little more than with the "panoply of executives and professionals (including Eversheds) involved, things appeared to be 'above board'."
The facts came "nowhere close" to PCP.
There is a growing body of authority to suggest that the mere reference by a party to the fact that it has obtained legal advice, without relying on the contents of that advice to advance or support its case is unlikely to constitute a waiver of legal privilege. Considerable care should be taken, however, when referring to any legal advice, and it remains best practice to avoid making any reference, insofar as possible.