As a result of COVID-19, it seems inevitable that litigation will follow. Documents created now will be relevant in future litigation. This article suggests practical steps for preserving privilege in communications where litigation takes place in English courts.

COVID-19 has resulted in huge challenges for businesses, including increasingly difficult trading conditions, against a background of rapidly changing law and regulation.
The focus has been on business continuity rather than future litigation. It seems inevitable, however, that litigation will follow this major global disruption.
The outcome in commercial cases usually turns on contemporaneous material. Documents created now will be highly relevant in future litigation. So, which documents will be privileged?
The tests for litigation privilege and legal advice privilege in English law are seemingly simple. For litigation privilege, litigation must be in reasonable prospect and the dominant purpose of the communication must be that litigation. For legal advice privilege, you need a lawyer-client communication for the dominant purpose of seeking or giving legal advice. How privilege applies in day-to-day business communications is, however, far from simple.

One increasingly common issue is whether a business can comply with its contractual obligations and if not, whether it can end contracts relying on express contractual provisions, force majeure or general law principles.

Litigation privilege

For litigation to be in reasonable prospect, there needs to be more than a mere possibility of litigation, but not necessarily more than a 50% likelihood. A business reviewing its contracts, in anticipation of potential litigation if it stops performing, almost certainly won’t meet the test. Conversely, communications with a particular counterparty, with each providing contradictory views on contractual provisions, may fall on the other side of the line.
The dominant purpose must also be satisfied. A common mistake is that if litigation is in prospect, everything created from that point is protected. Say the accounts section prepares different profit projections for performance of a contract, including using more expensive raw materials. That could be relevant in a later dispute over whether the pandemic resulted in non-performance of the contract due to force majeure or it was merely more expensive to perform, which is not sufficient. It may be difficult to say, years later, that the dominant purpose of preparing those documents was for anticipated litigation.

Legal advice privilege

The interpretation of legal advice privilege in English case law means that its scope is very narrow. The communication needs to be between a lawyer and a client; ’client’ is interpreted restrictively. Only those tasked with obtaining legal advice fall within the definition of ’client’. Profit projections are unlikely to have been prepared by a ’client’, even if prepared for the client to take legal advice. Even if they are sent by the accounts section to a lawyer, they won’t be privileged under legal advice privilege.
Furthermore, communications between a client and a lawyer must be for the dominant purpose of obtaining legal advice. Commercial input from a lawyer would not be protected by privilege. It isn’t always easy to establish what is legal advice or commercial input, particularly in an in-house context where a lawyer is being asked for input generally.

Practical steps

How can businesses try to preserve privilege during fast-moving events and decision-making in a crisis? Particularly where future litigation is likely to be in English courts? Key points include:

  • Documenting when litigation is likely to be in reasonable prospect, putting a document hold in place, and stopping the destruction of relevant material.
  • Marking emails and documents as privileged where this is the case. While not determinative, this will be good evidence later.
  • Trying to limit communications with lawyers to the “client” as narrowly interpreted.

If litigation is not in reasonable prospect, very few communications between non-lawyers in the general business are likely to be privileged. It’s worth remembering this when putting (electronic) pen to paper.

About the author:

Thomson Reuters guest writer, Anna Pertoldi, partner at Herbert Smith Freehills, is a general commercial litigator with particular expertise in fraud and professional negligence.