Collateral Waivers and “Cherry Picking”– a recent update from PCP Capital Partners LLP v Barclays Bank Plc [2020] EWHC 1393 (Comm)

Published: 25/6/2020

Legal professional privilege is regarded as a fundamental right of the client to whom that privilege belongs. The loss of that privilege through waiver is carefully controlled and the general rule is that privileged documents cannot be ordered to be provided in litigation by the party whose privilege it is unless this is as a result of a waiver, known as collateral waiver.

Where a party makes an application for documents based on a waiver of privilege, the court will consider at least two fundamental questions: (a) has there been a waiver of privilege?; and (b) if so, is it appropriate to order production of privileged documents other than those to which reference has been made which was the foundation for the waiver?

This doctrine is based on fairness. Parties can choose whether and to what extent they waive privilege, but it is for the court to consider what the consequences of that voluntary waiver are. If a party voluntarily waives privilege of part of a document or part of a set of documents the court and parties must not be presented with a partial picture, i.e. the disclosing party cannot "cherry pick" which documents to provide to ensure that fairness is maintained. This is well established in case law (Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529 and R. v Secretary of State for Transport Ex p. Factortame Ltd [1997] 9 Admin LR 591).

More recently, this issue was considered in PCP Capital Partners LLP v Barclays Bank Plc [2020] EWHC 1393 (Comm), as summarised below.

Background

After the financial crisis in 2008, the Defendant, Barclays Bank Plc ("Barclays") raised capital through private investors. The state of Qatar and related entities and persons (the "Qataris"), Barclays' largest shareholder at the time, and the Claimants, PCP Capital Partners LLP and PCP International Finance Limited ("PCP") agreed to invest. PCP alleges that Barclays represented to it that they would get "the same deal" as the Qataris, which PCP claims meant that PCP would receive the same fees and other payments pro rata for the investments as the Qataris would receive. PCP further contends that the representation was false and knowingly so because, in addition to the expressly declared fees, the Qataris received further funds disguised as consideration payable for advisory services pursuant to written advisory services agreements ("ASAs"). PCP contends that the ASAs were shams and claims a variety of losses up to £1.6 billion.

Separately, the SFO brought criminal charges against Barclays and certain senior Barclays executives. The charges against the bank were dismissed, and the executives acquitted, however in the course of these proceedings Barclays agreed to provide a number of documents over which Barclays had claimed legal professional privilege under a "limited waiver of privilege". The SFO refered to a number of these documents in open court at trial and during cross-examination, meaning that these documents lost the privilege previously attaching to them at that point (the "Open Documents").

The Application

PCP made an application for further disclosure against Barclays in relation to the ASAs, on the basis that Barclays' witness statements and opening statement in these proceedings referred to legal advice it had received. On that basis, it argued that Barclays had therefore waived privilege, and pursuant to the collateral waiver doctrine, all the otherwise privileged documents relating to the ASAs should now be available to them.

Barclays denied that PCP was entitled to any of the documents because: (i) the references to the legal advice were not of the nature that gave rise to a waiver; (ii) all the references were to the Open Documents which were no longer privileged due to their use in the SFO trial; (iii) the scope of the documents sought was too wide; and (iv) in any event the order sought was disproportionate and unduly burdensome on Barclays.

Decision

The disclosure sought by PCP was ordered.

There is no clear definition of when a waiver of privilege occurs. Rather, there are statements as to the general effect of a waiver of privilege. In this case Waksman J held that "first, the reference to the legal advice must be sufficient...and second, the party waiving must be relying on that reference in some way to support or advance his case on an issue that the court has to decide."

A purely narrative reference to legal advice does not constitute waiver of privilege, because there is no reliance upon it in relation to an issue in the case. Nor does a mere reference to the fact of legal advice along the lines of "My solicitor gave me detailed advice. The following day I entered into the contract", however saying "I entered into the contract as a result of that legal advice" would constitute a waiver.

Waksman J dealt with what he coined as the "vexed question which still confounds the law of privilege", being the distinction between a reference to the effect of legal advice and a reference to the content. A waiver cannot arise if the reference is only to the effect, and the effect means "the conclusion or outcome of the advice". Referring to Marubeni v Alafouzos [1986] WL 408062 Wakman J held that this distinction cannot be applied mechanistically. It is a fact-sensitive exercise, which has to be viewed and made through the prism of (a) whether there is any reliance on the privileged material; (b) what the purpose of that reliance is; and (c) the particular context of the case in question. This means that in a particular case, the fact that only the conclusion of the legal advice referred to is stated as opposed to the detail of the contents may not prevent there being a waiver.

In this case Barclays' witness statement said the witness "took comfort from" legal advice, and Waksman J held this was more than simply referring to the fact of advice – it deals with the effect of the advice, if by "effect" one does indeed mean conclusion. Although none of the contents of the legal advice were quoted, this was still sufficient for waiver. In this case the references to legal advice were not made casually or by accident and were only made to improve Barclays' case on the ASA issues. "Comfort" could not mean anything other than the lawyers were approving what was being done as lawful. The same logic was applied to the references in Barclays' opening – the effect of the statements could only be that the lawyer approved the transaction as lawful. On this basis, Waksman J held that a waiver had occurred.

Barclays argued that because all of the references to legal advice concerned the Open Documents, using them now did not involve waiver at all. Waksman J did not agree with this, rejecting the notion that a once-privileged document which has lost that status because it has been deployed on one occasion has therefore become irrelevant from a privilege point of view from then on.

Since there had been a waiver of privilege Waksman J also addressed scope, finding that the issue or transaction was obviously the lawyers' advice about the ASAs, and Barclays could not now argue for some much narrower transaction. On timing, Waksman J did not accept that the application was too late as the application could not have been brought or determined until the final versions of the relevant witness statements were produced, and that had only just happened. On proportionality he held that in litigation of "this mammoth scale", where the claims made and defended might be as much as £1 billion, the costs involved in this disclosure order were clearly not disproportionate. 

Comment

This update provides guidance on whether a reference to the contents versus the effect of legal advice may constitute a collateral waiver. This case makes it clear that this test will be very much fact specific and the context must be considered on a case-by-case basis. On this basis, the case does not provide great clarity and therefore may make it more difficult to predict the outcome of applications for disclosure on the basis of waiver of privilege.

It is notable that the court has taken a wide approach to the waiver of privilege and that references in witness statements to legal advice and taking comfort from this advice (or otherwise dealing with its effect) is sufficient to amount to a waiver, even in circumstances where the content of that advice is not set out. Lawyers should bear this in mind when drafting witness statements and referring to legal advice.

This decision will be of particular relevance to clients who are considering providing limited waiver of privilege, in particular for those involved in cases with the SFO. Organisations should carefully consider the potential impact of providing documents on a limited waiver basis and the risk of a collateral waiver over further documents.

Sign up to our newsletter