UK: The Legal Spotlight: A Question Of Privilege

Last Updated: 3 November 2017
Article by Vannin Capital

Authored by Charles Hollander QC

In the context of a proliferation of litigation funders and funded cases, Brick Court Chamber's Charles Hollander QC considers the often thorny issue of privilege

Once upon a time, litigation funding was champertous and unlawful. We are living in a brave new world where litigation funding creates new opportunities and new risks. The law of legal professional privilege is an area which has to adapt to the relationship between funder and litigant.

The funders will want to see advice from lawyers who have conduct of the potential litigation. The lawyers will not in such circumstances act for the funders: on the contrary, there will be a potential conflict between the interests of the funders (getting objective advice which will enable them to decide whether to fund on the best terms available) and the client's lawyers (whose duty is, within the limit of their professional obligations, to further the interests of the client).

Client privilege

So if the lawyers do not act for the funder but the client, there is no relationship between the client's lawyer and the funder, which creates privilege. The lawyer is not giving the funder legal advice or litigating on the funder's behalf. The privilege is that of the client.

The client will authorise the lawyers to provide an opinion to the funders. It should be an opinion addressed to the client which represents the legal advice given to the client. This is logical, because the funder will want to know what legal advice is being given to the client by the lawyers. The opinion when sent will be the confidential legal advice given to the client, sent to the funder with a view to satisfying the funder that the case is strong enough to justify funding. Whether by means of the principle of common interest privilege, or the principle of limited waiver, there should be no difficulty in claiming privilege for that legal advice in the hands of the funder. If A shows the confidential legal advice which he has received to B, so long as the advice is shown in confidence, there is no difficulty in both A and B claiming privilege. Only the client can waive that privilege. Similarly where other materials prepared for the client and privileged through the client's litigation privilege are sent to the funders, no problem arises.

It is to be emphasised that, in relation to communications between the client's solicitors and the funders, the funders do not have any relevant privilege of their own – it is the privilege of the client.

When updates are provided in the course of the litigation, then it is equally important that the updates are provided to the client and copied to the funder, for the same reason. If what is being referred to is legal advice, then even if the letter from the solicitors merely summarises the legal advice given to the client, there is no problem as the letter is secondary evidence of the legal advice given to the client and privileged in the funders' hands. Information as to progress of a case in court will not be privileged if it simply a summary of what occurred in open court, but if it contains an analysis, it will be treated as legal advice.

Internal communications

The legal advice received and prospects of success in the proposed litigation may be discussed internally within the funders' office. The funder may want to be confident that a claim for privilege could be made for these communications. However, if there is an internal discussion by email or similar within the funder's business, it is not by any means clear that there is a basis for privilege. The same issue applies where a company discusses internally what commercial steps to take in the light of legal advice received: if the communications go beyond repeating the legal advice, there may be problems claiming privilege.

Such internal communications within the funder's business should not, however, normally cause problems. Firstly, the funder's documents will not be within the client's control and thus it is only if the funder becomes a party to litigation (or perhaps in the unlikely event that a witness summons is served on the funder) that disclosure is likely to be an issue. Secondly, it is not at all obvious that such documents will be relevant to the litigation, as they will merely involve discussion of legal advice or legal merits in circumstances where the parties to the emails have no personal knowledge of the relevant events; documents are relevant and disclosable only where they deal with the issues in the case. Nevertheless, there may be circumstances where some such documents could be relevant (such as if they refer to what a witness has said when proofed). The best protection for such communications can be obtained by taking advantage of the legal structure within the funders' business. So long as there are qualified solicitors or barristers performing a legal function within the funder's office, there is no reason why they should not be asked to advise the funders in order to inform the decision whether funding should be given. The position is the same as an in-house lawyer asked to advise the company which employs him on legal issues. Certainly issues of this nature will be part commercial and part legal, but if the purpose of asking for advice from the in-house legal function is to ask them to "put on legal spectacles" then the funders can claim their own legal advice privilege for such internal communications.

Legal advice privilege

Legal advice privilege (as opposed to litigation privilege) can only be claimed for communications between the "client" and the legal adviser, according to Three Rivers District Council v Bank of England [2003]. So there should be a request from the executive function (for this purpose the "client" but still part of the funders office) to the legal function (the in-house legal arm of the funder's office) to give legal advice as to the merits of funding a particular piece of litigation. The legal function can be separated for this purpose from the executive function and structured so that opinions can be discussed within that legal function in the same way that an external law firm can discuss views within the firm without any problems in claiming privilege for those internal documents.

In this way internal emails within the legal function of the funder's office will be privileged, and the legal advice given to the executive function as to the funding advice is also privileged. What should be avoided so far as possible is emails within the executive function discussing the merits and demerits in a way that might be problematic if ever disclosed. The important matter to have in mind is that the funders themselves can only claim privilege for their own internal (or external) legal advice; otherwise the only relevant privilege is that of the client.

Litigation funding is creating a variety of new issues in litigation and privilege is an obvious issue. However, with some careful structuring as suggested above it should be possible to avoid problems. The commercial court grappled with analogous problems in the Accident Group litigation, when insurers sued large numbers of solicitors who vetted personal injury claims for after-the-event insurance and privilege issues arose between insurer and the solicitors being sued in relation to the ultimate clients, who were not involved in the litigation but were entitled to the privilege. It is only a matter of time before there is case law in relation to legal professional privilege in relation to funders.

Originally published in Funding In Focus, May 2015

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.

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