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Privilege and adjudication revisited

Privilege is not a new topic to these pages. For example, I considered it after the judgments in Walter Lily v Mackay (see Claims consultants beware) and R (Prudential plc and another) (see Legal advice privilege limited to lawyers).

However, in Walter Lily, Akenhead J said that there was an important caveat:

“…there remains an outstanding possible issue as to whether or not advice and other communications given by claims consultants in connection with adjudication proceedings are privileged. There is little authority on this latter issue and consideration might have to be given to issues of policy if and when this argument arises on another case.”

The Court of Appeal’s judgment in Rawlinson & Hunter v Akers provides some authority on this issue, and my thanks go to Anneliese Day QC for pointing this case out to me.

Rawlinson & Hunter v Akers

This case concerns Robert and Vincent Tchenguiz’s litigation against the Serious Fraud Office (SFO), following the SFO’s failed investigation into the Tchenguizs and their associated companies and trusts. There’s a great deal at stake as the Tchenguizs’ claim that their losses are in excess of £2.5 billion.

As part of the investigation, the SFO had sight of a number of  Grant Thornton reports. Mr Akers and Mr McDonald are Grant Thornton partners and also the joint liquidators of a group of companies associated with the Tchenguiz’s family trusts.

The Tchenguizs subsequently sought disclosure of the Grant Thornton reports for their claim against the SFO. The joint liquidators resisted this, claiming the reports were protected by litigation privilege. This argument was rejected by Eder J in the High Court. The joint liquidators therefore appealed.

In Rawlinson & Hunter v Akers, the Court of Appeal reiterated that the relevant legal test is that for a communication to be subject to litigation privilege it must have been made with the dominant purpose of litigation and the litigation must be pending, reasonably contemplated or existing when the communication is made.

The problem for the joint liquidators was that they had a duty to establish what, if any, assets or liabilities existed and what, if any, steps were open to the liquidators to collect in the assets or reduce or discharge the liabilities. In giving judgment, Tomlinson LJ agreed with Eder J that the main purpose of the reports was to satisfy this obligation, rather than for litigation. Therefore, the dominant purpose test had not been satisfied and the appeal was dismissed, meaning that the Grant Thornton reports had to be disclosed.

So how does this affect adjudication?

Well, it could be argued that the main purpose of advice obtained during an adjudication is for the purposes of the adjudication, rather than any contemplated or actual litigation, and therefore litigation privilege doesn’t apply. However, this presupposes that adjudication itself could not be considered to be “litigation” for the purposes of litigation privilege.

In his SCL paper, The role of privilege in adjudication, Adrian Bell considers this point and looks at an Australian case where the court concluded that litigation privilege does apply to adjudication (Dura (Australi) Constructions Pty Ltd v Hue Boutique Living Pty Ltd).

In Dura v Hue Boutique, the judge considered that privilege was intended to ensure fairness and that the adjudication process was similar in many ways to court proceedings. Adrian submits (rightly in my view) that the “issues of policy” referred to by Akenhead J in Walter Lily are likely to have been similar. Adrian also considers a number of English cases and concludes that adjudication is an adversarial process and is therefore covered by the scope of litigation privilege despite being different to both litigation and arbitration.

If Adrian is right, and I consider there to be considerable force in his arguments, then it would surely follow that documents produced in non-lawyer led adjudications are privileged and a party could not be compelled to disclose them during the adjudication or in later litigation. However, it doesn’t follow that Rawlinson & Hunter v Akers is irrelevant. What it shows is how strictly the courts will apply the dominant purpose test and, as a result, advice produced prior to and unconnected to an adjudication is unlikely to be covered by litigation privilege.

Claims consultants beware, you have been warned…

One thought on “Privilege and adjudication revisited

  1. An interesting development in this field Jonathan and, as you say, a further illustration about how careful people need to be here.

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