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Waiver of privilege even where there is a lack of advice

Posted on 6th December 2017

Legal privilege is a fundamental base of our English legal system upon which the administration of justice is built. In Ventouris v Mountain, The Italia Express (1991) 1WLR 607, Lord Justice Bingham explained the public interest in a client being:

“…free to unburden themselves without reserve to their legal advisors” and their legal advisors being “free to give honest and candid advice on a sound factual basis, without fear that these communications may be relied on by an opposing party if the dispute comes before the court for decision.”

Further, “it is the protection of confidential communications between client and legal advisor which lies at the heart of legal professional privilege, as is clear from the classical exposition of the law by Jessel MR in Anderson v Bank if British Colombia (1876) 2 Ch D 644.”

So you can see why courts are reluctant to interfere with the same without good reason.

But the rule is not infallible and courts do and have interfered as can be seen by the wealth of cases concerning legal privilege.

We ourselves had a case which went to the appeal dealing with joint/shared privilege and when privilege can be lost and how (Kousouros v O’Halloran and Aresti (2014) EWHC 2294).

Privilege can of course be expressly waived by the parties and that was initially contended by HMRC in the First Tier Tribunal (Tax Chamber) case of D’ Cash & Carry Limited v HMRC [2017] UKFTT 0732 (TC). However, given the appellant’s express denial of the same, HMRC instead argued that there had been implicit waive of privilege.

In determining whether there had been implied waiver, the principles established in Brennan v Sutherland City Council (2009) ICR 479 were relied on, namely:

  • The nature of the disclosure (whether it was the substance of the advice received as compared to the effect of the advice).
  • The extent of the disclosure (whether it was just the existence of the advice or the terms of the advice).
  • The fairness of not allowing disclosure.

The Tribunal also relied on National Centre for Young People with Epilepsy v Mrs S Boatang UTEAT/0440/10 in which the fundamental question to be answered was “if one party relies on the confidential communications with his or her legal advisor, is it fair on the other party not to have access to the legal advice concerned?”.

As with Mrs S Boatang, the appellant’s appeal was based entirely on the premises of the advice provided (or not provided) by legal advisors. Not only had the appellant disclosed the existence of legal advice, but also the substance of the advice given (or not given). In this case there were contradictory grounds put forward for the appeal. Firstly, it was argued that no advice was forthcoming from their (previous) legal advisors and so they were not aware of the statutory time limits. Then in amended grounds supported by a second witness statement, it was in fact put forward that the same legal advisor told them not to appeal.

For those reasons, I consider that the Tribunal came to the correct conclusion in allowing disclosure. However, in line with view that privilege is an “extremely important protection” (Brennan, paragraph 66), the Tribunal set express parameters of what information and documents could be disclosed by the legal advisors and that they would review and determine any redactions by made the legal advisors before the same is disclosed to HMRC.

What is curious about this case, is that HMRC could well have used the contradictory reasoning provided by the appellant to refuse the underlying appeal itself. This may still be its decision, even after the disclosure obtained by way of their application, albeit time and expense would have been saved from an application.

Nonetheless, this case has provided essential guidance on the fact that privilege can be implicitly waived even in respect of the fact that no legal advice was given.

What may also have influenced the Tribunal, and as I have seen with other cases, is the fact that even if the case is lost, the losing party may have recourse to their legal advisors for professional negligence. I can see here, if the appellant lost the appeal against HMRC, which they argue was entirely on the basis that they were either not properly advised about the time limit (when they should have done so) or wrongly advised that there were no merits to appeal (when there were), then they would look to their previous advisors for the consequential losses suffered.

This article first appeared on the Practical Law Dispute Resolution Blog; December 2017.

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