The High Court has ruled that a set of litigation funding documents were protected by privilege because they inferred the substantive legal advice that had been given in the underlying dispute.
Mr Justice Morgan rejected the submission that “the possibility that one could infer the substance of a party’s legal advice from a document did not suffice to make that document privileged”.
He also said that it was “not part of our law as to disclosure that every conceivable stone must be turned over”.
The arguments arose during unfair prejudice proceedings brought pursuant to section 994 of the Companies Act 2006 and concerning leading hotel company Edwardian Group.
The petitioners own approximately 20% of the shares in the company and want to be bought out. One of the acts of unfair prejudice they allege is the removal of one of the petitioners as a director in July 2009.
However, the petition was presented more than six years later, and the first respondent argued that, because of this, the petitioners should not be granted any relief.
One of the reasons the petitioners gave for the delay was that they spent five years “actively but unsuccessfully” seeking funding to commence the litigation.
The respondent wanted to see proof of this but the petitioners either did not provide the relevant document or heavily redacted them on disclosure, arguing that they revealed “directly or indirectly the nature, content or effect of privileged communications”.
Morgan J said  it was clear that this head of privilege was not confined to communications between lawyers and clients, but extended to other material which “evidences” the substance of the communications.
The test to apply, he concluded, was laid down in the 1884 case of Lyell v Kennedy, restated by the then Lord Justice Bingham in Ventouris v Mountain in 1991.
Bingham LJ said: “The ratio of the decision is, I think, that where the selection of documents which a solicitor has copied or assembled betrays the trend of the advice which he is giving the client the documents are privileged.
“[Counsel] for the plaintiff put this forward as an exception to what he claimed was the general rule, that non-privileged documents do not acquire privilege simply by being copied. If the ratio I have given is correct, the authority is consistent with the fundamental principle underlying the privilege.”
Morgan J said he could also “derive assistance” from Australian cases, which drew a distinction “between a case where there is a definite and reasonable foundation in the contents of the document for the suggested inference as to the substance of the legal advice given and merely something which would allow one to wonder or speculate whether legal advice had been obtained and as to the substance of that advice”.
Applying this to the facts, Morgan J – who had not seen the documents – said the description of the documents provided by the petitioners’ solicitor “would satisfy the test set in Lyell as to giving a clue as to the legal advice given and the test in Ventouris v Mountain as to betraying the trend of the legal advice”.
He added: “I also consider that [the] description of the basis of the claim is on the right side of the line between documents from which a party’s legal advice can be inferred and documents which allow one to wonder or speculate as to whether legal advice had been given and as to its possible substance.”
Thus he rejected the application for an order.
He also rejected an application relating to the disclosure of documents from the petitioners’ former solicitors, Magwells.
Morgan J said: “The information before me as to the Magwells Documents does not allow me to form a clear view on many of the large number of disputed matters of fact.
“Overall, I think it is likely that disclosure of all of the Magwells Documents would result in massive duplication of documents which have already been disclosed by one or other of the parties and that any new documents which might be disclosed would be few in number.”
Morgan J added: “I recognise that this means that in relation to disclosure there may be a stone which has been left unturned. However, it is not part of our law as to disclosure that every conceivable stone must be turned over.”
Morgan J said he was “not persuaded” that the petitioner’s solicitor had “not properly applied the test for privilege” when making the redactions, “although it is possible that he has not done so”.
He went on: “Therefore, I am not ‘reasonably certain’ that the claim to privilege has not been properly made.
“In addition, I consider that if it appeared that [the solicitor] had not correctly carried out the redaction exercise first time around, the court might not (on the ground of proportionality) require him to carry it out a second time.
“The advantage to the respondents of the redaction exercise being reviewed and redone is likely to be slight. Further, the time between now and the trial in January 2018 is limited and it would be very undesirable to lose the trial date to allow time for a second redaction exercise to be carried out.”