Assertion of privilege fails but no waiver of privilege (Kyla Shipping Co Ltd and another v Freight Trading Ltd and ors)

07 Mar 2022

Dispute Resolution analysis: The Commercial Court has rejected an assertion by Cs of litigation privilege in respect of a category of documents in proceedings coming shortly to trial. Cs’ solicitor was ordered to prepare an updated list of documents and a new confirmatory statement. The Court rejected a claim that privilege had been waived.

Kyla Shipping Co Ltd and another v Freight Trading Ltd and others [2022] EWHC 376 (Comm)

What are the practical implications of this case?

This is an interesting judgment covering three particular matters. (1) A summary of the authorities relating to litigation privilege in general, (2) An illustration of the options open to the Court if it fails to be satisfied on the evidence that documents are covered by litigation privilege, and (3) The circumstances in which privilege may be subject to a waiver. The Court noted that it was inevitable in such circumstances that the lawyer acting for the party seeking to assert privilege would act as a judge in his own, or his client’s cause. The position of the lawyer concerned as an officer of the Court is central to the integrity of that process. On the issue of waiver, the Court noted the analysis of Waksman J in PCP Capital Partners LLP v Barclays Bank plc [2020] EWHC 1393 (Comm) in which he sought to explain Marubeni v Alafouzos [1986] WL 408062, but concluded that in light of more modern authority it is unnecessary to try to reconcile older cases which were held to be inconsistent. Given the Judge’s noted expertise in this area, this is likely to be a particularly useful judgment for practitioners to consider.

What was the background?

This judgment concerns an application made in proceedings arising out of 41 freight forward agreements (“FFAs”) entered into in 2007 between C1 and D1 (or in one case between C and either D1 or D2. Cs allege that the FFAs were entered into by D3 through D4 at off market rates in order to enrich D1 or D2 at the expense of C1. The trial of the claim commences on 7 March 2022 for 12 days. D1, D3 and D4 brought an application challenging Cs claim for litigation privilege in respect of certain documents and contend further that there has been a waiver of privilege which entitles them to disclosure of additional materials referred to in a witness statement. When Cs completed their disclosure certificate, they indicated that they withheld because of privilege “documents relating to the investigations into the FFAs”. Cs relied upon a witness statement of Mr Charles Buss of Watson, Farley & Williams in support of its position in relation to litigation privilege. It was not disputed that documents created for the dominant purpose of what was described as the YPA Dispute were covered by litigation privilege. Once the so-called ‘mispricing claim’ had been identified and crystallised it was held (apparently uncontroversially) that this would also be a proper subject for a claim for litigation privilege. What was not accepted and required the determination of the Court was whether litigation privilege could be claimed for the so-called “ballast exercise”. This description came from a previous witness statement of Mr Buss in support of an application for service-out where he described an expert being instructed in November 2018 for the purpose of “providing ballast” in inter-partes correspondence. Ds criticised the limited information provided by Mr Buss in support of the claim for privilege. They said that litigation in relation to the FFAs was not in reasonable prospect in October 2018. The purpose, they say of instructing the expert was to see whether there was any legitimate grievance which might lead to litigation. Cs argued that Mr Buss was unable to say more on the topic without waiving privilege.

What did the court decide?

The Court concluded that the dominant purpose of the instruction of the expert was for litigation in reasonable prospect. The following reasons were given. (1) There was no suggestion in the correspondence that proceedings or a counterclaim in proceedings was envisaged in relation to the mismanagement claim. (2) The parties to any such litigation would not have been the shareholders of C1 and so the dispute was with different parties. (3) The references in Mr Buss’s first witness statement to the purpose of the instruction being for “ballast in the correspondence” is difficult to square with a claim for litigation privilege. (4) All in all, and so far as can be judged from limited correspondence, the instruction of the expert appeared to have been for the purpose of trying to provide backing for the mismanagement claim, a claim in respect of which it had not reached a stage where it was possible to say that litigation was in reasonable prospect. The Court observed that there were four options open to it if it concluded that the evidence did not support a claim for privilege. It could (1) order inspection, (2) order a further witness statement to deal with matters not covered in the previous evidence, (3) inspect the documents, or (4) order cross-examination on the witness statement. In light of Mr Buss’s experience and standing, the Court chose Option (2) and ordered Cs to produce an updated list of documents supported by a confirmatory witness statement from Mr Buss or another suitable person within 7 days. The Court rejected a claim by Ds that privilege had been waived by Mr Buss’s witness statement in support of the application for service-out. Mr Buss had made mention of documents in that witness statement, but it was in the context merely of setting out the various steps taken by Cs which led to the discovery of the alleged fraud. There was not, in any sense, reliance upon those documents.

Case details

  • Court: Commercial Court
  • Judge: Charles Hollander QC (sitting as a Deputy High Court Judge)
  • Date of judgment: 22 February 2022

Article by Phillip Patterson. First published by Lexis PSL


Phillip Patterson

Call: 2008


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