Facts
Failure to comply with unless order
Relief from sanction
Decision
Comment


In a recent decision the High Court again emphasised the high level of protection afforded to legal professional privilege in law, and made clear that a party's right to claim legal professional privilege should be overridden by a court order only in exceptional circumstances.

Facts

Applicants Mr Shalabayev and Mr Ablyazov were - with others - alleged by JSC BTA Bank to have misappropriated investment bonds with a nominal value of $290 million. In February 2011, as part of the wider proceedings, the bank obtained and executed a search order in respect of a storage unit licensed by one of the applicant's brothers. The search produced a number of boxes containing copies of the applicants' solicitor's client files.

Inevitably, the question arose of how to identify those parts of the files which were privileged. Following review by leading counsel (instructed by supervising solicitors), 8,000 documents were identified as being either privileged or containing such material that a claim to privilege could not be excluded. The court ordered that the applicants identify those documents over which they wished to assert legal professional privilege and, for each document, "provide sufficient particularity of the claim to privilege so as to enable the bank to decide whether to challenge such a claim" - this was referred to as the 'July order'.

The applicants' solicitors undertook a review of the documents identified - an exercise that took considerably longer than expected. They were granted two extensions to the original deadline, with the second extension being granted on an 'unless' basis. The unless order stated that if the applicants did not comply with the order by September 20 2011, they would be "debarred from claiming privilege over all those documents contained in the boxes in respect of which there has been no claim to privilege in accordance with the July order".

Failure to comply with unless order

The applicants' solicitors served a schedule on September 20 2011 in purported compliance with the unless order and claimed privilege over 2,069 documents. However, this schedule failed to confirm which applicant was claiming privilege over each document and the description of the documents was found to be "uninformative in the extreme", giving no details of the parties and no indication of the nature of the claim beyond a "bare generic description", such as 'litigation'. Consequently, the bank applied for a declaration that the applicants had failed to comply with the unless order.

The court considered the schedule and found that it did not comply with the unless order. This meant that the applicants would be debarred from advancing their claims of privilege over the listed documents unless they made an application for relief.

The applicants duly issued an application for relief and produced a further schedule on October 25 2011 listing just 221 documents over which privilege was claimed. This second schedule was the result of an additional review by both counsel and the applicants' solicitors.

In considering the application for relief, the court emphasised that the level of particularisation required by the July order was relatively undemanding, and held that although the second schedule contained some "serious defects", it complied with the July order "by a very narrow margin".

Relief from sanction

As the second schedule was found to comply with the July order, the court had to consider whether the applicants should be permitted to assert privilege over the remaining documents, notwithstanding that they were in breach of an unless order. In doing so, the court affirmed the overwhelming importance of applying the Three Rivers principle regarding privilege - namely, that it is "absolute... there is no balancing exercise that has to be carried out".

Accordingly, while the court was obliged to take into account the factors set out in Part 3.9(1) of the Civil Procedure Rules (CPR), this process was framed by the consideration that a party's substantive right to claim legal privilege is afforded a very high level of protection by the law. The court considered the following facts in relation to the factors set out in CPR 3.9(1):

  • An application for relief had been made promptly.
  • As a result of non-compliance, the bank had received a schedule that satisfied the July order after a delay of approximately one month.
  • If relief were not granted, the applicants would be barred from claiming privilege over documents for which the court was now satisfied that a claim might properly be advanced.
  • The claims of privilege were advanced on behalf of four defendants, whereas the unless order had been granted against only two of them. Therefore, two defendants who were not the subject of unless order would lose the right to claim privilege as a result of a procedural default for which they were not personally responsible.
  • The bank could provide no positive evidence of the applicants' intention to ignore or stultify the July order. The applicants' solicitors submitted evidence that the applicants understood the nature of the unless order and intended to comply with it. In the circumstances, the court felt unable to infer an intention to ignore the order.
  • Although the court believed that the applicants' solicitors could have acted with greater urgency, they had at least provided a partial explanation for the delays in complying with the orders.
  • Both applicants had a history of failing to comply with court orders. Furthermore, one applicant had been sentenced to imprisonment for contempt of court and the other had had a receiver appointed to deal with his assets in advance of a trial, having failed to comply with a disclosure order. The latter applicant was also facing a contempt application in the Commercial Court.
  • The matter was in its early stages and had not yet been set down for trial. Consequently, a delay of one month would not affect a trial date.

Decision

Having considered these factors in the context of the Three Rivers principle, the court granted the application for relief from sanction, although it made clear that had the case not involved the right to claim legal professional privilege, the previous conduct of the applicants would probably have been decisive in a refusal of the application.

However, as this application involved a claim for privilege, the proper administration of justice required that a party which advanced an adequate claim to privilege in belated compliance with an unless order should, in the absence of exceptional circumstances, be granted relief from sanction which would otherwise prevent such a claim being made.

Comment

It may seem surprising that the court was willing to grant relief from sanction to applicants with a clear history of disregarding court orders. However, in doing so the court has reaffirmed the importance attached to the right of parties to claim legal professional privilege, and demonstrates the court's high regard for the absolute nature of the right.

That said, the applicants were clearly assisted by proceedings still being in their early stages, the fact that the initial obligation of the July order was not overly demanding, and the fact that not granting the relief sought would have been prejudicial to other defendants who would have been affected by, but had no personal liability for, the applicants' failure to comply with the unless order.

The court also recognised that although a party may indirectly forfeit the right to claim privilege, it would be undesirable for potentially valid claims to privilege - however late they may be introduced - to be indirectly overridden by the exercise of a case management power.

For further information on this topic please contact Laura Martin at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected]).