When you’re discussing matters relating to a dispute – for example, with your lawyer – it’s likely that you’ll be sharing some rather confidential information.
Legal privilege (or privilege for short) is what keeps that information confidential.
It’s an important protection under most established legal systems – and it’s considered to be a fundamental principle of justice, which provides the right to refuse disclosure of documentation containing legal advice.
For competition law purposes, knowing whether a document (which could contain competitively sensitive data, or other confidential or even inflammatory content) has the protection of privileged status can be critical – especially for businesses facing regulatory investigations, damages actions in the courts, regulator information request relating to market studies and inquiries or merger scrutiny.
Getting it wrong could lead to very serious consequences for individuals and their employers. Entire cases and reputations can be won or lost on the basis of the disclosure of one or two documents. So it’s vital that you know when such disclosures can be lawfully prevented.
Used effectively, privilege can give you the ability internally to speak freely, to explore all commercially conceivable options for your business, push boundaries, and to discuss it all within a safe space.
It also provides reassurance and protection if something goes wrong and you need to talk about it in order to seek legal advice.
It’s important to understand how you put in place robust safeguards. No business – no matter how big or small – is immune to complaints, disputes, or investigations. In addition, any business planning to grow, acquire, or develop into other markets will create and commission correspondence, documents, reports, studies, financial and economic assessments, etc. – in short, a wealth of materials, all of which can be disclosable (potentially publicly so) unless they can assert the protection of legal privilege.
There are 3 main types of privilege:
Legal advice privilege
This applies to communications between a lawyer and their client
To successfully assert legal advice privilege, 3 factors must be satisfied:
1. Legal advice: The information involves confidential correspondence between a client and their lawyer only.
The question of ‘who is the client’ is not always straightforward. Take legal advice on this for important projects and always ensure that in external lawyer engagement terms, ‘client’ is defined appropriately broadly.
2. Secret: The communication is made for the sole or dominant purpose of giving or receiving legal advice.
Legal advice is advice on a client’s legal rights, liabilities, obligations, options and/or remedies and is not confined to simply telling the client the law.
It can include advice on what can/should prudently be done in the relevant circumstances. Protection will not extend, however, to anything that is not confidential.
3. No 3rd party: It’s not a communication with a third party (i.e. someone who isn’t a client). Protection isn’t given to communications with third parties, e.g. non-legal experts such as consultants, economists, accountants (even when offering legal advice), financial advisors or investors.
Care should be taken when it’s envisaged that legal advice may be circulated to shareholders.
This applies to communications between a party to a dispute, or their lawyer, and someone else.
Communications are protected by litigation privilege when they are:
1. Secret: The litigation privilege not only protects confidential communications between a client and their lawyers but also between a client, their lawyers and third parties (e.g. experts, external consultants, economists, financial advisors, and accountants), where those third parties are engaged in connection with the same litigation/dispute.
2. Dispute related: This protection can only exist where the dominant purpose of the communication is either for obtaining or giving legal advice or to aid in the conduct of the litigation – e.g. in dispute-related information gathering/assessments.
3. Within a set time frame: The litigation or dispute must have already commenced or there must be real likelihood of it occurring (as opposed to a mere possibility).
Courts adopt quite a restrictive stance when the issue of litigation privilege arises. It shouldn’t be assumed that once legal proceedings are underway, all documents that come into existence are privileged.
Ensure that you’re comfortable that all the steps above have been satisfied to avoid disclosing something that could adversely affect your case.
Documents aren’t protected when litigation is not in reasonable contemplation (although legal advice privilege might still apply).
This applies to communications, such as emails, telephone calls or conversations in meetings, that are genuine attempts to negotiate the settlement of a dispute.
So, how does ‘without prejudice’ help businesses?
1. Another important category of privilege, which is relevant to offers of settlement in negotiation.
‘Conditional gifts’ – this protection can be applied to communications involving 2 or more parties who are in a dispute and who are trying to negotiate a settlement.
To qualify for protection, the communication must have been made by a party against its own interest, for example, one of the parties offers to settle a claim for an amount lower than the figure that the party, in fact, believes it is owed.
2. The objective: encourage efficient resolution of disputes
The purpose of the rule is to encourage disputing parties to resolve matters among themselves and to avoid costly and lengthy court proceedings.
‘Without prejudice’ communications can take place as soon as there’s a dispute in question; it’s not necessary for court proceedings to have commenced already.
3. Protection from disclosure lasts to the point where the compromise position is agreed.
If a compromise is agreed in a communication headed ‘without prejudice’, it means that if the terms proposed aren’t accepted, the parties can continue with their dispute without that communication ever being submitted in evidence against the party who offered it.
It the terms are accepted, however then a fresh contract is effectively made and the communications will lose their ‘without prejudice’ status and can be disclosed in evidence.
But remember: The words ‘without prejudice’ in a letter or spoken in a meeting will not automatically afford protection from disclosure later on.
To optimise protection, it’s always advisable to label/declare communications to which you want the protection to be attached to be made ‘without prejudice’. Your intentions are then always clear to your counterparties in any disagreement.
Also, this tactical tool shouldn’t be used as a platform to make unsubstantiated claims or statements that parties don’t want a judge to see.
There’s another variety of ‘without prejudice’, which applies to discussions concerning costs in relation to a dispute. ‘Without prejudice save as to costs’ is a term that, if invoked by one of the parties, enables them both to agree that information that would otherwise be protected by the ‘without prejudice’ rule can be put before the court when determining the question of responsibility for payment of costs (usually only something that would be proposed at the end of a case) and for that purpose only.
There are other exceptions to the rule. E.g. ‘without prejudiced’ communications may be admitted to court if they help to rectify, or interpret a document, or to show an agreement was concluded as a result of fraud. Where in doubt, seek legal advice.
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