When will reference to a document in a witness statement waive privilege in that document

Tread carefully when considering whether and how to reference privileged documents; "deployment" of a document may draw back the cloak of privilege but a "mere reference" may not. Context will be key.

Background

TMO was a company in liquidation and in May 2016.  It is claiming against five defendants for breach of contract or fiduciary or statutory duties, which TMO alleged had caused it to enter administration and then liquidation.  TMO's draft particulars of claim put the losses at £19.5m.

One defendant, upon receiving the draft particulars of claim, queried this figure.  TMO replied:

"…Without any waiver of privilege in the advice obtained…, we confirm that for the purposes of preparing the draft particulars of claim, we have obtained advice from a reputable valuation expert with considerable experience of valuing companies in the renewable energy sector…"

The claim was then issued.  In the course of a subsequent dispute about security for costs, one defendant questioned the valuation, indicating that they did not believe it credible that the liquidators thought the business was worth £19.5m.  That figure was, they said, "unexplained and unsupported". 

TMO's liquidators took issue with this. In a responsive witness statement they made plain the circumstances in which the valuation had been arrived at; the liquidators had obtained a preliminary market valuation report from an accountancy firm.  The paragraph named the author and gave some details of how the valuation was carried out.  It noted that it was not "waiving any privilege in the report", and explained that the accountants had used a "discounted cash flow methodology" to carry out the valuation "in a range of different scenarios".  It stated that "The figure of £19.5m is derived from that valuation".  The liquidator therefore concluded that on the basis of this report, he was confident in the valuation.

The defendants' solicitors then requested a copy of the report on the basis that it had been deployed by the liquidator in his witness statement.  TMO refused stating that the passage in the witness statement was a reference, not a waiver of privilege.

Nearly nine months later, when preparing for a CMC, the defendants renewed their request for the report in the context of a security for costs dispute which was again refused.  The defendants then applied for production of the report.

The key principles

Under paragraph 21 of Civil Procedure Rules Practice Direction 51U, unless a right to withhold production, such as privilege, is claimed, parties may require copies of documents "mentioned" in witness statements.  As the report had been "mentioned" in the witness statement, the dispute turned on whether it remained privileged or whether the comments in the witness statement about the report had waived privileged in it. 

A mere reference to a document or its effect will not waive privilege in it, but deploying it in court, by relying on its content or by using it to persuade the court to take a particular view of the merits of the case at any stage, will do so.  Had the liquidator's witness statement deployed the report?     

The first judgment

The deputy master concluded that TMO had deployed the report and ordered that it should be produced to the defendants.  His reasoning was that:

• Elsewhere in his witness statement, the liquidator had referred to legal advice in a more careful manner.
• When the liquidator said in his witness statement that the valuation "derived from" the report, although he may have had in mind case law which suggests that this is different from referring to the contents of a document, that phrase in this context meant 'contained in' or 'part of the contents of'.
• The words "without waiving any privilege" were not effective – the liquidator could not rely on the £19.5m valuation but preserve privilege in respect of the rest of the report.
• The liquidator had clearly tied his conclusion that he was confident in the valuation to the report.
• Accordingly, the liquidator had waived privilege by deploying part of the report.

Appeal

TMO appealed on the basis that the report had not been deployed.  TMO argued that the reference had been made purely to rebut the argument that the liquidator could not have believed the valuation: not on any wider basis related to any alleged lack of merit of the pleaded losses.  The defendants argued that the liquidator had made more than a 'bare' reference to the report – the witness statement had contained a summary of its contents, and the issue (the valuation) went to the heart of damages and quantum.  Instead of simply saying a report had been obtained, the liquidator went further than he needed to.  The valuation was, the liquidator had said, 'derived' from the report.

The court did not agree with all of TMO's arguments, but did agree that the reference to the report had been narrow and only for a specific purpose.  It was also persuasive that the report would not be relied upon at trial, and the context in which the report was referred to (a security for costs dispute) did not engage the underlying merits of the claim.  The court found that the deputy master had not taken these points into account, but that he should have.

Further, the court did not agree that just by naming the accountancy firm and the author of the report, this necessarily meant the report had been 'deployed'.  The further references to methodology and the range of different scenarios "took it somewhat further", but still did not constitute deployment – it was simply the liquidator setting out the effect of the report to justify his belief in the valuation.  Referring in two sentences to a very complex report cannot properly be seen as a reference to the report's contents.

Accordingly, the order for production was set aside.

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