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Dispute Resolution

Internal Investigations and Litigation Privilege
Tuesday 20th March 2018

Organisations often have policies and procedures in place for conducting investigations, whether on matters of health and safety, employment, or other allegations of wrongdoing.  Those investigations will generate documents and there have been several recent cases on the question of whether those documents are disclosable in subsequent litigation.  A recent High Court Judgment gives further guidance on this issue.

In litigation the parties must conduct a search for documents as ordered by the Court and then disclose documents (including electronic documents) to their opponent.  This is an area of proceedings which is subject to reform, with consultation under way on proposed reforms as discussed in our previous blog here.

When considering which documents to disclose to its opponent, a party can object to the inspection of otherwise disclosable documents on the basis that they fall within one of two types of privilege:

  • Legal professional privilege, which covers confidential communications between a lawyer and their client for the purpose of giving or seeking legal advice.
  • Litigation privilege, which covers confidential communications between a client and their lawyer (or a third party) where adversarial litigation has started or is in reasonable contemplation, and the communication is for the sole or dominant purpose of litigation.

During internal investigations documents are always generated at the early fact-finding and interview stage, where litigation has not even been threatened.  If litigation is later commenced, the question is whether those documents are protected by one of the forms of privilege above.  The latest case to have considered this issue is Bilta (UK) (in liquidation) & others v Royal Bank of Scotland & another [2017].

HMRC had sent a letter to RBS making allegations about certain transactions which took place during 2009.  Later correspondence was sent by HMRC stating that the bank’s claim for VAT input tax might be at risk, and they invited the bank to set out its views.  The amount in dispute was some £86 million plus interest.  RBS instructed a firm of solicitors to lead the internal investigation.  That investigation generated interview transcripts and other documents.

The transactions involved the former directors of Bilta and the liquidators of that company later commenced Court proceedings against the bank, and they sought the disclosure of documents generated by the internal investigation, including the interview transcripts.  The Court considered whether those documents were protected from disclosure by litigation privilege.

Adversarial litigation was in reasonable contemplation at the time of the internal investigation, because of the letter received from RBS.  The issue here was over the dominant purpose of the documents – whether they had been generated for the purpose of conducting the contemplated litigation or for some other purpose such as trying to persuade HMRC not to issue a tax assessment.  Sir Geoffrey Vos took the view that the latter was at most a secondary purpose and held that the dominant purpose was litigation.

The Judgment refers to various facts including the letter from HMRC asserting that there might be grounds to deny input tax (which was consistent with a dispute arising), that RBS instructed an external tax litigation team to lead the internal investigation, that the solicitors’ letter of engagement described their work as “to provide legal advice in respect of a dispute with HMRC regarding the recoverability of income tax…” and that the letter of RBS to HMRC following the investigation, was comparable to a letter of response to a letter of claim.  On this basis the Judge determined that these documents were created for the sole or dominant purpose of litigation against HMRC (in the First Tier Tribunal (Tax Chamber)), and that RBS was entitled to refuse to disclose them to the liquidators of Bilta on the ground of litigation privilege.

Other recent decisions have gone the other way, and have found that (in the circumstances of those cases) documents generated by an internal investigation are not privileged.  So each case will be determined on its particular facts and all parties to litigation must properly consider their disclosure obligations in light of the statements of case and the disclosure direction from the Court.  However there are certain practical steps that a business can take to seek to improve the prospect of successfully arguing that internal investigation documents fall within litigation privilege.  They include the following:-

  • Properly understanding what documents are being created by the internal investigation and why they are being created.  In this case the Judge considered the contemporaneous evidence of the bank’s senior employees which set out their reasons for conducting their internal investigations;
  • Instructing specialist legal advisors at an early stage;
  • Considering to whom documents are disseminated, and why, and including legal advisors in correspondence; and
  • Marking correspondence and documents with confidentiality terms including that they are privileged and have been created and disseminated in contemplation of litigation.

These steps will not be determinative of the issue and so there will always be a risk that the documents generated by an internal investigation will be disclosable in subsequent litigation, and the recent cases should act as a reminder to businesses (and to their in-house legal advisors) of the risks involved when carrying out such investigations.

If you would like to find out more on the topic please contact Glym Lancefield on 0151 600 3060 or via email.


Threat to disclose confidential information
Tuesday 27th February 2018

There can often be a dramatic fallout when a relationship comes to an end, and, in light of the decision in UK Mission Enterprise Limited v Peter Lendvai [Unreported], it would appear that the termination of an employment relationship is no different.

In this instance, the aggrieved departing individual was the subject of an interim injunction which prohibited the publication of confidential information regarding the company’s clients. The interim injunction was accompanied by a penal notice which meant that if the terms of the injunction were breached it would put the individual at risk of being found in contempt and facing a possible prison sentence.

The company provided support to members of the Dubai government and its royal family whilst they were in the UK. The individual was employed by the company and had signed a standard employment contract which prohibited him from using or disclosing confidential information either during, or after, his employment ended. Due to the nature of the job in question, the employee had access to confidential information regarding the company’s clients.

The individual was dismissed and a dispute arose which culminated with the individual writing to the company’s managing director threatening to disclose the confidential information he had obtained during his employment, most notably, publishing photos and recordings regarding the company’s esteemed clients on the internet.

The company proceeded with legal action but, by the date of the hearing, the individual had changed his position and confirmed that he no longer had an intention to carry out his threat and was concerned that if the injunction was granted then he could be held responsible for the actions of other aggrieved employees who did proceed to disclose the company’s confidential information.

Notwithstanding the individual’s change in position at the date of the hearing, the court decided that there was a real risk that the company’s confidential information would be disclosed if the individual was not restrained. The balance of convenience favoured protecting the company against the risk of disclosure and an interim injunction was granted.

In the event that the terms of the injunction were breached by a third party, it would be for the individual to prove that he was not responsible for the publication in order to avoid potential committal proceedings.

It would therefore be advisable for any employer to (a) review the provisions regarding confidential information in your employment contracts; (b) consider how securely your confidential information is kept and monitor those who have access to it; and (c) act swiftly, decisively and seek urgent legal advice should an aggrieved employee make threats against your company.


No special rules for a Litigant in Person, the Supreme Court Rules
Wednesday 21st February 2018

Today the Supreme Court rejected a plea for relief from a Litigant in Person (LiP) who had failed to strictly adhere to the Civil Procedure Rules (CPR).

By way of background, the case involved Mr Barton who sought to bring a claim for professional negligence against Wright Halsall, his previous solicitors, which was issued on 25 February 2013. The Claim Form would have been served by the Court upon the Defendant, however, pursuant to the exception in CPR 6.4(b) Mr Barton elected to serve it himself.

On 26 March 2013 the Defendant’s solicitors informed Mr Barton that they were instructed and that they “await service of the Claim Form and Particulars of Claim”. On 24 June 2013, which was the last day of the 4 month time period before the expiry of the Claim Form, Mr Barton emailed the same to the solicitors. He received an automatic reply and a number to contact if the case was urgent, which he did not use. Later that day, the solicitors replied to Mr Barton stating that they had never confirmed that they would accept service by email and as such the claim form had expired unserved and was statute-barred.

The Court rules provide that service by email is only permitted where the opponent has indicated that he is willing to accept service by those means.

Mr Barton argued at Court that his service complied with the rules on the basis that the solicitor’s email of 24 June amounted to an indication that they would accept service by email. In the alternative he asked that service be validated pursuant to CPR 6.15(2). In the further alternative he asked for the validity of the claim form to be extended (CPR 7.6). Mr Barton failed on all three grounds and he was given leave to appeal in respect of the second ground only, leaving the question to be answered whether the service by email should be validated as “good service” after the event.

In the Supreme Court Lord Briggs in his judgment stated that “there cannot fairly be one attitude to compliance with rules for represented parties and another for litigants in person”. He did however note that “the answer is to make very different new rules (as is now planned) rather than to treat litigants in person as immune from their consequences”.

Whilst Mr Barton’s appeal was narrowly rejected by a majority of 3-2 in the Supreme Court, it has paved the way for reforms to the Civil Procedure Rules in the near future. In the meantime, the case highlights the importance of ensuring that consent is obtained prior to serving documents by email and, if you are in any doubt as to compliance with the Court rules, the importance of seeking legal advice.

Interested parties will also note our recent blog regarding service by email in arbitration proceedings:


To repair or replace…?
Tuesday 20th February 2018

Disputes regarding the scope and application of repairing obligations in leases frequently arise and, given the financial implications for the parties involved, are significant.

The recent decision in De Havailland Studios Ltd v Peries v Voysey [2017] UKUT 322 (LC) Upper Tribunal (Lands Chamber) provides a useful reference on the question of choice of whether to repair or replace and whose choice it is.

The case concerned defective windows in a converted residential block of forty one flats.  One of the flats was let to two lessees on a long lease under which the landlord was obliged to repair the windows with the ability to recover the cost from the two lessees through a service charge. 

The landlord contended that the windows should be repaired whilst the tenants contended they should be replaced, on the basis that it would be a false economy to repair them.  The cost of replacement was considerable and would have financial implications for the landlord.

The tenants applied to the First Tier Tribunal for a determination of the method of repair to be invoked and the Tribunal, whilst finding that both methods were reasonable, gave judgment that the better method in that instance was replacement because it would be unreasonable to incur the costs of repair as against replacement.

The landlord appealed the decision on the ground that the First Tier Tribunal was wrong, where having found that both methods were reasonable, it then decided which method should be adopted based its view that the costs of repair were unreasonable. 

The landlord was successful on the appeal, with the Upper Tribunal stating that the key consideration was where the two courses of action were reasonable the decision on which to use lies with the landlord.  In making its decision, the Upper Tribunal referred to the decision in Waaler v Hounslow LBC [2017] EWCA Civ 45 which determined that when deciding whether cost were reasonable, it was necessary to consider the outcome to the tenants as opposed to merely whether or not the costs themselves were reasonable in amount.  Underlying the decision was the principle that where a contract confers discretion on a party to incur charges which the other party is liable to pay, the party exercising the discretion must act rationally. 

With particular benefit to residential landlords the moral of the story is that the choice of which method to use in terms of repair or replacement within the context of their repairing obligations should not be assessed on cost alone and, for example, on which method is cheaper, but on which method will yield a reasonable outcome, within the facts and context of each case. 


Government launches new Office for Product Safety Standards
Tuesday 20th February 2018

On 21 January 2018 the Government announced the creation of a new Office for Product Safety Standards (“OPSS”) which is tasked with “identifying consumer risks and managing response to large-scale product recalls and repairs”.

The announcement comes as part the Government’s response to the Working Group on Product Recalls and Safety. The report, published in July 2017, recommended the “need for a centralised technical and scientific resource capability to support decision making and co-ordination of activity of Local Authorities and the businesses they regulate”

The OPSS is based within the department for Business, Energy and Industrial Strategy (“BEIS”) and covers general consumer product safety including white goods, toys, clothes and cosmetics. Outside its remit are products such as vehicles, medicines, medical devises or workplace equipment which are already covered by other agencies.

The primary function of the OPSS is to seek to ensure that UK consumers receive the highest possible levels of protection from unsafe goods, ensure that UK businesses are protected from unfair competition posed by sub-standard and unsafe products and help give businesses confidence in meeting their responsibilities to supply safe goods. In order to achieve this the OPSS will support the network of Local Authority trading standards teams by providing advice and support to ensure that manufacturers, importers and retailers meet their responsibilities to place safe products on the market. It will also co-ordinate rapid and effective action if and when national safety issues arise.

Currently the OPSS has been granted a budget of £12m per year. Whilst the OPSS has already been launched it is anticipated that its capabilities will develop over time and that not all of its aspects will be within its remit from day one. It is hoped that the implementation of the OPSS will result in a uniform approach to the enforcement of safety standards which thus in turn will reduce the number of faulty goods on the market.

Consumers who have purchased faulty goods have a number of legal remedies available to them pursuant to the existing breach of contract and consumer protection legislation.  The launch of this new Office for Product Safety Standards will hopefully lead to fewer consumers being placed in that position.


A fatal break
Friday 16th February 2018

The recent decision in Sackville UK Property Select II (GP) No 1 (1) Sackville UK Property Select II Nominee (1) Ltd (2) v Robertson Taylor Insurance Brokers Ltd (1) Integro Insurance Brokers Ltd (2) [2018] EWHC 122 (Ch) serves as a reminder of the preparation and attention to detail that must be taken when serving break notices.

The case concerned the assignment of a lease from Robertson to Integro following Integro’s acquisition of Robertson.  The lease was for a term of ten years expiring on 23 March 2023, with a tenant’s option to break the lease on 14 March 2018 by the tenant giving not less than nine months’ prior written notice to the landlord.   The tenant was defined by the lease as “Tenant includes the successors in title of Robertson and any person in whom the Lease may from time to time be vested by whatever means”.

The licence to assign the lease took effect on 29 March 2017 and contained a covenant for Integro to apply for registration of the lease within ten business days of completion of the assignment.  Integro did not comply with the covenant and applied for registration just prior to 7 July 2017, with 7 July 2017 being the date of registration.   

Prior to registration, Integro exercised the break option by serving written notice on the landlord on 2 May 2017. 

The landlord contended that the break notice was invalid because as Integro was not the registered proprietor of the leasehold interest it was not the tenant and it could not, therefore, exercise the break option.  Until the lease was registered to Integro, Integro was the beneficial and not the legal owner of the leasehold interest, the result being that Integro had no standing to enforce the break covenant under the lease.   

The only basis then on which the break notice could be valid was if it could be proved that Integro had served it on behalf of Robertson but the court found that there was no evidence to that effect and determined that the break notice served by Integro was invalid and the lease was not terminated.

Points to take away from this decision are:

i.              identify who the parties are under the lease;

ii.             check the wording of the lease and all documents associated with it such as licences to assign and deeds of variation etc;

iii.            check the wording of the break clause to identify any specifications and conditions attached to it;

iv.            prepare as early as possible ahead of exercising a break option to ensure there is sufficient time to consider these technical aspects.  


Creditors Going for Gold
Thursday 15th February 2018

The legendary Liverpool FC manager Bill Shankly once said “If you are first you are first.  If you are second, you are nothing”, and at the PyeongChang 2018 Olympic and Paralympic Winter Games the competitors strive for a Gold medal.  A recent case demonstrates that creditors enforcing a debt should also seek to be first across the finish line.

One of the enforcement options for a creditor is to seek a charging order, pursuant to the Charging Orders Act 1979.  A charging order secures a judgment debt by imposing a charge over a judgment debtor’s interest in land or in certain other assets.  When the asset is sold the creditor will hope that the sale will release sufficient funds to it in payment of or towards the debt.

The dispute between Midtown Acquisitions LP and Essar Global Fund Ltd concerns the guarantee of a US$450 million loan, and demonstrates various debt recovery issues including enforcement by an English Court of a foreign judgment.  At one point in the proceedings the creditor sought to seize control of a Boeing 737-700 jet and a 280-foot ‘super yacht’.

The latest chapter in the proceedings has involved the High Court determining the priority of two creditors who obtained charging orders over the same asset of the debtor.  The interim charging orders were made around 6 weeks apart.

The Charging Orders Act 1979 gives the Court a discretion as to whether to make an interim charging order final, and in January the Judge in this case held that applying a ‘first past the post’ principle to prioritise the earlier interim order as a rule would be inconsistent with that discretion.  The Court should look at all of the factors.  Here both creditors were large commercial entities and neither had delayed in obtaining their interim order.  The Judge held that it was not inequitable to prefer one over the other and the Court gave priority to the earlier order.

So, whilst bing first across the line will not guarantee priority against other creditors, all things being equal a creditor should still act quickly to give them the best opportunity of gaining priority and enforcing their debt.


Paradise found?
Wednesday 31st January 2018

This week we learned from the High Court the details of exactly how the information that has become known as the ‘Paradise Papers’ found its way in to the public domain. The papers concern information deriving from law firm, Appleby.

According to court papers prepared by Appleby, the following is an account of how the Paradise papers came to be made public:

An investigation by a cyber forensics team established that during the period November 2015 to May 2016 the Appleby Server was subject to unauthorised access by one or more people referred to in the statement of case as the Hacker. Appleby allege that the Hacker provided several million documents taken from the Appleby Server covering the period from the 1950s to 2016 to a German newspaper Süddeutsche Zeitung. It appears that the German newspaper received a total of 13 million documents of which about 6.8 million came from Appleby. The documents were made available by the German newspaper to an American body called the International Consortium of Investigative Journalists which created a database onto which it placed the documents. The database was thereafter made available to a large number of media organisations across the world including the BBC and the Guardian.”

Incidents like this follow are becoming more regular (see, for example, the exploits of the Russian ‘Cuddly Bears’ group or the ‘Panama Papers’ leaks) and give risk to many different aspects of risk for business. In addition to up to date IT cybersecurity systems, robust and specific terms of business for all those that hold or process valuable or confidential data will go a long way towards protecting against these risks.


Service by email: are you being served?
Tuesday 23rd January 2018

Glencore Agriculture B.V. (formerly Glencore Grain B.V.) -v- Conqueror Holdings Limited [2017] EWHC 2893 (Comm)


In this case, the High Court considered whether a notice of arbitration was validly served on a party when it was sent to an individual employee’s email address.

Section 76 of the Arbitration Act 1996 (“the Act”) provides that parties are free to agree the manner of service of the notice of arbitration but, failing that, the notice may be served "by any effective means".

This, of course, is a far wider concept than that prescribed under the CPR in which prior consent to serve documents (including a claim form) by electronic means is required for service to be effective.

Factual Background

A dispute arose between the parties in relation to the delay caused whilst Conqueror’s chartered vessel was at a loading port. Mr Oosterman of Glencore had advised Conqeuror that the vessel would remain at anchorage.

A letter before action was sent to Mr Oosterman’s email address, followed by further correspondence and a notice of arbitration. All communications were sent by email to Mr Oosterman’s email address, there was no response to any of them. The first time that Glencore became aware of the arbitration proceedings was when it received, by post, the arbitration award issued in favour of Conqueror in the sum of $43,176.27.

It transpired that Mr Oosterman was a relatively low-level employee at Glencore who had in fact left its employ before the purported service of the notice of arbitration.

Glencore’s application to set aside was upheld on the basis that it had taken no part in the proceedings simply because it was had been unaware of them. Popplewell J commented whether service by email to an individual’s email address constitutes good service “must depend upon the particular role which the named individual plays or is held out as playing within the organisation".


Care should be taken when serving arbitration notices (or any documents for that matter) by email. Under the Act, there is no requirement for parties to confirm that they are prepared to accept service by email.

There was found to be a distinction between instances of:

  1.  serving documents at a company’s generic email address “” where the sender can reasonably expect the person who opens the email to be authorised internally to deal with its contents. In Bernuth Lines v High Seas, service to a generic company email address was found to be valid service; and
  1. serving documents at an individual employee’s email address with no knowledge of whether the individual in question had authority, whether express, implied or ostensible, to accept service of legal proceedings.

Companies who do operate a generic email address may be well advised to ensure that the employee who operates that account is suitably briefed to ensure that the appropriate response is taken if proceedings or correspondence are sent to that address.

This decision highlights two crucial points about the service of arbitration proceedings by email:

  1. Check that the email address being used is the appropriate address; and
  1. Ensure that the recipient is a properly authorised person to accept service



A new approach to the disclosure of documents?
Wednesday 3rd January 2018

New rules on disclosure are to be piloted this year with the aim of moving towards a more considered approach to the disclosure exercise that is more cost effective for the parties and more tailored to how documents are stored using modern technology.

The disclosure of documents is often one of the most important but also costly stages in commercial litigation.  The usual case management direction for disclosure has been ‘standard’ disclosure, which is described in Part 31.6 of the Civil Procedure Rules (CPR) as requiring a party to disclose:-

(a)   the documents on which he relies; and

(b)   the documents which –

(i)             adversely affect his own case;

(ii)            adversely affect another party’s case; or

(iii)           support another party’s case; and

(c)   the documents which he is required to disclose by a relevant practice direction.

The 2013 reforms to civil litigation provided a ‘menu’ of disclosure options which are set out in CPR 31.5(7).  These included ‘standard’ disclosure but also other options such as disclosure on an ‘issue by issue’ basis or a direction that each party disclose any documents which it is reasonable to suppose may contain information which enables that party to advance its own case or to damage that of any other party, or which leads to an enquiry which has either of those consequences.  However these other options have not been widely used and the usual order remains for ‘standard’ disclosure.

Parties to litigation are often frustrated by how a direction of ‘standard’ disclosure can be used by an opponent to demand that a wide search for documents be undertaken at often disproportionate expense, or to disclose a large volume of documents that are mostly irrelevant to issues in dispute.

Last November a Working Group launched a consultation exercise on further reforms to the disclosure rules, with a plan to then pilot reforms over a two-year period in the Business and Property Courts in the Rolls Building and in centres across the country, including Liverpool and Manchester.

The key proposed changes are as follows:-

·         The parties are to give ‘Basic Disclosure’ with their statements of case.  The proposals anticipate that a search should not be required for such documents, and that Basic Disclosure will mean key documents which a party relies on and which are necessary for their opponent to understand the case.

·         Before the first Case Management Conference the parties are to discuss and jointly prepare a ‘Disclosure Review Document’ to list the main issues in the case, to share information about how documents are stored and how they may be searched and reviewed, and to propose directions for ‘Extended Disclosure’.

·         Five models of Extended Disclosure are proposed, being:-

  1. Model A: no disclosure.
  2. Model B: limited disclosure.
  3. Model C: request-led search-based disclosure.
  4. Model D: narrow search-based disclosure, with or without narrative documents.
  5. Model E: wide searched-based disclosure.  The draft Practice Direction states that this model is “only to be ordered in an exceptional case”.

·         The parties are to be required to give a cost estimate for disclosure before the Case Management Conference, but to complete their cost budget for disclosure after a disclosure order has been made by the Court.

·         Businesses should also note that new rules are proposed regarding the preservation of documents, including an express obligation to suspend relevant document destruction processes for the duration of the claim, and to send a written notification to all relevant employees that they must not delete or destroy documents that may be relevant to the claim and should take reasonable steps to preserve such documents.  That latter obligation extends to agents or third parties who may hold documents on the party’s behalf.

Consultation on the proposed reforms is open until 28 February 2018.  The responses will then be reviewed by the Civil Justice Rule Committee, following which the new disclosure scheme will be piloted.  Litigants will hope that, if implemented, the new rules will bring about real reform in this area of litigation.