Referring to privileged material in the context of litigation, whether in open correspondence, statements of case, witness statements, or otherwise, is always beset with risk; the ever-present danger of (inadvertently) waiving privilege should constantly be borne in mind. In the recent decision of TMO Renewables Ltd v Reeves and Anor,1 the High Court was asked to consider (on appeal) whether one of the liquidators of the appellant company, TMO Renewables Ltd ("TMO"), had waived litigation privilege in respect of a valuation report (the "Report") by referring to it in a witness statement. The case serves as a useful reminder of the caution that must be exercised when referring to privileged documents.
In May 2016, TMO obtained the Report from a firm of auditors. The Report addressed issues in relation to alleged losses suffered by TMO as a result of certain alleged breaches of contract or fiduciary or statutory duties on the part of the five Defendants, who had caused TMO to enter administration (during which the administrators had sold TMO's business and assets to another company) and then liquidation. Prior to proceedings being issued, and in response to draft Particulars of Claim which had been provided to the Defendants, one of the Defendants queried – in correspondence – the quantum of the losses alleged to have been suffered (said to have been calculated by reference to the value of TMO's business and assets, alleged to be £19.5 million). In response, TMO's solicitors stated that "[w]ithout any waiver of privilege… we confirm that for the purposes of preparing the draft particulars of claim, we have obtained advice from a reputable valuation expert…".
After the claim had been issued, and in a subsequent dispute around security for costs, the Defendant again challenged the credibility of the liquidators' assertion that TMO's business and assets were valued at £19.5 million, stating that the liquidators could not possibly believe the pleaded case in the – now issued and served – Particulars of Claim.
On 5 October 2018, in response to the attack on the credibility of the pleaded case, one of the liquidators served a witness statement, stating that he wished to set out the circumstances in which the quantum of the claim had been calculated; more specifically, that, "[w]ithout waiving any privilege in the report", the firm had used a "discounted cash flow methodology" to carry out a valuation and the £19.5 million figure "is derived from that valuation". The witness statement also provided the name and credentials of the author of the Report.
Following service of the liquidator's witness statement, the Defendants' solicitors requested production of the Report on the basis that it had been "deployed". That request was later repeated while the parties were preparing for a case management conference. Both requests were refused. The Defendants then applied for production of the Report.
At first instance, the Deputy Master found that the liquidator had "deployed" the Report in his witness statement and ordered that the Report be produced, on the following bases:
- the Deputy Master found it "surprising" that the liquidator had not been "more careful in the way he introduced the reference" to the Report;
- the liquidator's witness statement stated that the valuation in question "derived from" the Report. While there is judicial authority that referring to something being "derived from" a privileged document is not to be regarded as referring to the privileged document's "contents", in this particular context the words meant "contained in" or "part of the contents of", rather than "the effect of";
- the liquidator could not maintain privilege using the words "without waiving any privilege in the report", while also relying on the valuation; and
- the liquidator went further than just answering an allegation against him personally by dealing with a substantive aspect of the case (i.e. the quantum).
The first instance judgment was appealed to the High Court.
The key question in these circumstances is whether the maker of the relevant statement is "deploying in court material which would otherwise be privileged".2 The High Court set out a number of useful principles including:
- even if the privileged document referred to is being relied on for some purpose, a "mere reference" to it does not of itself amount to a waiver of privilege;
- the test is not reliance in itself, but "whether the contents of the document are being relied on, rather than its effect"; and
- where a document is not quoted or summarised but just referred to, there is no waiver of privilege.
TMO submitted that the Deputy Master had made a number of errors in his assessment, including that: (a) he did not give enough weight to the fact that none of the contents of the Report was quoted; and (b) he wrongly concluded that the reference to the Report engaged the alleged lack of merit of the pleaded losses, rather than the reference being "directed solely at rebutting the allegation that the liquidators could not believe the quantum". The Defendants argued that the witness statement made more than "mere" or "bare" reference to the Report by relying on its contents in respect of an issue going to quantum, which was at the "heart of the claim and its merits".
The Court did not agree that the Report had been "deployed" just because the witness statement named the firm, the author of the Report and his qualifications (which the Court said the liquidator was obliged to do under CPR 32PD.18 in identifying the source of his belief). While the references to the methodology used for the valuation "took it somewhat further", the witness statement was simply setting out the effect of the Report to justify the liquidator's belief in the valuation.
Further, referring in two sentences in very broad terms to a complex and detailed Report could not properly be said to be a reference to its contents, "as opposed to its effect, namely the effect on his state of mind" regarding his belief in the valuation.
As such, the appeal was allowed and the order for production of the Report was set aside.
This case serves as useful guidance when referring to privileged documents in witness statements or other documents in the context of litigation, and demonstrates the circumstances under which such documents may be referred to without privilege being waived. Parties should be particularly wary of relying too heavily on a statement to the effect that privilege is not waived, as that statement may not stand up when a court considers the wider context of the reference in determining whether a document has been "deployed".