July 6, 2009
In previous client updates ("UK House of Lords confirms the limitations of the economic torts of intentionally causing economic loss" and "English Court of Appeal clarifies economic tort of conspiracy"), we discussed two landmark judgments concerning economic torts handed down in 2007 by, respectively, the UK Judicial Committee of the House of Lords and the English Court of Appeal. An "economic tort" or "intentional tort" can be perpetrated by a party (D) if D causes economic loss to another (P) in a situation where D is in neither a contractual nor other legal relationship with P.
The first of those previous client updates considered, in particular, the economic torts of (i) procuring or inducing a breach of contract between P and a third party (T); and (ii) unlawful interference with P’s trade or business; whilst the second of those previous client updates considered the tort of conspiracy, in particular the question of the degree of intention to injure P required for D to be liable for that tort. This client update follows on from the latter and deals further with civil conspiracy in English law.
By way of brief recap, civil conspiracy in English law requires:
(i) an agreement between D and T;
(ii) to do something;
(iii) with the intention to injure P; and
(iv) which, in fact, causes harm to P.
In the case of Meretz, the Court of Appeal determined that the Defendants did not have any intention to injure P: on the contrary, they had genuinely believed that they were entitled to act as they did, not least because they had sought prior legal advice on their proposed actions. The question of whether or not the advice was correct (the Court of Appeal in fact determined that no firm legal advice had been given) was irrelevant.
On the back of that case, and assuming that your motive is not in fact to injure P, we therefore suggested that the moral of the story was to take legal advice and obtain comfort that you are within your legal rights to act as you wish. If the advice proves right, then there can be no unlawful means conspiracy; if the advice proves wrong, you will be, in any event, protected as you will not have the requisite intention.
Waiver of privilege?
What the Court of Appeal did not consider in Meretz was whether the Defendants could say that they had genuinely believed that they were entitled to act as they did because they sought legal advice on their proposed actions without that amounting to a waiver of privilege in the advice given (the Defendants voluntarily disclosed the advice they had received). In other words, was the Claimant permitted to test the genuineness of the Defendants’ belief by having access to the advice that had been given, even if the Defendants wished to withhold that advice?
That question has recently been considered by the High Court of Justice of England and Wales in Digicel (St Lucia) Limited and others v Cable & Wireless Plc and others.
Decision in Digicel
In Digicel, the Defendants, as in Meretz, claimed that, even if they had injured the Claimants by unlawful means (which did not constitute a breach of contract or was otherwise founded in tort, for which the Claimants could claim), they had an honest belief in the lawfulness of their actions such that they could not be liable for conspiracy to injure by unlawful means. In response to that defence, the Claimants alleged that the Defendants had waived legal professional privilege in any legal advice that they had received in that regard, and asked the court to order disclosure of the same.
The court disagreed. After reviewing the various case law, it confirmed that there is no general principle of English law whereby privilege in documents is impliedly waived by putting in issue allegations to which the privileged documents are relevant, even highly relevant.
Absent the specific situation of a claim by a client against its legal advisor, the following principles apply:
- whether a reference to legal advice gives rise to a waiver of privilege is a matter of law to be judged objectively. Making a statement that the reference is not to be taken as a waiver of privilege does not prevent the court holding that, as a matter of law, objectively considered, the statement does constitute a waiver;
- a reference to legal advice having been obtained (still less only an inference that legal advice was obtained) or a decision or action being stated as having been based on legal advice is not sufficient for a waiver of privilege. There has to be a reference which, fairly read, amounts to a reference to or reliance on the contents of the legal advice;
- whether a reference is fairly construed as a reference to or reliance on the contents of the legal advice or to something less than that is a question of fact: there is an ill-defined line between the contents of legal advice and the effect of legal advice;
- a reference to what a person believes, even in a legal context, does not of itself mean that legal advice was obtained, much less what the content of such advice was;
- fairness or otherwise is irrelevant ("not the touchstone") for determining whether there has been a waiver of privilege; and
- merely raising the issue as to the Defendants’ honest belief as to the lawfulness of their actions, even if that belief and/or those actions were allegedly based on or influenced by legal advice, does not amount to an implied waiver of privilege.
The decision in Digicel is a welcome one, confirming as it does that privilege protection is a paramount right and should not be lightly interfered with or overridden. And that is so, even if it might be considered fair to do so, which the court clearly thought was the case here ("To order disclosure is tempting, but wrong").
What remains to be seen, particularly in the light of the judge’s clear preference to have ordered disclosure had he considered there was a legal principle permitting him to do so, is whether the Defendants’ failure voluntarily to produce the legal advice to support and evidence their assertions will prejudice them in proving that they did in fact have an honest belief in the lawfulness of their actions. The Defendants accepted at the invitation of the judge that, in the absence of disclosure of the legal advice, they could not contend that the court should infer that the legal advice supported their alleged beliefs. The Defendants will, therefore, have to rely on the other evidence available.
 House of Lords: OBG Limited and others (Appellants) v Allan and others (Respondents); Douglas and another and others (Appellants) v Hello! Limited and others (Respondents); Mainstream Properties Limited (Appellants) v Young and others and another (Respondents)  UKHL 21; and Court of Appeal: Meretz Investments N.V. & ASNR v ACP Limited & Ors  EWCA Civ 1303
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, Rachel Couter (+44 20 7071 4217, [email protected]) or Philip Rocher (+44 20 7071 4202, [email protected]) in the firm’s London office.
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