USP Strategies Plc & Anor v London General Holdings Ltd & Ors

Legal advice privilege may protect a communication from a client to a third party where the communication evidences or reveals the substance of privileged advice. The protection is not confined to verbatim copies and may extend to summaries, extracts and paraphrases. Disclosure to a third party may produce only a limited waiver where confidentiality and permitted use are restricted.

References merely stating that legal advice was obtained, or identifying its subject matter, were treated as waived. Unwaived privileged material obtained by another party will ordinarily be restrained from use, subject to sufficiently strong equitable or public-interest considerations. Copies prepared for submission to solicitors are not privileged merely because of that purpose, but solicitors’ drafts and drafts returned to the client as part of legal advice may be privileged.

The claimants had succeeded at an earlier liability trial in establishing copyright infringement and breach of confidence concerning a collections account agreement. An inquiry as to damages followed. The defendants applied to maintain redactions, exclude parts of witness statements and third-party documents, resist parts of the pleaded case, and avoid providing a further list of documents.

The central issues were whether communications conveying legal advice to Powerhouse retained privilege, whether privilege had been waived, whether the claimants could use information obtained from Powerhouse, and what disclosure orders were required. A further issue concerned hypothetical drafts prepared for possible submission to solicitors in relation to another transaction.

1. The applications were determined on the basis that legal advice privilege could attach to material communicated by the defendants to Powerhouse where that material evidenced or revealed the substance of legal advice. The principle covered complete advice, summaries, extracts and paraphrases. The distinction between verbatim advice and a summary was unsustainable.

2. The confidentiality agreement between the defendants and Powerhouse covered legal advice. Disclosure to Powerhouse therefore resulted, at most, in a limited waiver. The advice remained confidential against the outside world, and its use was restricted by the agreement.

3. References merely recording that legal advice had been obtained, or that it had been obtained on a particular subject, were either not privileged or had plainly been waived. Level 3 material revealing the substance of advice remained prima facie privileged. The identity of the lawyers was not privileged.

4. Following Goddard v Nationwide Building Society and ISTIL Group Inc v Zahoor, the ordinary course was to restrain use of unwaived privileged material and to exclude it from evidence. The court was not to admit such material merely because it might assist the truth-finding process. Delay, acquiescence or a sufficiently strong public-interest consideration could justify a different result, but none applied here.

5. The claimants’ witnesses could state that they relied on information about legal advice, without disclosing the substance of that advice. Particular passages revealing the substance were to be excised. Other passages, including the relevant evidence of Mr Chan, could remain. The disputed pleading was left standing because the claimants might establish the case by admissible means.

6. A copy of the CAA prepared for submission to solicitors was not privileged merely because of that purpose. Solicitors’ drafts prepared in performing the function of giving legal advice, and drafts returned to the client as part of that advice, were privileged. No sufficient evidence established iniquity capable of defeating privilege.

7. The defendants were ordered to provide a further list of documents in accordance with the earlier disclosure order. The post-transaction letter was irrelevant and required no disclosure.

The judgment concerned applications arising during an inquiry into damages following an earlier liability judgment delivered by HH Judge Weeks QC on 8 November 2002. The present court gave directions and made disclosure and evidence orders.