AXA Seguros, SA De CV v Allianz Insurance Plc (t/a Allianz Global Risks) & Ors

Litigation privilege requires both a reasonable prospect of litigation when the document was created and a sole or dominant purpose of obtaining advice or evidence for that litigation. A prospect of litigation may be reasonable even though several conditions must first be fulfilled and litigation is not more likely than not. The court assesses the issue objectively, considering all the evidence; the parties’ contemporaneous perceptions are relevant but not conclusive. Where expert material is commissioned for both litigation-related issues and a separate common-interest purpose, privilege fails unless the litigation purpose predominates or the material can be separated into privileged parts. A claim of privilege also requires confidentiality, but the court need not decide that issue where dominant purpose has not been established.

AXA Seguros sought an indemnity under a facultative reinsurance contract following damage caused by Hurricane Juliette to part of a Mexican toll-road concession. The reinsurers claimed litigation privilege over reports and associated material produced by Halcrow during investigations in 2002 and 2003.

The application concerned whether litigation between the cedant and reinsurers was reasonably in prospect when Halcrow was instructed, whether the material was created for the dominant purpose of anticipated litigation, whether confidentiality had been lost, and whether privilege could be maintained if Halcrow acted as the reinsurers’ Part 35 experts.

1. Litigation privilege. The court held that the two requirements were: litigation must have been reasonably in prospect when the document was created, rather than a mere possibility; and the document must have been made for the sole or dominant purpose of obtaining advice or evidence for actual or anticipated litigation. Litigation need not have been more probable than not.
2. Reasonable prospect. The question was objective. Evidence of the contemporaneous perception of the reinsurer or its lawyers was relevant, but not conclusive. The fact that litigation depended on further events did not necessarily reduce it to a mere possibility. In this case, the unsatisfactory survey, the contractual requirement concerning internationally acceptable construction standards, and the asserted reverse burden of proof meant that, in January 2002, litigation was reasonably in prospect.
3. Dominant purpose. The reinsurers failed to establish the necessary predominant purpose. Halcrow’s work addressed both coverage and the extent and causation of damage relevant to the underlying claim. On the quantum and causation issues the claimant and reinsurers had a community of interest. Neither purpose predominated, and the material could not be divided into separate parts attributable to distinct purposes.
4. The court therefore rejected the claim to litigation privilege. It was unnecessary to decide whether confidentiality had otherwise been lost.
5. Had privilege been established, the court indicated that Halcrow’s role as proposed experts would raise a serious difficulty. Experts must act independently and disclose matters bearing on their opinions, including material inconsistent with or casting doubt on those opinions. The court would have considered directions requiring any necessary waiver to be addressed promptly.
6. The court reserved the question of the form of order and costs for further argument.