JSC BTA Bank v Shalabayev & Anor

A claim to legal professional privilege must be established with sufficient particularity to enable the opposing party to decide whether to challenge it. The required level of detail depends on the order and its procedural context. An unless order may preserve claims made late if the underlying order was substantially complied with.

Legal professional privilege is a substantive and, subject to waiver or statutory override, absolute right. The court should therefore be very cautious before allowing case-management sanctions indirectly to destroy a potentially valid claim. Where an adequate claim is eventually made, relief from sanctions will ordinarily be appropriate absent exceptional circumstances, particularly where the delay causes limited prejudice and disclosure would cause irretrievable loss of privilege.

The Bank obtained a search order under which documents were seized from premises connected with the defendants. The fourteenth and eighteenth defendants claimed legal professional privilege over documents in the seized boxes.

An order required them to identify privileged documents and provide sufficient particulars to enable the Bank to decide whether to challenge the claims. An unless order later provided that failure to comply would debar claims to privilege over documents not properly identified by the deadline.

The defendants’ first schedule was held non-compliant. They subsequently served a materially fuller schedule and applied for relief from the resulting sanction. The issues were whether the later schedule satisfied the original order and, if so, whether relief should be granted under CPR rule 3.9.

1. The application for relief from sanctions was granted. The 221 Schedule satisfied the July Order, although only by a fairly narrow margin. The order required sufficient particularity to enable the Bank to decide whether to challenge the claim; it did not require a definitive final formulation of every claim.

2. A claim to privilege must be properly established by the person asserting it. The necessary specificity depends on context and should reveal enough of the claimant’s analysis, or the purpose for which documents were created, to permit an informed challenge. The threshold imposed by the July Order was deliberately pragmatic and required co-operation between the parties.

3. Legal advice privilege concerns communications between lawyer and client for the purpose of obtaining legal advice in a relevant legal context. Litigation privilege requires litigation to be in progress or contemplation, a sole or dominant purpose of conducting that adversarial litigation, and an objective assessment of the purpose for which the material was created.

4. Under CPR rule 3.9 the court must consider all the circumstances. The list of factors is non-exhaustive. The fundamental and absolute nature of legal professional privilege was of overwhelming importance. A court should be very wary of using case-management powers indirectly to override a potentially valid claim, since that would introduce the balancing exercise which the law of privilege excludes.

5. The defendants’ history of non-compliance weighed against relief, but the failure was principally attributable to their solicitors, there was no positive evidence of deliberate default, the application was prompt, the proceedings were at an early stage, and the delay caused no material effect on the trial date. Refusal of relief could irretrievably destroy valid privilege and could also prejudice other joint privilege holders who were not subject to the unless order.

6. The parties were directed to proceed with objections to the claims in the 221 Schedule, seeking agreement where possible and referring unresolved issues to the court. The judge expressed the preliminary view that the defendants should bear the costs of the application.