Starbev GP Ltd v Interbrew Central European Holding BV

Litigation privilege protects communications made when litigation is reasonably in prospect and for the dominant purpose of obtaining legal advice or evidence for that litigation. A mere possibility of a dispute or future proceedings is insufficient.

The party claiming privilege bears the burden of proof. Its assertions are not conclusive. The court must scrutinise the evidence anxiously and assess purpose objectively, taking account of contemporaneous documents. Work originally commissioned for an audit or investigation does not become privileged merely because litigation later becomes possible or because an existing report is requested in writing.

Starbev applied under rule 31.19(5) of the Civil Procedure Rules 1998 to challenge ICEH's withholding of two categories of documents on grounds of litigation privilege.

The first category concerned Barclays' advice about the structure of the consideration for Starbev's sale of a brewing business. The second concerned KPMG's work under a contractual audit provision after 20 July 2012. The underlying proceedings concerned the calculation of deferred consideration and an alleged anti-avoidance purpose.

The central questions were whether litigation was reasonably anticipated when each adviser was instructed and whether anticipated litigation was the dominant purpose of the relevant communications.

1. The application was granted and disclosure ordered. ICEH had not established litigation privilege over the Barclays advice, the KPMG report or the related documents up to the production of each advice or report.

2. The party claiming litigation privilege bears the burden of establishing it. Its witness evidence concerning the purpose of communications is not determinative. The court must subject that evidence to anxious scrutiny, assess purpose objectively and consider all relevant evidence, including contemporaneous material.

3. Litigation must be reasonably in prospect. A mere possibility of a dispute, a general apprehension of proceedings or a distinct possibility that somebody might litigate at some stage is insufficient. The prospect need not exceed 50%, but it must amount to more than a mere possibility.

4. The Barclays documents were not privileged. Barclays had been retained to investigate ICEH's suspicions, check the position and calculate the possible payment. Until that investigation established substance in the suspicions, litigation was not reasonably anticipated. ICEH also failed to establish that litigation was the dominant purpose of the instruction.

5. The KPMG documents were not privileged. KPMG had originally been engaged to conduct a contractual audit and to report its findings in writing. The contemporaneous retainer and the instruction of 20 July described the report as part of the normal process and did not record any change of role. Even if litigation had become reasonably anticipated and was one purpose of KPMG's work, ICEH had not shown that it had displaced the audit purpose and become dominant.

6. Inspection by the court under rule 31.19(6) of the Civil Procedure Rules 1998 is a last resort. ICEH should have been able to establish any valid claim without exposing privileged material to the court. The court therefore declined to inspect the documents.

7. The latest possible commencement of privilege appeared likely to be the letter before action of 28 September 2012, although ICEH could contend for an earlier date. That question was left for agreement or a further ruling.

not stated in the judgment.