Sotheby's v Mark Weiss Ltd & Ors

Litigation privilege requires the party claiming it to prove that litigation was reasonably contemplated and that the dominant purpose of the relevant communication was litigation. Where communications serve two purposes, including an important commercial or contractual decision, the litigation purpose will not suffice unless it is dominant. Dominant purpose is assessed objectively and factually, taking a realistic and commercial view of the evidence. The fact that litigation may be an inevitable consequence of a commercial decision does not make litigation the dominant purpose of documents created to inform that decision.

Sotheby’s sought inspection of correspondence with two art experts, Mr Martin and Mr Twilley, concerning a painting which Sotheby’s had sold and later determined to be counterfeit. Inspection was withheld on the basis of litigation privilege. Sotheby’s relied on anticipated litigation with the defendants, while the defendants argued that the correspondence had also been created to enable Sotheby’s to decide whether the painting was counterfeit and whether to rescind its sale to the buyer.

The central issue was whether the correspondence had been created for the dominant purpose of use in contemplated litigation.

1. The court applied the established principles of litigation privilege. The party claiming privilege bears the burden of proof. Litigation must have been reasonably contemplated or anticipated, and the relevant communications must have been created for the dominant purpose of enabling legal advice to be obtained or evidence to be obtained for use in contemplated litigation.

2. The assessment of dominant purpose is objective and fact-sensitive. The court must scrutinise the evidence carefully and take a realistic, indeed commercial, view of the facts. The decision in SFO v ENRC Ltd [2018] EWCA Civ 2006 did not alter the dominant-purpose test in Waugh v British Railways Board [1980] AC 520.

3. The correspondence with Mr Martin had two purposes of equal importance: to provide evidence for anticipated litigation and to enable Sotheby’s to decide whether the painting was counterfeit and whether to rescind the sale. The same report and related correspondence would serve both purposes. Sotheby’s therefore failed to establish that litigation was the dominant purpose.

4. The correspondence with Mr Twilley likewise had a dual purpose. His peer review was intended both to provide a proper basis for Sotheby’s contractual rescission decision and to make Sotheby’s position robust in anticipated litigation. The wording of the engagement letter demonstrated that the litigation purpose was not dominant.

5. The court distinguished SFO v ENRC Ltd [2018] EWCA Civ 2006 and Re Highgrade Traders [1984] BCLC 151 on their materially different facts. The authorities did not establish that litigation is necessarily the dominant purpose whenever litigation is likely to follow from a commercial decision.

6. The correspondence was not protected by litigation privilege. Inspection was ordered.