KYLA SHIPPING CO LTD v FREIGHT TRADING LTD

Litigation privilege requires proof that litigation was reasonably in prospect and that the document was created for the dominant purpose of conducting that litigation. An investigation undertaken to provide support for a grievance, before the relevant claim had crystallised and before litigation was reasonably in prospect, is not privileged merely because litigation later resulted.

Waiver depends on a fact-sensitive assessment of what was disclosed, the purpose and extent of reliance, and fairness. A general narrative explaining how an investigation led to the discovery of a claim is not, without reliance on particular privileged material, a waiver. Any collateral waiver must extend only so far as fairness requires.

The claim concerned 41 forward freight agreements entered into in 2007 and 2008. The Claimants alleged that the agreements had been concluded at off-market rates and sought to rely on a limitation provision concerning later-discovered facts.

The Defendants challenged the Claimants’ claims to litigation privilege over documents generated during an investigation into the agreements. They also alleged that a witness statement used on an earlier service-out application had waived privilege by describing the investigation and the discovery of the alleged mispricing.

The issues were whether litigation privilege covered the pre-crystallisation investigation and whether the witness statement caused waiver, including collateral waiver of related documents.

1. Litigation privilege. The party asserting privilege bears the burden of proving that litigation was reasonably contemplated or anticipated and that the dominant purpose of the document was conducting that litigation. Reasonable prospect means more than a mere possibility, although litigation need not be more likely than not.
2. The expert was instructed to investigate and support a mismanagement grievance in correspondence. The evidence did not show that proceedings or a counterclaim concerning that grievance were then envisaged. The relevant parties would also have differed from those involved in the existing shareholder dispute. The dominant-purpose issue therefore did not assist the Claimants.
3. The Claimants had not discharged the burden of proving privilege for the challenged material. The privilege assessment was to be redone on the basis that privilege could not be claimed for the mismanagement dispute, but could be claimed once litigation concerning the mispricing claim was in reasonable contemplation.
4. Waiver. Whether reference to privileged material amounts to waiver is a composite, fact-sensitive question. The court must consider what was revealed, the purpose and extent of reliance, the context, and whether fairness requires disclosure of the underlying advice or documents. The content/effect distinction cannot be applied mechanically.
5. A waiver may extend to associated documents concerning the same issue or transaction, but only to the minimum disclosure consistent with fairness. Privilege remains a fundamental right.
6. The witness statement gave a general account of the steps leading to discovery of the alleged mispricing. It did not rely on any particular privileged document or disclose its contents. The waiver application was therefore dismissed.

The Claimants were required to serve a further privilege list supported by a confirmatory witness statement within seven days of hand-down.