“Gentleman, it has been a privilege playing with you tonight”.  These were reportedly the last words of Wallace Hartley the band leader on the RMS Titanic shortly before that ship began its infamous voyage to the bottom of the Atlantic Ocean.  Bizarrely, almost 100 years later to the day, The Royal Courts of Justice in London witnessed yet another titanic sinking where “privilege” was one of the last words uttered before the victims sank beneath icy waters.

In March 2012 the sinking of DMW Developments Limited (DMW) was, of course, completely metaphorical, although we are sure that the outcome of its recent legal proceedings was thoroughly unpleasant nonetheless. DMW’s tale raises serious issues regarding the receipt of legal advice from claims consultants. Like most, DMW didn’t realise that it could be forced to disclose details of its ‘confidential’ exchanges with its retained consultant to its opponent in Court proceedings.

DMW’s story begins in 2004 when it engaged Walter Lilly & Co Limited (Walter Lilly) to construct an exclusive residence.  After 2 years the project was encountering choppy waters and DMW sent up its first distress flare which led to the appointment of a claims consultant, Knowles.

Knowles provided advice regarding the role of the Architect pursuant to the building contract and, presumably, the meaning and effect of certain contractual provisions (including the contractual procedures regarding extension of time for completion and recompense for delay and disruption).

A short while later Walter Lilly commenced proceedings against DMW and this rather unpleasant voyage proceeded full steam ahead to trial.  By this time the parties had already completed the disclosure process (having provided each other with copies of the documents in their possession that were relevant to the case).  At the eleventh hour, however, Walter Lilly discovered that DMW had failed to disclose certain documents exchanged between DMW and its claims consultant.  DMW responded by crying “privilege”.

On this occasion, the “privilege” referred to was ‘legal professional privilege’ (LPP).  LPP entitles a party subject to the disclosure process to withhold certain documents from production to the Court.  LPP protects confidential communications between lawyers and their clients made for the purpose of seeking or giving legal advice.

Walter Lilly wasn’t taking no for an answer and applied to the Court to force the issue.  In a chilling ruling (for DMS anyway), Mr Justice Akenhead agreed with Walter Lilly and ordered DMW to hand over all documentation relating to advice provided by its claims consultant.

Whilst this ruling may appear surprising to some (particularly those who habitually seek legal advice from claims consultants), the Judge’s reasoning was relatively simple. In law, there is a strong presumption that, once proceedings are commenced, all relevant documents must be disclosed to the Court and your opponent (even if those documents are unfavourable to your cause).

LPP is a limited exception to this general rule. The Court’s have previously held that it is not enough that the subject matter of the document is ‘legal advice’. That ‘legal advice’ must be provided by practicing solicitors or barristers.

The Judge relied on the fact that Knowles does not hold itself out as a firm of solicitors or group of barristers.  DMW had also failed to establish that the individuals within Knowles who had provided the advice in question were practising solicitors or barristers.  The Judge held that DMW’s misapprehension as to the status of those individuals was immaterial as it had “no good reason to believe that they were employing solicitors or barristers because they were employing Knowles which does not profess to be offering the services of qualified practising solicitors and barristers”.

There is one final ‘iceberg’ in the Judge’s conclusion. Mr Justice Akenhead acknowledged that certain communications with non-lawyers may be exempt from the disclosure process due to ‘litigation privilege’ (LP). LP protects confidential communications between clients and third parties (including non-lawyers) which come into existence for the purpose of being used in connection with actual or pending litigation.  However, the Judge left open the question as to whether adjudication proceedings qualify as ‘litigation’ for the purposes of LP.  This raises the spectre that any communications between a party and its claims consultant for the purpose of adjudication proceedings may be ‘discloseable’ should the matter proceed to final determination.

Lessons to be learnt from the above case are clear in that any party seeking legal or contractual advice (or even, perhaps, advice regarding adjudication) must ensure that its representative is a practising solicitor or barrister.  Communication on such issues is likely to entail frank discussion of exposure, weaknesses and/or strategic considerations.  Disclosure of such prejudicial material to an opponent is likely to entail a swift trip to Davy Jones’ locker.

If you have any questions in relation to this article, Legal Protection Privilege or any other legal issue arising in relation to a construction or engineering contract, please contact Kevin Connell on 0161 930 5151