Tuesday law report: Extent of waiver of professional privilege

16 March 1999

Paragon Finance plc (formerly known as National Home Loans Corporation plc) and others v Freshfields (a firm)

Court of Appeal (Lord Bingham of Cornhill CJ, Lord Justice Brooke and Lord Justice Chadwick) 11 March 1999

THE WAIVER of legal professional privilege, implicit in the bringing of proceedings by a former client against a former solicitor alleging negligence in the handling of a commercial transaction between the client and a third party, did not extend to confidential communications between the client and a different solicitor instructed to pursue the claim against the third party.

The Court of Appeal allowed the plaintiffs' appeal against an order requiring them to disclose to the defendant certain confidential communications between themselves and their solicitors.

The plaintiffs, who were mortgage lenders, claimed damages for professional negligence from the defendant firm of solicitors, which had formerly acted for them in connection with insurance claims arising out of defaults on mortgages. The defendant had withdrawn as the plaintiffs' solicitor in 1993, and thereafter Slaughter & May had acted for the plaintiffs.

The defendant strongly contested the allegations of negligence made by the plaintiffs. The defendant sought disclosure of certain confidential communications between the plaintiffs and Slaughter & May and counsel concerning claims made by the plaintiffs against the insurers and the pursuit and settlement of those claims.

The judge granted the defendant's application, holding that if a client sued his former solicitor, claiming damages for alleged negligence in the handling of a commercial transaction between the client and a third party, the client's waiver of legal professional privilege, which was implied by the bringing of the proceedings against the former solicitors, applied not only to confidential communications between the client and those former solicitors relating to that transaction, but also to confidential communications between the client and different solicitors whom he later instructed to pursue and settle his claim against the third party. The plaintiffs appealed.

Stewart Boyd QC and Charles Hollander (Slaughter & May) for the plaintiffs; Simon Browne-Wilkinson and Bankim Thanki (Barlow Lyde & Gilbert) for the defendant.

Lord Bingham CJ, handing down the judgment of the court, said that the protection afforded by legal professional privilege was absolute unless the client, whose privilege it was, expressly or impliedly waived it.

When a client sued a solicitor who had formerly acted for him in negligence, he invited the court to adjudicate on questions directly arising from the confidential relationship which had formerly subsisted between them.

Since court proceedings were public, the client brought the formerly confidential relationship into the public domain, and thereby waived any right to claim the protection of legal professional privilege in relation to any communication between them so far as necessary for the just determination of his claim.

In the present case the plaintiffs had, by bringing the proceedings, impliedly waived any claim to legal professional privilege in relation to confid- ential communications between themselves and the defendant concerning the transactions in question up to the moment when the defendant had ceased to act, but had not invited the court to adjudicate on any question arising from their confidential relationship with Slaughter & May.

They had not, therefore, brought that confidential relationship into the public domain. The court was of the clear opinion that the principles in Lillicrap v Nalder & Son (a firm) [1993] 1 All ER governed the matter, and was fortified in that view by the decisions in Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow (a firm) [1995] 1 All ER 976 and R v Derby Magistrates' Court, ex p B [1995] 4 All ER 526.

Kate O'Hanlon

Barrister