Transport for Greater Manchester v Thales Transport & Security Ltd [2013] EWHC 149 (TCC)

[2013] EWHC 149 (TCC)Case No HT-12-370
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 8 th February 2013
Before
MR JUSTICE AKENHEAD
Between
TRANSPORT FOR GREATER MANCHESTER (formerly Greater Manchester Passenger Transport Executive)ClaimantTHALES TRANSPORT & SECURITY LIMITEDDefendant
Steven Walker QC and Marc Lixenberg (instructed by Weightmans LLP) for ClaimantJonathan Acton Davis QC and Simon Crawshaw (instructed by Linklaters LLP) for DefendantHearing by way of written submissions
JUDGMENT

Introduction

[1]A potential outstanding issue remained following the main judgement which I handed down in this matter on 31 December 2012 ([2012] EWHC 3717 (TCC)). That issue relates to privilege claimed in respect of a report produced by the Nichols Group dated December 2011 and two "key deliverables" documents said to evidence Thales’instructions to that firm. The earlier judgement should be taken as read and I will not repeat its contents save on this issue which related to Item 18 of the classes of documents sought; I said:
“54. Item 18 raises some interesting issues on privilege. It seems to be common ground that genuinely privileged documents, such as advice given by solicitors, would not be discloseable pursuant to Clause 27 or 28, at least generally. The documents sought are those "relating to resource planning and project reviews carried out by The Nichols Group from the commencement of their involvement in the Project to the present, including their terms of appointment, activities undertaken and outputs (including reviews and reports)". The Nichols Group was engaged by Thales, it is said by Mr Done (for Thales) in December 2010 and prepared reports on an ad hoc and regular weekly basis, albeit these were "very high level, ex post facto" reviews "of the issues experienced on the project". The fact that they are high-level or after the event is neither here nor there for reasons given earlier in this judgment. It is clear that they were brought in and for some two years at least were giving advice and reporting on the issues, which must have included delays, compensation events, cost overruns, which are all symptomatic of good or poor performance of contractual obligations. Subject to the issue of privilege, these reports should be provided as well as those more generally relating to resource planning and project review and the other classes of document referred to within this Item. 55. The privilege issue arises because Mr Done says at Paragraph 10 that since December 2011 "the reports produced by Nichols have been prepared for Thales Legal department for the dominant purpose of gathering evidence and information for use in relation to contemplated adjudication and/or litigation disputes arising under the Contract”
. Ms Cairns of the legal department and herself a solicitor repeats that almost verbatim and adds that the reports since December 2011 were to assist her in advising in relation to the claims. This assertion is in one sense slightly odd because there is no detail provided about this and no explanation as to whether the Nichols Group is continuing to provide exactly what it did before December 2011 (in which case, it is at least arguable that the dominant purpose remains as it did before) or whether there has been a new retainer for it only to provide adjudication or litigation related services. Bearing in mind what Mr Justice Beatson said in the case of West London Pipeline and Storage Ltd and another v Total UK Ltd and others[2008] EWHC 1729 (Comm) and in particular his observation at paragraph 86(1) that affidavits "should be as specific as possible without making disclosure of the very matters at the claimant of privilege is designed to protect", I can not make a decision on the available evidence. Because the witness statements from Thales are somewhat opaque on the issue and raise genuine questions, I consider that it is appropriate in my discretion to give Thales an opportunity to submit further witness evidence which is more specific and provides a sufficient substratum of fact to enable the Court to form a view as to dominant purpose and any other issues relating to privilege. Further witness evidence needs to be put in reasonably promptly, albeit that it may have to be after the Christmas and New Year break, by 9 January 2013.”[2]The Court Order following the judgment stated that so far as this document category was concerned, Thales had permission "to file and serve, by 4 pm on 9 January 2013, further witness evidence upon which it relies in support of" any claim for litigation privilege. Accordingly, on that date Thales served a further witness statement from Ms Cairns who confirms historically that, initially, Nichols were employed by Thales without any letter of engagement in respect both of the TOS Contract as well as the underlying Design, Construct and Maintain Contract ("the DCM Contract") with most of the assignments relating to delivery under the TOS Contract. She says that by late 2011 Thales had identified a number of substantial claims in relation to variations where TGM had rejected Thales’ view that they were variations and, given that and its poor relationship with TGM, Thales took the view that it would need to pursue claims through formal dispute resolution process, including adjudication. In late 2011, she says, Thales sought her advice and assistance as to how to prepare and advance these claims formally. In her opinion, by then “litigation (of one category or another) was within reasonable contemplation”. She says that "in late 2011 I instructed Nichols to proceed with a new work stream assignment, to review the position of disputed claims under the TOS [Contract] and to assist Thales to prepare those claims". Those instructions were oral and not documented. She says that Nichols’ practice “was to summarise instructions in an assignment brief setting out key deliverables". She attaches two relevant ones, albeit substantial elements had been redacted. The first one dated 5 December 2011 says that the Objectives are “to prepare key documents in a structure[d] way ahead of the mobilisation of a TMS Commercial dispute team in January 2012” with "Key Outputs" being “(i) Report and recommendations (ii) Others to be agreed at commercial meeting 6th December"; the Management Plan is said to involve:
“Assembly of historical documents, correspondences pre-launch of claims team i. Creating a timeline framework and commencing its population with: a) Correspondence b) Jira logs c) Key events ii. Collating programme evidence and commencing correlation with 1 above iii. Pursuing the 6-step process iv. Support on commercial-technical correspondence for IT, CC and AJ v.

(s) for commercial team (including externals)”

The second one dated 30 March 2012 contains the following:
“Background: Thales has selected its advisers and key team members for its commercial and claims activities going forward and wishes to retain Nichols Group staff to support those activities. Objectives: To prepare documentation as part of the "Business as Usual" and "Claims" teams. As stated below, the tasks that each member of the Claims Team perform will be subject to regular review, depending on the merits and priority of each claim. Specific responsibilities will flow from that process and will be clarified on a weekly basis. Management Plan a) Correspondence b) Jira logs c) Key events externals)”
Management Plan • All consultants will report to Robert Dalton ◦ Direction on Business as Usual matters will be by Ian Tildesley ◦ Direction on Claims matters will be by Robert Dalton"

Management Plan

[3]Ms Cairns goes on to say that following the December 2011 report Thales instructed Nichols to continue to assist it to collate and prepare evidence for the claims disputed. She highlights the two separate work streams, namely "Business as Usual" and "Claims". She says that Nichols provided "weekly flash reports" for which she claims privilege. She says that Linklaters were approached in January 2012, later confirmed as 11 January 2012 by Ms Bradford of Linklaters in a statement dated 28 January 2013. Since Ms Cairns’ statement, the "flash reports" have been openly disclosed, it being said in Thales’ written submissions that it does not pursue any claim to privilege in such reports. This is all to be considered in the context of her first witness statement dated 4 December 2012 in which she referred to Nichols’ "two separate workstreams" going on to say: “5. Reports provided by Nichols from December 2011 were for the dominant purpose of gathering evidence and information for use in relation to contemplated adjudication and/or litigation of disputes arising under the TOS [Contract] and to assist me in advising in relation to the claims. The reports were (and continue to be) provided to me for these purposes. 6. Accordingly, I believe that litigation privilege applies to the Nichols reporting documents produced from December 2011 and Thales objects to the production of such reports on this basis."[4]The "flash reports", now disclosed and currently running from week ending 24 February to week ending 30 November 2012, are essentially “Progress reports” which generally involves lumping together under headings "Progress and Achievements" and "Priorities for next week" what are together called "Claims and Commercial" matters.[5]TGM has not put in any responsive evidence as such but has made its position clear through correspondence. On 7 January 2013, its solicitors, Weightmans, expressed their client’s scepticism as to whether the Nichols reports were "produced for the dominant purpose of gathering information and evidence for use in relation to contemplated adjudication and/or litigation" which was partly based on the fact that Nichols’ charges were included as part of the claims being pursued. On 14 January 2013, they wrote following receipt of Ms Cairns’ second statement raising concerns about the differences between the first and second statements referred to above and calling for explanations as to when and how she "realised that the evidence in her first statement was incorrect". They go on to assert that the reports were not prepared for the dominant purpose of contemplated litigation.[6]Linklaters responded on 18 January 2013 relying on Ms Cairns’ evidence as demonstrating that the reports were prepared for the dominant purpose of contemplated litigation. An explanation is suggested as to why she said what she did in her first statement which seems to be to the effect that at least the weekly flash reports had not then “been identified and collated for her to review”. On 21 January 2013, Weightmans replied briefly expressing dissatisfaction with the explanation and confirming that they intended to pursue an order for production of the Nichols’ reports. On 23 January 2013 Linklaters wrote saying that their client no longer pursued "any claim for privilege in the weekly flash reports". Weightmans replied on 24 January 2012 referring to the "radical change" in Thales’ position.[7]The parties have exchanged written submissions. There is no issue now, as I understand it, that the Nichols report of December 2011 is discloseable contractually subject to the issue of litigation privilege. No issue (upon which a decision is required) is taken as to whether documents prepared or advice taken for the dominant purpose of adjudication as opposed to arbitration or litigation attract privilege and I therefore assume for the purposes of this judgment that litigation privilege can attach to such documents. I will in the course of the "Discussion" part of this judgment below address the arguments and so will not summarise them here. The Law[8]In West London Pipeline and Storage Ltd and another v Total UK Ltd [2008] EWHC 1729, Mr Justice Beatson materially said: “50. Legal professional privilege is recognised as a fundamental substantive right which prevails over the public interest in all relevant material being available to courts when deciding cases: see R v Derby Magistrates' Court, ex p. B[1996] AC 487, 507-508; In re L (A Minor) (Police Investigation: Privilege) [1997] AC 16, 32; R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563 at [7]. The burden of establishing that a communication is privileged lies on the party claiming privilege. This is implicit in Lord Edmund Davies's words in Waugh's case, quoted in paragraph [52] below, and is also implicit in the other speeches in Waugh's case: see also Re Highgrade Traders Ltd. [1984] BCLC 151, at 175d; National Westminster Bank plc v Rabobank Nederland [2006] EWHC 2332 (Comm) at [53]; LFEPA v Halcrow Gilbert & Co Ltd[2004] EWHC 2340 (QB) at [48]; Matthews & Malek on Disclosure (2007) 11-46.51. Litigation privilege differs from legal advice privilege, which protects all communications to lawyers. It relates only to communications at the stage when litigation is pending or in contemplation, and only those made for the sole or dominant purpose of obtaining legal advice or conducting that litigation. The modern law on litigation privilege stems from the decision of the House of Lords in Waugh v British Railways Board [1980] AC 521, a decision in which the approach of the High Court of Australia in Grant v. Downs (1976) 135 C.L.R. 674, and in particular the formulation of Barwick CJ (at 677), was adopted.52. In Waugh's case Lord Edmund Davies stated that he would certainly deny a claim for privilege when litigation was merely one of several purposes of equal or similar importance intended to be served by the material sought to be withheld from disclosure. He stated (at 542) "it is surely right to insist that, before the claim is conceded or upheld, such purposes must be shown to have played a paramount part" and (at 543) that "the public interest is, on balance, best served by rigidly conforming within narrow limits the cases where material relevant to litigation may lawfully be withheld". Lord Wilberforce said (at 531) that it was clear that the due administration of justice strongly required the disclosure and production of the Board's report on an accident, and that in order to override this public interest the sole or dominant purpose of the report had to be to prepare for litigation. In Bank Austria Akt. v Price Waterhouse 16 April 1997 Neuberger J said: "A claim for privilege is an unusual claim in the sense that the legal advisers to the party claiming privilege are, subject to one point, the judges in their own client's cause. The court must therefore be particularly careful to consider how the claim for privilege is made out."53. Thus, affidavits claiming privilege whether sworn by the legal advisers to the party claiming privilege as is often the case, or, as in this case, by a Director of the party, should be specific enough to show something of the deponent's analysis of the documents or, in the case of a claim to litigation privilege, the purpose for which they were created. It is desirable that they should refer to such contemporary material as it is possible to do so without making disclosure of the very matters that the claim for privilege is designed to protect. On the need for specificity in such affidavits, see for example, Andrew Smith J in Sumitomo Corp v Credit Lyonnais Rouse Ltd [2001] 151 NLJ 272 at [39], referred to without criticism by the Court of Appeal [2002] 1 WLR 479 at [28], although the court did not (see [81]) consider the criticisms of the affidavit in that case were justified… 74. Where the Court is minded to go behind an affidavit, there are four options open to it. It may conclude, as happened in Neilson v Laugharne and Lask's case, that the evidence in the affidavit does not establish that which it seeks to establish, i.e. that the person claiming privilege has not discharged the burden that lies on him, and order disclosure or inspection. It may order a further affidavit to deal with matters the earlier affidavit does not cover or on which it is unsatisfactory. This is seen in cases on inadequate affidavits disclosing assets in response to freezing orders, but also in the case of an affidavit as to disclosure or inspection: see Birmingham and Midland Motor Omnibus Co. Ltd. v London and North Western Railway Co. [1913] 3 KB 850. See also National Westminster Bank plc v Rabobank Nederland [2006] EWHC 2332 (Comm) at [53] and [63]; Atos Consulting Ltd. v Avis plc (No 2)[2007] EWHC 323 (TCC) at [36-37], although in those cases the evidence was by witness statement rather than by affidavit: see [2006] EWHC 2332 (Comm) at [34] – [44] and [2007] EWHC 323 (TCC) at [7], [12], [18]. They are also cases on the third option open to the Court, to inspect the documents, which it may do in the circumstances set out in the next two paragraphs. The fourth option is that, subject to the restrictions in paragraphs 79-84 of this judgment, the Court may order cross-examination of the deponent” "A claim for privilege is an unusual claim in the sense that the legal advisers to the party claiming privilege are, subject to one point, the judges in their own client's cause. The court must therefore be particularly careful to consider how the claim for privilege is made out."[9]It is clear from this case and the authorities relied upon that the onus of proof that documents are subject to litigation privilege is on the party asserting such privilege. It is not enough that there are two equal reasons why the documents came into being, where one of them is in contemplation of litigation, because neither reason would then be a "dominant" one such as to justify a claim of litigation privilege. The exercise of determining whether that onus has been discharged rests with the judge to be based on all the available information and the judge must be able to have regard to all such evidence as well as appropriate inferences to be drawn from the evidence which he or she is presented with. There are no particular cases which determine precisely how a judge should assess and analyse that evidence as cases will vary in an infinite way. Discussion[10]I do not imply any impropriety or unprofessional conduct on the part of Ms Cairns in observing that some very material omissions and discrepancies arise in her statements as well as from the belated disclosure of the “flash reports”:(a) Her first statement of 4 December 2012, whilst brief, suggested that all the reports, the December 2011 report and what are now referred to as the "flash reports", were for the dominant purpose of contemplated litigation and were provided to her for that purpose. There has been a major "rowing back” from that in two respects: (i) First, Linklaters in their letter of 18 January 2013 ask the reader to infer that she had not had the weekly flash reports identified and collated for her to review before she prepared her first statement or indeed until she returned on 7 January 2013 from her Christmas break. It is surprising that she can say on the one hand in her first witness statement that these documents were provided to her and that they were privileged but that she had not reviewed them for the purpose of unequivocally asserting litigation privilege. (ii) Secondly, the claim for litigation privilege in relation to the "flash reports" has now been dropped, it not being suggested that it was being voluntarily waived. There is no comprehensive or indeed any explanation as to why privilege was claimed in the first place. When one looks at the flash reports, it is clear why litigation privilege can not be claimed for them: they elide equally the "Claims" and "Commercial" imperatives driving the process at least of those reports: while “Claims” might describe claims which imply that adjudication/litigation is contemplated, "Commercial" does not necessarily or at all so imply. There is no discernible weighting between the two imperatives. It could not, unfairly, be said that a claim for privilege should not be asserted unless either it has been considered carefully and the relevant documents for which privilege is to be claimed have actually been considered by the deponent or at the very least an explanation is provided to the Court as to why the deponent has not at least yet had a full opportunity to review such documents.(b) By the time of her second statement at the latest, Ms Cairns had clearly had time to review the flash reports and she still unequivocally asserted litigation privilege in relation at least to parts of them. That assertion has now been abandoned, and properly so for the reasons given above.[11]The Court must assume that Thales has in its evidence been as “specific” as it can be “to show something of the deponent's analysis of the documents or, in the case of a claim to litigation privilege, the purpose for which they were created” and has referred to “such contemporary material as it is possible to do so without making disclosure of the very matters that the claim for privilege is designed to protect” (Paragraph 53 of the West Pipeline case).[12]I have formed the view that Thales has not come near establishing that the dominant purpose of the December 2011 report was contemplated litigation. My reasons are as follows, albeit not necessarily in order of importance:(a) It is not possible to attach much weight to the judgment of Ms Cairns in her assessment, honest though it may well be, as to the dominant purpose. I have regard to the contents of Paragraph 10 above and also to the fact that it does not appear clearly or otherwise that Thales’ highly experienced solicitors have been asked to verify and confirm the basis of the claim for privilege.(b) It is therefore necessary to look at those documents which have been disclosed. The flash reports indicate clearly that for reporting purposes in those reports at least "Claims" and "Commercial" matters were dealt with together. This suggests at least that Nichols did not regard one or other as having a dominant purpose.(c) There is no evidence from Nichols and, extremely surprisingly, there was apparently no written instruction to them about the December 2011 report which it might reasonably be expected there would be if there was to be a departure from its previous retainer to something the dominant purpose of which was contemplated litigation. Thales is a highly sophisticated party with access to its own legal department and to independent solicitors of the highest calibre.(d) The first "deliverables" document dated 5 December 2011 which is said to evidence in some way the new retainer does no such thing. The reference in the "Management Plan" to assembling historical documents and correspondence "pre-launch of claims team" suggests that at best this was to involve some preparatory step before any claims team was constituted. The production of "a timeline framework" with reference to correspondence, "Jira logs” and “key events” is consistent only with a consideration of time issues. "Support on commercial-technical correspondence” is more consistent with non-claims related matters than with claims. It may be that CC is a reference to Ms Cairns whose initials are CMMC; there is no suggestion that the other two “IT” and “AJ” are lawyers and indeed IT may be Mr Tildesley. The production or reference to a "shared commercial tool for commercial team" does not suggest anything particularly to do with contemplated litigation.(e) Unlike the second deliverable which is at least entitled "TMS Claims Support”, the first deliverable is just said to be "Project Management & Forensic Support". If anything, on the basis of Ms Cairns’ evidence, it was the first deliverable which resulted in or evidenced the basis for the production of the December 2011 report. The title alone suggests no differentiation in weight to "Forensic Support" over "Project Management”, assuming for the moment that "Forensic Support" relates to some sort of support for the work associated with contemplated litigation.(f) It would not be reasonable or necessary to assume in the light of the evidence that the December 2011 report falls into any different category than the flash reports, given Ms Cairns’ witness statements, although of course it may be the case that the December 2011 report contains more information which Thales commercially would rather not disclose.[13]There is some argument that the Court should look at the December 2011 report. I decline to do so for essentially for two reasons. The first is that the onus is on Thales to establish that the dominant purpose of the report was in connection with contemplated litigation and it has not discharged that burden. Secondly, Thales has been given a second opportunity to put in further evidence and it has done so; there is no particular need for them to have the Court look at the document in question. One could have a more sympathetic understanding of Thales’ position if it had simply and frankly explained that it was only by the Court looking at the document that it could be seen that its dominant purpose obviously involved contemplated litigation; however that is not really suggested. In any event, in Paragraph 7 of its submissions, it is properly accepted by Thales’ Counsel that inspection by the Court is generally to be adopted where the Court feels unable to reach a decision based on the evidence alone; the Court can reach a decision on the evidence here. Decision[14]It follows from the above that the claim for litigation privilege relating to the December 2011 report has not been made out and accordingly it should be disclosed, no later than 11 February 2013. Any representations on costs and summary assessments should be in writing and submitted to the court no later than 8 February 2013.