Check Your Privilege: Confidential Communications Between Lawyer / Client and Litigation Lender

By Isabel Agudo (Junior Associate) and Adam Paterson (Senior Associate)

Privilege is a legal right that grants individuals and corporate entities the power to resist disclosure of confidential and potentially sensitive material. In basic terms, these rights ensure that a litigant can obtain advice and investigate their case without fear that the documents produced and advice obtained will need to be disclosed to another party or the Court at a later date. 
There are various forms of privilege including:  

“Legal advice privilege” protects written or verbal communications between a lawyer and their client for the purposes of giving or obtaining legal advice.  

“Litigation privilege” protects written or verbal communications between a lawyer or their client on one hand, and a third party on the other, where adversarial legal proceedings are reasonably in prospect such as litigation, arbitration, or investigations. 

“Common interest privilege” allows a party to share material that is already privileged with another third party who has a common interest in the subject matter.

It is possible for a document or communication to be protected by more than one form of privilege.  
Sharing Information with a Third Party Litigation Lender 
It is of course crucial to the conduct of proceedings that information sent to us as a third party litigation lender are not going to be disclosed to the other party at a later date.  
Much of the information shared with us by a client or solicitor is already privileged between them, such as counsel’s advice for example. The privileged status is preserved when the document is disclosed to us. Even though the document has been disclosed outside of the lawyer-client relationship it remains protected because:  

–  Any waiver of confidentiality and privilege is for the limited purpose of seeking a litigation loan to fund proceedings.  

– Arguably, there is a common interest between the client and us as the lender which means that the documents disclosed to us gain a new privileged status when sent to us for the purpose of initial or ongoing due diligence.  
This means that we cannot be compelled to disclose various documents, for example application forms, asset schedules, counsel’s submissions, expert reports, continued correspondence, telephone attendance notes, cost estimates and case updates among others.  
Explaining the Threshold for Litigation Privilege 
1. Unlike legal advice privilege, the scope of litigation privilege is wider in that it can protect communications not only with legal professionals, but also with non-legal advisers. Therefore, in addition to a third party lender, material produced by an accountant, a forensic expert, a surveyor, an estate agent, or an executor for instance, may be covered by litigation privilege. 
2. Litigation must be afoot or ongoing. In a matrimonial case, even where the parties have yet to issue Form A, the divorcees are anticipating financial remedy proceedings in order for the court to determine how to fairly divide their assets. The same principle applies where a matter settles early and does not culminate in a Final Hearing. 
3. Litigation must be the dominant purpose of the communications. The term “dominant” is described as the ruling, prevailing, paramount or most influential purpose. As a third party lender we are only concerned with information for which litigation is the main purpose and therefore this Is overwhelmingly likely to apply to information we are sent as part of an application for lending or information that we request as the case progresses. 
General Data Protection Regulation (GDPR) vs. Privileged Data 
Legal professional privilege is one of the exemptions to GDPR disclosure obligations. Personal data to which a claim to legal privilege could be maintained – such as litigation privilege – prevails over the right to be informed and the right of access as set out in the GDPR’s key provisions.  
Consequently, if the spouse or other family member of a client logged a subject access request for documentation that relates to them on the basis of GDPR, a third party litigation lender would have the right to deny this request by citing litigation privilege. We are legally permitted to withhold certain information from a spouse, family member or any other opposing party. 
The Data Protection Act 2018 (the most recent data protection legislation) upholds this GDPR exemption. 
At Schneider Financial Solutions we value confidentiality and protect communications with our partners and clients with careful information governance policies and procedures. If you have queries about this blog post please contact info@schneiderfs.com and follow our LinkedIn page for more articles: https://www.linkedin.com/company/schneider-financial-solutions