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Legal privileges in litigation finance

August 3, 2022

Legal privileges in litigation finance

The right to attorney-client privilege is a fundamental right for all litigants. In cases where the privilege applies, a party is permitted to withhold potentially sensitive and confidential documents from its opponent and the court.

When a claimant seeks funding for its claim, a funder will always undertake a careful review of the case to decide whether to invest and on what terms. As part of this process, the claimant is asked to provide certain key case documents, such as advice from a lawyer or draft evidence. Lawyers who guard their clients’ information often have concerns about whether disclosing documents in this way will jeopardise their important privileged status. Under English law, privilege can be protected by entering into a non-disclosure agreement with a funder or agreeing that all documents will only be made available to the funder on a restricted basis.

There are two main types of legal professional privileges in England:

The legal advice privilege is a legal doctrine that safeguards both the content and record of private communications between a lawyer and their client, but not those with third parties, so long as those communications are primarily for the purpose of obtaining and receiving legal advice in a situation where it is relevant.

The litigation privilege safeguards private communications and records of those communications between a lawyer and their client and a third party, or between a client and a third party, that were made with the express or implied intent to obtain information or advice in connection with the conduct of an on-going or reasonably anticipated legal action, including avoiding, settling, or opposing that action.

Legal advice privilege is not limited to legal advice, but also includes advice as to what should be prudently and reasonably done in the particular legal context. This applies to advice on matters of presentation, trade or strategy insofar as strategic advice, provided that it relates to a client’s rights, liabilities, obligations and remedies. It does not apply to purely strategic or commercial advice that is not given in a relevant legal context. Nor does it apply to the fruits of legal advice, such as a contract or conveyance. Lawyers’ working papers are only privileged if they would reveal or give an indication of the tenor of the legal advice.

There is sound case law confirming that a party who discloses a privileged document to a /limited number of third parties in circumstances where the confidentiality of the document as a whole is maintained does not lose the privilege of the document and it may be exempt from inspection. The first step a claimant should take to maintain confidentiality and protect against waivers is to enter into a confidentiality agreement with the potential funder. Litigation finance companies routinely enter into confidentiality agreements with claimants and typically have a standard form that they provide to attorneys. These agreements generally prohibit the litigation funder from disclosing confidential information obtained from the claimant or its counsel to third parties, and may also include language about the common legal interest of the company and the litigation funder, which can help protect against claims of waiver.

The second step a claimant should take to maintain confidentiality and protect against waivers is to consider what information it should and should not share with the litigation funder. Documents and information such as the contract at issue, correspondence between litigants or potential litigants, relevant non-privileged emails and attachments, and any available pleadings generally provide the most useful information and pose little risk of waiver (absent restrictions imposed by a protective or confidentiality order or agreement). Certain confidential information whose value depends on the claimant’s efforts to keep the information secret, such as a claimant’s trade secrets that form the basis of a trade secret misappropriation lawsuit, can generally be disclosed once a nondisclosure agreement is in place with the potential funder of the litigation.

Due to all of these factors, attorneys and their clients can rest assured that any personal or privileged material communicated with a professional funder would be kept safe, and that the possibility of funding can be investigated in a completely private setting.


August 3, 2022

Insights