Judge holding gavel in courtroomThe High Court has decided that a series of reports prepared by the accountants Deloitte LLP (“Deloitte”) for Sports Direct International PLC (“Sports Direct”) (now known as Frasers Group Ltd) in relation to a proposed tax structure were not prepared for the sole or dominant purpose of litigation, and were therefore not protected from disclosure by litigation privilege.


This latest judgment is part of a series, which arose out of an application by the Financial Reporting Council (“FRC”) for an order requiring Sports Direct to provide them with various documents to assist with an investigation of an auditor. The investigation was sparked by reports of one of Sports Direct’s subsidiaries, Sportsdirect.com Retail Limited (“Sports Direct – Retail”), engaging a company to provide delivery services as part of a tax structure adopted following advice from Deloitte.

In accordance with the order, Sports Direct handed over approximately 2000 documents to the FRC, but withheld 40 claiming that legal professional privilege applied. The FRC began a claim to challenge whether privilege did indeed apply to the documents, and while successful in the High Court, parts of the decision were overturned in favour of Sports Direct at the Court of Appeal.

The dispute then returned to the High Court, where Lord Justice Nugee was required to come to a decision over whether three reports prepared by Deloitte could be afforded the protection of litigation privilege.

The Judgment

By way of reminder, litigation privilege applies to a document which is a communication between a lawyer and client, or between either of these parties and a third party, made for the dominant purpose of litigation and relating to litigation which is pending, reasonably contemplated or existing.

In applying this well-known test, Lord Justice Nugee found that the reports prepared by Deloitte were not prepared for the sole dominant purpose of litigation. Instead, the purpose of the first report (and subsequently the other two reports) was to recommend a new tax arrangement to withstand more robustly a challenge from the tax authorities.

This was the case even though Sports Direct – Retail did expect there to be litigation over the tax structure. As the Court put it – “even if it is contemplated that the particular structure will be likely to be attacked by the relevant authorities and that there will be litigation, the advice as to how to implement the new structure…is not primarily advice as to the conduct of the future possible litigation.”

In deciding that litigation was not the sole or dominant purpose for the reports, Lord Justice Nugee concluded that there was no need to go on to consider whether Sports Direct – Retail did reasonably contemplate litigation when the report was written. On 8 October 2020, Lord Justice Nugee refused to grant Sports Direct permission to appeal this judgment.


Whilst this case is perhaps a straightforward application of the undisputed legal principles that apply when determining whether litigation privilege is applicable, it serves as a useful reminder that not all advice given in situations where litigation may arise will receive the benefit of litigation privilege.