Disclosure of privileged documents to third party does not necessarily destroy or waive the privilege
Fyffes Plc (plaintiff/ appellant) v DCC Plc & Others (defendants/ respondents)
Practice and procedure - Discovery - Legal Privilege - Circumstances in which disclosure to third party may result in privilege being waived - Whether fairness to be considered in determining whether privilege waived - Companies Act 1990, Part V- Rules of the Superior Courts 1986, Order 31 Rule 18.
The Supreme Court (Mr Justice Geoghegan, Mr Justice Fennelly and Mr Justice McCracken) judgment delivered January 27, 2005.
Disclosure of documents covered by legal professional privilege to a third party will not destroy the privilege, even where such disclosure is made to obtain an advantage, where there is not sufficient nexus between the matter for which the documents were disclosed and the action in which it is claimed that the privilege was destroyed.
The Supreme Court so held in dismissing an appeal from a decision of the High Court refusing to order discovery of documents over which legal privilege was claimed.
Paul Gallagher, SC and John Hennessy BL for the appellant; Michael Cush SC, Michael Ashe SC and John McCarroll BL for the respondents.
Mr Justice Fennelly stated that the appeal related to discovery in an action at hearing in the High Court. The appellants sought inspection of documents prepared in connection with the action. It was accepted that the documents were such as would normally be entitled to legal professional privilege. It was claimed that the respondents waived that privilege. In the action the appellant claims damages against the respondents by virtue of Part V of the 1990 Act for alleged "insider dealing". It claims that in February 2000 the first and second named respondents sold shares in the appellant at a time when the third named respondent was a director of the appellant and, in that capacity, in possession of information regarding the affairs of the appellant company, which was of a confidential and price-sensitive nature which enable the first, second and fourth named respondents to make a very substantial profit. Section 109 of the 1990 Act imposes civil liability for such unlawful dealing in shares and section 111 makes such dealing a criminal offence.
Mr Justice Fennelly stated that the disputed documents were sent by the respondents to the Irish Stock Exchange in circumstances which, according to the appellants, amounted to a waiver of the legal professional privilege attached to them. Under section 115 of the 1990 Act, the Stock Exchange is obliged to report to the DPP if it "appears" to it "that any person has committed an offence under" that part of the Act. Prior to March 2002 the respondents learned that the Stock Exchange had referred the matter to the DPP and thereafter, in concert with their legal and other professional advisers, decided to endeavour to persuade the Stock Exchange to reverse its opinion and, to the extent that that was possible, to communicate with the DPP in the hope that the original complaint or communication could be withdrawn or, at any rate, to drop any criminal investigation or prosecution. In particular, they made available to the Exchange copies of a number of expert reports, prepared for the defence of the appellant's claim. These were designed to show that any information in the possession of the third named respondent was not price-sensitive. Having refused to make discovery of documents relating to the Stock Exchange, the respondents were ordered to do so by Laffoy J in October 2004. In discovery made pursuant to that order, they claimed legal professional privilege in respect of confidential communications between the defendants, their legal advisers (either directly or through an agent including communications with counsel) and third parties which have come into existence in contemplation and for the purposes of this action. In a supplemental affidavit they specified that this claim also covered certain documents appended to the disclosed documents. In particular this related to "expert reports which were, on legal advice, obtained in 2002 for the purpose of these proceedings". In addition it was pointed out that certain other disclosed documents "referred to the contents of the said privileged reports". Accordingly, the passages in question were redacted from documents as disclosed. The appellant challenged these claims to privilege by way of notice of motion for inspection of all the documents in their full unredacted form. Smyth J. refused that motion.
Counsel for the appellant submitted that the respondents had waived the right to claim privilege over the documents by communicating them to the Stock Exchange. The appellants accepted that privilege had not been waived either expressly or impliedly. Indeed at all times the respondents made explicit demands that the confidentiality (and hence the privilege) of the documents be maintained by the Stock Exchange. Counsel accepted that a party might, according to the authorities, retain his right to privilege over documents which were communicated to a third party for a specific, limited purpose. The principal authorities are British Coal Corporation v Dennis Rye Limited 1 WLR 1113 and Downey v Murray NI 600.
However, he submitted that each of these cases concerned communications made to the police or prosecuting authorities in pursuance of a public duty to assist in the investigation of crime. In the present case, instead of using the available machinery of communicating with the DPP the respondents communicated with the Exchange, which had no further public or statutory role once it had referred the matter to the DPP in the first instance. In the alternative, counsel submitted, in reliance on the Australian case of Goldberg v Ng and others 33 NSWLR 301; 132 ALR 57, that the court should apply the "fairness test". The respondent had communicated the documents to the Exchange in order to obtain a benefit for themselves in connection with proceedings, albeit criminal proceedings, arising from the same facts and it would be unfair to permit them to limit the effect of the disclosure of the documents in those circumstances. He submitted that the principle inherent in that decision was accepted by the Supreme Court in Hannigan v DPP 1 IR 378. That case demonstrated, it was submitted, that where a party deploys a document to his advantage, disclosure will be ordered if it is just and equitable. The principal argument was that the strategy used in the attempt to influence the DPP via the Stock Exchange was sufficient to cause loss of privilege, though it was also submitted that it was possible that the evidence of any Stock Exchange witnesses in the civil action might be influenced.
Mr Justice Fennelly stated that the respondents frankly accepted that they were engaged in an attempt to encourage the Stock Exchange to the view that they had come to a premature decision and to reopen their original examination of the matter so that they might reconsider the appropriateness of their decision to refer it to the DPP. By agreement made between the representatives of the Exchange and experts engaged by the respondents, it was arranged that certain information would be provided to the Exchange on a confidential basis. It was accepted by counsel for both parties that the essence of the arrangement was that the Exchange would communicate their views to the DPP, in the event that they came to a conclusion that the information in the possession of the third named respondent was, as the respondents claimed was demonstrated by their expert reports, not price sensitive, but not otherwise. In the latter event, they would not communicate their views to the DPP and would destroy their notes. It is only fair to point out that the Exchange insisted that they could not be precluded from communicating with the DPP in the performance of their statutory supervisory functions. The appellant submitted that the respondents were using the privileged documents to obtain a benefit for themselves and that they should not, therefore, be permitted to retain the privilege.
For the respondents it was submitted that they were entitled to maintain the privilege, while admittedly engaged in an attempt to influence the Exchange to convey a favourable view to the DPP - they were entitled to use the privileged documents for that specific and limited purpose without sacrificing the privilege. The respondents relied on Paragon Finance plc v Freshfields 1 WLR 1183 for the proposition that legal professional privilege, once it is established, is absolute by reason of important principles of public policy and that the courts are not required to balance the interests of the party claiming privilege in maintaining it against the interests of the opposing party in having access to the documents.
Mr Justice Fennelly stated that it was crucial to the resolution of the dispute to examine the broad proposition of principle advanced by the appellant that disclosure of material to a third party generally destroys any confidentiality and therefore any privilege. Finlay CJ, in Smurfit Paribas Bank v A.A.B. Export Finance 1 IR 469, examined the underlying principles and traced their historic development. On the facts of that case, he was concerned only to determine whether the principles extended to documents passing between solicitor and client which contained no legal advice but referred to or contained only the client's instructions. He identified, at p. 476, the purpose of privilege as being "the requirement of the superior interest of the common good in the proper conduct of litigation which justified the immunity of communications from discovery in so far as they were made for the purpose of litigation as being the desirability in that good of the correct and efficient trial of actions by the courts". He (Finlay C.J.) also showed how the authorities had extended the scope of privilege to documents created for the purpose of seeking or giving professional advice, an issue which did not arise in the present case. Mr Justice Fennelly quoted Finlay CJ who stated at p.477:
"Such privilege should, therefore, in my view, only be granted by the courts in instances which have been identified as securing an objective which in the public interest in the proper conduct of the administration of justice can be said to outweigh the disadvantage arising from the restriction of disclosure of all the facts."
Mr Justice Fennelly said that the learned Chief Justice did not, in his view, by those words, mean to suggest that in cases where reliance is placed on legal professional privilege in respect of documents the courts should balance the two considerations, as it were, on a case-by-case basis. Rather, he was referring to what the policy of the law should be. Whether or not documents are privileged will be determined by the application of these principles to the facts of the case. Once it is found to exist, there is no judicial discretion to displace it. Mr Justice Fennelly adopted the dictum of Lord Bingham in Paragon Finance plc v Freshfields, to the effect that the root of the privilege lies in the obligation of confidence owed by a legal adviser to his client in relation to confidential communications between them, which, for public policy reasons the law accords to such communication a degree of protection and unless that confidential relationship is abused to facilitate crime or fraud, the protection is absolute unless the client waives it expressly or impliedly.
Mr Justice Fennelly said that clearly a party to an action may waive privilege in express terms. A party may also be held to have impliedly waived it, as when a party does not claim privilege, but includes potentially privileged documents in the non-privileged schedule to the affidavit. Equally, a party waives the privilege attaching to documents passing between himself and his solicitor when he elects to sue the latter. That was the subject of the Paragon case. Even there, however, there were limits.
The appellant, nonetheless, argued for the broad proposition that any disclosure to a third party leads to loss of the privilege. No authority had been cited in support of such a far-reaching principle. None of the cases cited laid down any general principle that, in order to protect the privilege, the communication had to be to a public authority in pursuance of a public duty. Mr Justice Fennelly noted the dicta of Clarke J.A. in Goldberg v Ng, (above), that there did not exist "universal rule that the disclosure of documents produced for the sole purpose of seeking legal advice or litigation to a stranger to that litigation constitutes a waiver of the privilege in that document" (p.676) and concluded that that was a correct statement of the law and that it undermined the first basic proposition advanced on behalf of the appellant. In the absence of a general principle that communication to any third party will lose the privilege unless it is made in pursuit of some public duty, no legal basis was advanced for its loss in the circumstances of the present case, when disclosure was made for a particular purpose and subject to express conditions as to confidentiality. The appellant's second argument was based on the proposition that the matter should be governed by the principle identified in Goldberg v Ng. There was, indeed, some support for the existence of a notion of fairness in the judgment of Lord Bingham in Paragon Finance (at p.1192). However, it is clear from the context that Lord Bingham was really speaking of waiver.
Mr Justice Fennelly stated that up to this point in time, apart for the Australian jurisprudence, it seems clear that the circumstances in which privilege is lost are limited to the effects of some voluntary act of the person claiming it. An extreme instance is fraudulent behaviour. More commonly, the voluntary act is considered as amounting to waiver. It is probable that the application of waiver proceeds from some notion of fairness, but it is certainly not the same thing. Of particular materiality in Goldberg was the choice of the solicitor to communicate to the Law Society in defence of the complaint of professional misbehaviour documents which were privileged in the civil action, when he could have made a full statement which would not have enjoyed privilege. Mr Justice Fennelly noted that English precedent had been referred to, in particular Great Atlantic Insurance v Home Insurance Co 2 All ER 485. Mr Justice Fennelly then referred to Hannigan v DPP (above), also relied on by the appellant. There, a garda officer had summarised the effect of a document otherwise privileged, on public interests grounds, in an affidavit. The judgment of Hardiman J, with the agreement of the other members of the Court said, at p.383: "...he status of a document from the point of view of privilege or immunity from disclosure, changes once it has been referred to in pleadings or affidavit". Hardiman J cited Matthews and Malek, (cited above) at para.9.15, for the proposition that: "The general rule is that where privileged material is deployed in court in an interlocutory application, privilege in that and any associated material is waived" Returning to the Australian cases Mr Justice Fennelly stated it was of note that Kirby P, in his dissenting judgment in Goldberg, explained previous Australian authority as being concerned with unfair conduct before the particular tribunal which would ultimately determine the rights of the parties. Kirby P. was of the view that implied or imputed waiver did not apply to "conduct outside the court or quasi-judicial tribunal" deciding the issue between the parties.
Mr Justice Fennelly said that he would conclude that the well-established rule regarding privilege, whether including a notion of fairness or not, goes no further than the proposition that a party who seeks to deploy his privileged documents by partially disclosing them or summarising their effect so as to gain an advantage over his opponent in the action in which they are privileged, runs a serious risk of losing the privilege. Partial disclosure would have to be for the purposeof gaining an advantage in that action. In addition, express stipulations of confidentiality, such as in the present case, will necessarily be a material factor. They will obviously negative any claim of express waiver and most cases of implied waiver.
For the respondent, it was submitted that there is no relevant nexus between the transactions between the respondents, the Stock Exchange and the DPP on the one hand and the civil action on the other. The appellant could not argue that whether or not the DPP instituted criminal proceedings would have any effect whatsoever on the High Court judge hearing the civil action or that the evidence in that action could be affected by events occurring in the context of a possible or actual criminal prosecution. Mr Justice Fennelly stated that the objective of the respondent was, by influencing the Stock Exchange, to seek to persuade the DPP not to proceed with the criminal investigation. It was no part of the court's function to comment on the general desirability of such behaviour. It was designed to obtain an advantage for the respondents, but it was not an advantage which placed or would have placed the appellant at any corresponding or related disadvantage in the civil action. The respondents did not commit any act amounting to an implied or imputed waiver of their privilege. Mr Justice Fennelly stated that he would dismiss the appeal.
Mr Justice McCracken in his judgment stated that there did not appear to be any authorities in this jurisdiction dealing directly with the issue. In British Coal Corporation v. Dennis Rye Ltd & Anor (No.2) 3 All ER 816 the plaintiff sued the defendants, inter alia, for damages for fraudulent or negligent misrepresentation and conspiracy to defraud. The plaintiff furnished to the police certain documents which had been created for the purpose of the civil action. Criminal charges were brought, and these documents were disclosed by the prosecution to the defendants. The defendants were acquitted in the criminal proceedings, and in the civil proceedings, the plaintiff applied for a return of all documents and an injunction restraining the defendants from using the documents or any information obtained in them in the civil action. The defendants alleged that by reason of the plaintiff's actions any privilege attached to the documents had been lost. Neill L.J., (at p.821/822), stated that it was clear that the plaintiff made the documents available for a limited purpose only, and such action could not be construed as a waiver of any rights available to the plaintiff in the subsequent civil action. O'Nell L.J. further stated that the plaintiff acted in accordance with its duty to assist in the conduct of the criminal proceedings and it would be contrary to public policy if the making available of documents in criminal proceedings had the effect of automatically removing privilege which would otherwise be available in subsequent civil litigation.
The situation was considered more recently by the Privy Council on appeal from the Court of Appeal in New Zealand. In B & Ors v. Auckland District Law Society & Anor 4 All ER 269 there was a situation where a complaint was made to the Law Society against the plaintiffs who, in the course of answering the complaint, disclosed certain privileged and confidential documents to counsel appointed by the Law Society. The documents were furnished on the express basis that privilege was not waived. Subsequently, the plaintiff sought the return of the documents but the Law Society refused to acknowledge the privilege or return the documents. Millet L.J. said (at p.285/286) that the question is not whether privilege has been waived, but whether it had been lost, and that it must often be in the interests of justice that a partial or limited waiver of privilege should be made by a party who would not contemplate anything which might cause privilege to be lost.
It should also be mentioned that the British Coal Corporation case has been expressly approved of in Northern Ireland in the case of Downey v Murray NI 600. In that case, the plaintiff in proceedings for damages arising out of a motor accident had made a written statement to her solicitors. The solicitors forwarded a copy of the statement to the police subject to a condition that it should not be communicated to any other person. The police did not in fact prosecute the defendant and it was held that the statement was privileged and that the privilege had not been lost or waived by the disclosure of the statement to the police.
Mr Justice Mc Cracken said he preferred the reasoning in British Coal Corporation to that in Goldberg. It is important to remember at all times that privilege does not exist merely for the protection of a party, but also exists to ensure the proper administration of justice. There may be many situations in which it is desirable, or even mandatory, that privileged documents be disclosed to a third party for a limited purpose, for example to police authorities where a prosecution was in contemplation, or to the relevant law society, the regulating body of the party who made the disclosure. Mandatory disclosure actually arises in the present case, where under section 115 of the 1990 Act, the Stock Exchange must disclose all documents in its possession to the DPP if requested to do so. If such disclosures are to be governed solely or primarily by a concept of fairness, as is suggested in the Goldberg case, each case is going to be looked at subjectively according to its own particular facts without any particular regard to a general rule. In his view this is highly undesirable. While one cannot lay down absolute rules in matters such as this, it is essential that there should be as great a degree of certainty as possible, so that parties can reasonably foresee the result of actions of disclosure taken by them. Were that not so, it is possible that serious injustices could occur because a party might fail to make a disclosure due to the fear that they might lose the benefit of a legal privilege to which they were entitled. In saying this, he was not ruling out the fact that there may be cases in which the question of fairness arises, and the general rule may have to give way where a serious injustice might result. It is very much in the public interest that a quoted company, and the shareholders and directors of a quoted company, should co-operate fully and openly with the Stock Exchange. It is, of course, in the interests of DCC that there should be no prosecution, but equally it is in the public interest that a decision as to whether there should be a prosecution should be taken by the DPP in the full knowledge of all the facts, not only those which were originally communicated to him.
Mr Justice McCracken said he could not see how it could be said that the appellants were placed at any disadvantage through the disclosure of the documents (to the Stock Exchange). There was an important distinction to be drawn between the present case and the Goldberg case, in that in the latter both the civil action and the inquiry by the regulatory authority were instigated by the Ng's, while in the present case the appellants were in no way responsible for the actions of the Stock Exchange. While it may be argued that there is a peripheral advantage to DCC, in that a prosecution might damage them in the civil action, this did not come remotely near the serious consequences which would have to exist were the general rule to be set aside on the basis of unfairness. Mr Justice McCracken said that it was not necessary for the purposes of the present case to determine the limitations which may exist as to the reasons for a limited disclosure. Clearly there are circumstances in which a limited disclosure may not be protected, as for example, if it were made to an interested party, solely for the purpose of embarrassing or prejudicing the other party in civil proceedings. Mr Justice McCracken concluded by saying that it is sufficient to say that the basis rule applies where there is a nexus between the disclosing party and the party to whom the documents are disclosed. Accordingly he dismissed the appeal.
Mr Justice Geoghegan concurred with the judgments of Mr Justice Fennelly and Mr Justice McCracken.
Solicitors: Arthur Cox & Co. (Dublin), for the appellant; William Fry & Co. (Dublin) for the respondents.
P.J. Breen, barrister