Introduction
Facts
Decision
Comment


Introduction

In Flowcrete UK Ltd v Vebro Polymers UK Ltd,(1) the High Court recently clarified the circumstances in which courts may exercise their discretion to prevent the use of inadvertently disclosed privileged material. Applying established principles, the Court decided that there had been only limited and unsatisfactory evidence of inadvertent disclosure, such that the claimants were permitted to rely on allegedly privileged material in the proceedings.

Facts

The decision concerned an interlocutory application made by the defendants. In the underlying proceedings the claimants asserted that various former employees of the first claimant, who had established a competitor business, had misappropriated and misused confidential information. It was also alleged that, for some of the defendants, this constituted a breach of their employment contracts with the first claimant.

Following the exchange of extended disclosure in the proceedings, the defendants sought injunctive relief to:

  • prevent the use by the claimants of certain communications which it claimed were inadvertently disclosed; and
  • require destruction of such communications.

The documents in question comprised two PDF files, which were themselves compilations of other documents totalling 800 pages. The documents were provided by the defendants to the claimants on 14 June 2022. Over the next month, in correspondence the claimants' solicitors raised a number of issues with the defendants' wider disclosure, but it was not until 17 August 2022 that the defendants' solicitors responded to assert that the "compilation documents" in question were subject to legal advice privilege and professional privilege (the specific documents within the "compilations" which were alleged to be privileged were not specified until 26 September 2022). The claimants' solicitors objected to this characterisation on the basis that the documents were not obviously privileged, nor had they appeared to have been provided by mistake.

On 21 September 2022, the claimants' solicitors notified the defendants of their intention to make an application to resolve the alleged deficiencies with the defendants' wider disclosure, making clear that they would refer to the "compilation documents" within that application. The disclosure application was made the next day, and the defendants issued their own counterapplication shortly thereafter.

By the time of the hearing, the defendants had narrowed their application, seeking relief in relation to six individual documents within the "compilations" (the disputed documents). The parties had also agreed to proceed, for the purposes of the defendants' application, on the basis that the disputed documents were subject to litigation privilege. It therefore fell to the High Court to determine whether the documents had been inadvertently disclosed and whether the defendant should be granted the relief sought.

Decision

The High Court rejected the defendants' application, finding that the defendants had failed to establish that the disputed documents had been inadvertently disclosed and, even if they had been, the legal threshold for the Court to intervene had not been reached.

Legal principles
As the claimants had received and read the disputed documents before being told that they were allegedly privileged and had been inadvertently disclosed, paragraph 19 of Practice Direction (PD) 57AD of the Civil Procedure Rules (CPR) was engaged. This rule states that the recipient of a privileged document that has been inadvertently disclosed may only use the document or its contents with the court's permission.

In assessing whether to grant permission, the Court therefore relied on the principles governing inadvertent disclosure as set out in the Court of Appeal's decision in Al Fayed v Commissioner of the Police of the Metropolis.(2) It was noted that this judgment considered the application of CPR 31.20, to be the predecessor of CPR PD 57AD, but that the rule was materially unchanged by the updated disclosure rules.

In summary, the principles in Al Fayed state the following.

A solicitor considering documents made available by a counterparty has no duty of care to that party and is, in general, entitled to assume that any privilege which might otherwise have been claimed for such documents has been waived.

The court has jurisdiction to intervene to prevent the use of documents made available for inspection by mistake where justice requires (eg, in the case of inspection procured by fraud).

In the absence of fraud, the court may still intervene. However, it should consider whether the documents have been made available for inspection as a result of an obvious mistake. A mistake is likely to be held to be obvious and an injunction may be granted where:

  • a solicitor receiving the documents appreciates that a mistake has been made before making use of the documents; or
  • it would have been obvious to a reasonable solicitor that a mistake had been made.

In either case, the court must also be satisfied that there are no other circumstances which would make it unjust or inequitable to grant relief. In this regard, the court may refuse relief where documents disclose wrongdoing. The authorities make clear that this requires an assessment of whether it would be unconscionable for the recipient to rely on the document, and does not simply depend on whether the documents point to dishonest conduct.(3)

Rather than the question of privilege, the first relevant question for the courts in assessing such applications is whether it was an obvious mistake to provide the documents in question for inspection and, if it was, whether relief will still be granted depending on whether it would be just and equitable to do so.

Application
The Court noted that the burden was on the defendants to establish that the disputed documents had been inadvertently disclosed. In this regard, the judge considered the defendants had provided limited and unsatisfactory evidence.

It was noted that the defendants had failed to adduce any evidence from the individual who was said to have created the compilations which included the disputed documents, and that there was a tension in the factual evidence that was given as to the reason the compilations were produced. In particular, the judge was not satisfied by the explanation that the compilations were created to assist in the provision of advice to the defendants, noting that the fact that the documents were headed "[email protected]", which seemed to suggest that they were in fact compiled for the purposes of the disclosure exercise. Further, contrary to the defendants' evidence, it was clear from the balance of the defendants' disclosure – and their disclosure certificate – that there was no express attempt to assert privilege over the disputed documents at the time documents were exchanged by the parties.

The decision went on to explain that, even if the judge had been satisfied that the disputed documents had been inadvertently disclosed, he would still have refused the defendants the injunctive relief sought both because:

  • he did not regard the disclosure as having been an "obvious mistake"; and
  • it would have been unjust or inequitable to grant the relief sought.

In respect of the first point, the judge considered that the receipt of a PDF compilation was not sufficient to put the claimants' solicitors on notice that privileged material might be contained within it. Other contextual considerations included the fact that one of the disputed documents was disclosed separately in native form (ie, having being reviewed twice) and that none of the disputed documents were marked privileged or without prejudice, or "were of a type that was obviously privileged or unintended for disclosure". In these circumstances, particularly where the question of privilege and inadvertent disclosure had not been raised over a month after disclosure had been given, the claimants' solicitors could not be expected to have second-guessed the defendants' disclosure decisions.

Finally, dealing with the question of whether it would be unjust or inequitable to grant the relief sought, the claimants cited both the defendants' delay in bringing the application, and the fact that some of the disputed documents disclosed prima facie wrongdoing or inappropriate conduct. Considering these in turn, the Court noted that it was incumbent on a party to act without delay in asserting and identifying privilege over inadvertently disclosed documents and that, while it would not have been fatal to the injunction application in this case, had the other criteria been satisfied, the defendants had delayed in properly asserting privilege over the disputed documents. It also accepted that the content of two of the disputed documents suggested that the independence of a witness for the defendants might be called into question, which the claimants ought to be allowed to explore at trial.

Comment

This decision, pursuant to which the claimants in Flowcrete were permitted to rely on allegedly privileged material in the proceedings, is a cautionary tale for solicitors and their clients who might be actively participating in the disclosure review process. Parties and their legal representatives should be sure to:

  • carefully assess the content of any disclosable documents for privilege (legal professional or otherwise);
  • exercise caution before making any "compilations" of contemporaneous documents; and
  • notify counterparties of any inadvertently disclosed documents as a matter of priority.

The consequences of failing to take any of these steps can be significant.

For further information on this topic please contact Joe Cresswell or Matthew Evans at RPC by telephone (+44 20 3060 6000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.

Endnotes

(1) [2023] EWHC 22 (Comm).

(2) [2002] EWCA Civ 780.

(3) See Pickett v Balkind [2022] EWHC 2226 (TCC).