In the recent case of DSM SFG Group Holdings Ltd -v- Kelly [2019] EWCA Civ 2256, the Court of Appeal has overturned a decision of the high Court that would have allowed a defendant to modify undertakings restricting the use of covertly recorded and confidential material other than to defend the case against him, and to replace them with less onerous undertakings permitting the use of the material in order to bring claims against the claimant and third parties.

The Court of Appeal found that to allow the material to be used in such a way, before properly establishing the defendant’s right to do so, would potentially result in injustice. Issues of confidentiality of documents should be resolved prior to reliance on their contents, not contemporaneously to their use or after their use. The decision therefore, does not stop a party from using such material to defend a claim, but will prevent parties relying on the use of unauthorised confidential material to establish a separate action without first obtaining the right to do so.

The case also provides a reminder of the court’s position when considering whether or not to allow a party to vary undertakings previously given. Generally, variance will be not be allowed unless there has been a material change in circumstances following the provision of the original undertakings.


Mr Kelly, along with three other members of his family, agreed to sell his interest in a number of businesses to the claimants in 2017 for approximately £23 million. However, after becoming suspicious that all was not right with the deal he resorted to planting recording devices at the claimant’s in-house solicitors’ office. As a result he managed to record over 40 hours of mostly privileged conversations between the claimants and their in-house and external lawyers.

The claimants sought injunctive relief after discovering the recording devices, bringing claims for harassment and breach of confidence. Pending a final trial on the issues, Mr Kelly provided undertakings in February 2019 in relation to the recordings that:

  • He would not make any use of the recordings except to defend the present claim.
  • He would retain solicitors and counsel whom he had not previously instructed on any matter concerning the claimants.

In May 2019, Mr Kelly applied to be released from the undertakings and to be allowed to give new undertakings in order that he may use the recordings to bring his own claims against the claimants in relation to the sale of his interests in the businesses.

The parties agreed shortly after Mr Kelly made his application that they would appoint independent counsel to conduct a review of the recordings and any non-privileged material would be disclosed to a confidentiality ring.

The High Court then allowed Mr Kelly’s application to be released from his undertakings and to give new undertakings allowing him to use the recordings for the purpose of bringing claims against the claimants. Mr Kelly as also permitted to use solicitors of his choosing (who would be subject to the limits imposed by the confidentiality ring). It was the High Court Judge’s belief that the original undertakings would unfairly restrict Mr Kelly in bringing his defence and dealing with all aspects of the claim, which included the bringing of any related or counter claim. The judge considered that the review of the material by independent counsel and the identification of privileged and non-privileged material amounted to a material change in circumstances which justified a change in the undertakings. The judge was also confident of the court's ability to manage the trial in a way that was fair to both parties.

The claimants appealed this decision and the matter proceeded to the Court of Appeal.

Court of Appeal decision

Simon LJ gave the leading judgment in the case allowing the appeal on all grounds with Davis LJ giving a short judgment in agreement. The reasons for the decision were as follows.

It was stated that the principles concerning the protection of confidential information were well established. Simon LJ cited the case of Lord Ashburton -v- Pape [1913] 2 Ch 469 as a summary of the position that by way of a starting point - the use of confidential information should not be permitted without establishing prior entitlement to do so (it was common ground from the start of proceedings that its use would be allowed in defence of the claim).

Simon LJ also made reference to British American Tobacco Australia Ltd -v- Peter Gordon [2007] NSWSC 230 which the High Court declined to follow. Simon LJ instead said that despite not being strictly binding and the facts being different, the case set out a clear principle that issues over the use of confidential information are to be resolved before the material can be relied upon. To allow Mr Kelly’s later undertakings to stand would result in the exact opposite of this principle.

  • The High Court judge was plainly wrong to conclude that the review by independent counsel of the confidential material was a material change of circumstances. It was in fact a ‘sensible and practical’ way to maintain confidentiality pending trial.
  • The Court of Appeal also disagreed that the claimant’s position could be sufficiently protected during the trial, which would be significantly more complex if the modified undertakings were allowed to continue.

The case was an interesting one as it clarified the position where a party wishes to rely on confidential material in that they must establish a right to do so before such materials can be used to support a claim. The case also confirms that undertakings to the court will generally only be allowed to be varied following a material change in circumstances.