The differing approaches of the US and Irish courts. 

A recent decision of the Second Circuit in New York State has cast doubt on the ability of litigants in the US to make voluntary disclosure to regulatory bodies without losing privilege. In Gruss v Zwirn 2013 WL 3481350 the court found that a confidentiality agreement between the defendants and the Securities and Exchange Commission (SEC) was inadequate to protect against waiver of privilege in documents voluntarily disclosed by the defendants to the SEC.

The defendants operated a number of hedge funds which were the subject of reports of financial irregularities. The defendants hired two law firms to carry out an internal investigation. The law firms interviewed the hedge firm's employees and drafted summaries of those interviews. The plaintiff, the CFO, was blamed for the irregularities and resigned. The defendants made voluntary disclosures to the SEC, through their lawyers, subject to a confidentiality agreement which stated that the defendants did not intend to waive privilege through its disclosure and that the SEC would "maintain the confidentiality of the Protected Materials pursuant to this agreement and will not disclose them to any third party, except to the extent that the SEC determines that disclosure is required by law or would be in furtherance of the [SEC's] discharge of its duties and responsibilities." The disclosures to the SEC comprised presentations which summarised the witness interviews but did not include notes of the interviews themselves.

The plaintiff sued for defamation and sought the lawyers' notes and summaries of all interviews in the investigation.

The court granted the plaintiff's application, holding that privilege had been waived and although it left open the question whether a confidentiality agreement could ever protect privilege the court found that the confidentiality agreement in the present case was 'a fig leaf' and 'illusory' because it gave the SEC the unilateral right to disclose these documents. 

Further, the court found that although the notes and summaries had not actually been disclosed to the SEC, 'when a party selectively discloses attorney-client communications to an adverse government entity, the privilege is waived not only as to the materials provided, but also as to the underlying source documents'.

Following the decision one US commentator said "The selective waiver doctrine may not be dead, but it is certainly struggling to survive."

The Irish courts have adopted a less restrictive approach. 

The importance of legal professional privilege was recognised in Miley v Flood [2001] 2 IR 50 when the court stated that legal professional privilege is:  "…more than a mere rule of evidence.  It is a fundamental condition on which the administration of justice as a whole rests."

The leading Irish authority is the Supreme Court decision in Fyffes v DCC [2005] 1 ILRM 357. The plaintiff claimed damages for insider trading by the defendants in the plaintiff's shares. The plaintiff argued that two of the defendants sold shares in the plaintiff company at a time when the third defendant was a director of the plaintiff and, in that capacity, in possession of confidential, sensitive information about the appellant's share price. Separately, the Stock Exchange investigated dealings in the plaintiff's shares and referred the matter to the DPP. In an effort to persuade the Stock Exchange to reverse its position and encourage the DPP to drop any criminal investigation, the defendants disclosed to the Stock Exchange a  number of expert reports prepared for the defence of the plaintiff's civil claim to underpin the argument that any information in the possession of the third defendant was not price sensitive. The plaintiff sought discovery of these expert reports claiming that the defendants had waived privilege by disclosing them to a third party.

In the Supreme Court McCracken J pointed out that the purpose of privilege was not merely to protect a party, but also to ensure the proper administration of justice. He went on to say that:-

"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….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 to ensure that it can properly exercise its regulatory function."

In his judgment Fennelly J stated that privilege could be lost if it is being used as a cloak to cover fraud or by express statutory provision.  However, he rejected the plaintiff's argument that any disclosure to a third party would lead to a loss of privilege unless the disclosure is made to a public body and in pursuit of a public duty, noting that no authority had been found to support such a broad and far-reaching principle.

The Supreme Court also rejected the plaintiff's contention that a claim to privilege should be disallowed where a party had made voluntary disclosure of privileged material in circumstances where it would be unfair to deprive the opposing party in the litigation of equal access to it.  McCracken J pointed out that the concept of fairness, could lead to uncertainty:-

"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 are entitled."

The Court took into account the confidentiality agreement between the defendants and the Stock Exchange saying that such stipulations of confidentiality "will obviously negative any claim of express waiver and most cases of implied waiver."

Discovery of the reports was, accordingly, refused.

The Fyffes decision was subsequently applied by the High Court in Woori Bank & Hanvit LSP Finance Ltd v KDB Ireland Ltd [2005] IEHC 451. The first plaintiff was a Korean Bank, the second plaintiff an Irish company and the defendant was a provider of financial services. A dispute arose in relation to agreements and transactions between the parties. Both the first plaintiff and the defendant made criminal complaints against each other to the Korean authorities. The transactions were also the subject of investigations by the Board of Inspection and Audit (BAI) and the Financial Supervisory Service (FSS) in Korea.

The defendant sought disclosure of various categories of documents over which the plaintiffs asserted legal professional privilege. One category comprised documents that had been disclosed by the plaintiff to the Public Prosecutor's Office in Korea. The defendant conceded that these documents were privileged, but argued that by disclosing the documents the plaintiff had lost or waived its entitlement to protection. The High Court found that the documents had been disclosed to the Public Prosecutor for the purposes of supporting the plaintiff's criminal complaint against the defendant and defending the criminal complaint brought against it. The judge stated that she was satisfied that the plaintiff had taken steps to preserve the confidentiality of the documents as it had emphasised to the Public Prosecutor the need for utmost confidentiality. The plaintiff also presented evidence that public prosecutors are obliged by Korean law not to disclose information obtained during an investigation. Applying the Fyffes principles, the court held that there had been no waiver or loss of privilege in the documents.

It is reassuring that the Irish courts have emphasised the importance of legal professional privilege and have made clear that limited disclosure to a regulatory authority for a specific purpose will not constitute a waiver of that privilege.  However, given the weight which the Supreme Court attached to stipulations of confidentiality it is important, when disclosing privileged documents voluntarily to a regulatory authority, that there should be an agreement between the parties stating clearly that the documents are privileged and that the providing party is not waiving that privilege.  The agreement should also emphasise that the documents are being provided for a stated limited purpose and should be held in confidence by the receiving party and not disclosed to any other party without consent or unless required by law.