Overview
Court grants retrospective permission to use disclosed documents
Court gives permission for collateral use of disclosed documents in Belgian proceedings
English court refuses permission to provide disclosed documents pursuant to a subpoena from the US courts
Disclosure
Court considers how disclosure should be carried out
Judge considers whether confidential documents obtained as part of SFO investigation should be disclosed in court proceedings
Judge considers whether earlier expert's report would have had to be disclosed
Judge refuses to edit inadmissible section of expert report
Judge allows non-party access to documents and questions relevance of the reason for the request
Judge holds that legal advice privilege could not be claimed where a communication was sent to both lawyers and nonlawyers
Judge rules that litigation privilege cannot be claimed
Court of Appeal holds that litigation privilege cannot be claimed for documents discussing only settlement and considers the test for the court inspecting documents following a challenge to privilege
Service of claim form on process agent who is no longer authorised to act
Service where solicitor has come off the record and service on a company
As reported in our last newsletter, England and Wales remains the preferred forum for many parties for the resolution of large commercial disputes. The English courts continue to be busy and Clyde & Co has once again been ranked as the number one disputes firm in the jurisdiction according to The Lawyer's litigation tracker. Disclosure is one of the key features of litigation in England and Wales and there have been several recent cases about this issue and the use of documents disclosed in proceedings. In fact, the majority of the notable cases in the last six months, including recent Court of Appeal authority, relate to which documents are disclosable, the application of a claim to privilege, preventing the use of disclosed documents for a collateral purpose and when non-parties can gain access to documents produced in the course of proceedings. There have also been interesting decisions in relation to the use of
experts and how properly to serve a claim form.
Court grants retrospective permission to use disclosed documents
CPR r31.22 provides that a party to whom a document has been disclosed in the course of proceedings may use the document only for those proceedings (except where the document has been read in court, the court has given permission, or the disclosing party agrees). In other words, the documents are protected from "collateral use". One of the issues in this case was whether the party to whom disclosure had been made (the applicant) should be given retrospective permission for its use of such documents in communications with US lawyers (instructed to advise on the availability of claims in the US).
It has previously been confirmed in Tchenguiz v Grant Thornton [2017] that, if the purpose of a review of disclosed documents is to advise on whether other proceedings would be possible, then that review amounted to a use for a collateral purpose. In this case, Baker J held that "there is a subtlety created by the fact that CPR 31.22(1) operates by reference to the purpose for which there is to be or has been use. That means it is possible, at least in the current, specific, context of an English litigant taking advice, via its English solicitors in the litigation, from (other) external advisers, for the obtaining of the advice and the advice obtained to involve a breach of the collateral use rule, because of [the applicant]'s purpose, though the self-same advice, upon materially the same brief to the external adviser, could have been sought legitimately, without breach (i.e. without needing permission), for the purpose of the proceedings here".
Accordingly, there would have been no collateral use if the advice of the US lawyers had been sought for the purpose of deciding what claims to make in the proceedings to be brought in England. The applicant asserted that it had no present intention of bringing proceedings in the US. On the facts, the judge was prepared to give retrospective permission on the basis that the applicant's lawyer would reconfirm by affidavit the applicant's present intentions in relation to proceedings in the US and the US lawyers' retainers would be terminated.
This case reconfirms the importance of ascertaining the purpose behind instructing foreign lawyers to advise on the availability of claims in their jurisdiction, based on information disclosed in the English proceedings. If the purpose is to bring proceedings in the foreign jurisdiction, that will be a collateral use. If it is instead to confirm that proceedings should continue only in England, then that will not be a collateral use. The difficulty is that in many cases the real purpose may only become clear after the foreign lawyers' advice has been received.
Court gives permission for collateral use of disclosed documents in Belgian proceedings
Permission was sought in this case to use disclosed documents in separate proceedings in Belgium (where only very limited disclosure is available). The two proceedings were part of global litigation between members of the same two groups of companies.
Chief Master Marsh noted that, under English law, "cogent reasons" are needed before a collateral use is allowed, and there has to be a balance between the competing interests of justice. Where the documents are proposed to be used in foreign proceedings, the English court must assume that European courts (absent cogent evidence to the contrary) will ensure that there is no risk of injustice: "[u]se in legal proceedings in Belgium with its built-in safeguards is quite different to wider use, such as use by the press".
In this case, the application was for permission to use over 100 documents. Chief Master Marsh held that he would need to review each of the documents for their relevance to the Belgian claim and rejected an argument that a sampling approach could be adopted: "The sampling approach is more obviously suitable where the documents are an homogenous class", which was not the case here.
He went on to note that "where the court is asked for permission to use documents in foreign proceedings, it is not necessary for the court to do more than consider whether the documents are likely to be of relevance to the foreign proceedings. It is not for the court to determine whether the documents will, in fact, be thought to be sufficiently important to warrant introduction in the foreign claim by the foreign lawyers who review them, or that the foreign court will find them to be sufficiently compelling to give them weight in that court's determination". The claimants were able to demonstrate on the facts that the majority of the documents were likely to be relevant to the Belgian proceedings.
English court refuses permission to provide disclosed documents pursuant to a subpoena from the US courts
As demonstrated above, recent case law on CPR r31.22 and collateral use of disclosed documents has focused on the issue of whether a party who wants to use documents for another purpose should be allowed to do so. However, the issue in this case was different: the group companies faced a difficult choice between (arguably) breaching their duties to the US courts, or breaching their duties to the English courts.
The parent company of one of the parties was served with a subpoena by the US courts. That subpoena required it to produce documents which had been disclosed, and witness statements which had been served, in the English proceedings. The subpoena also required all group companies (including the parties) to produce those documents.
The parties sought permission from the English court to provide those documents to the FBI. Hildyard J noted that prior case law has established that the permission of the court would be granted to allow collateral use of documents if: (a) there were special circumstances which constituted "cogent and persuasive reasons"; and (b) such collateral use would not occasion injustice to the person giving disclosure (Crest Homes Plc v Marks [1987]). He also observed that a more restrictive approach should be adopted for collateral use of witness statements prior to trial (especially where trial is imminent).
The judge concluded that it had not been shown that disclosure of the documents and witness statements was necessary for the purpose of the US process: "However, in this case the fact is that the justification can only be that the documents in question are really needed to enable the Grand Jury to perfect a course already set (by amending or replacing an indictment they have already caused to be issued) or to investigate whether other persons than those thus far identified as (in its view) the main culprits should also be brought to trial". It had also not been demonstrated that the parties had legal control of the requested documents (because permission from the English court was required) and so the judge was not persuaded that they were "truly under compulsion" (even accepting that the subpoena was entirely regular).
This ruling makes it clear that the English court will not allow concerns about breaching duties to a foreign court (in themselves) to override the underlying public policy that a litigant's right to privacy and confidentiality should be preserved.
As previously reported, the Disclosure Pilot Scheme commenced on 1 January 2019. This important scheme, bringing in wide-ranging changes, applies in:
The Business and Property Courts in the Rolls Building, which include the Chancery
Division, the Financial List and Business List, the Commercial Court, the Technology and Construction Court, the Circuit Commercial Court (previously known as the London Mercantile Court); and
The Chancery Division of the High Court, the TCC and the Circuit Commercial Courts in the
District Registries of the High Court in Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle and Cardiff.
There have been no reported decisions yet under the Disclosure Pilot Scheme.
Court considers how disclosure should be carried out
In a case pre-dating the Disclosure Pilot Scheme, the claimant asserted that Form N265 (the List of Documents) had not been completed properly and applied to court for a further order. The main issue raised by the claimant was that the defendants had failed to explain the search parameters or methodology applied. For example, there had been no explanation as to how emails had been harvested and assessed for relevance. No Electronic Disclosure Questionnaire (Form N264) ("EDQ") had been supplied either.
The defendants countered that they had complied with their disclosure duties by stating in the disclosure statement that they had carried out a reasonable and proportionate search. That argument was rejected by Master Clark. He accepted the claimant's argument that "the disclosure list should enable the court and the opposing party to evaluate the adequacy of the search carried out. Disclosure is a transparent, not an opaque process".
He was also critical of the failure to complete the EDQ (which is not a compulsory document). The Master set out the various matters which must be included in a disclosure list, such as the location of documents, the identity of third parties who have relevant documents under the disclosing party's control, custodians, date ranges and keywords. He also said that the requirement to set out whether, and to what extent, documents are irretrievable due to their loss or destruction, is often overlooked but is important.
Judge considers whether confidential documents obtained as part of SFO investigation should be disclosed in court proceedings
During the course of the Serious Fraud Office's ("SFO") investigation of the defendant, the SFO used its powers to compel the production of information and documentation from third parties. In the absence of the third parties' consent, those documents may only be used for the purpose of the investigation ('the compulsion principle'). The documents were sent, in confidence, to the defendant during the investigation. When the claimants commenced proceedings against the defendant, they sought disclosure of the documents obtained from the third parties. Accordingly, the defendant was bound by two potentially conflicting obligations: (1) the obligation to keep the documents supplied to it by the SFO confidential (unless otherwise directed by the court); and (2) the obligation to give full and proper disclosure in the court proceedings.
Hildyard J rejected the claimants' argument that, in this context, disclosure in the proceedings ought to be the default position unless a third party objects (with reasons). The judge held that the court should adjudicate the matter unless the third party has actually expressed their consent. The judge referred to the CPR by analogy and noted that confidentiality in itself is not a ground for refusing to disclose documents. Where the confidentiality asserted is purely private (i.e. relates only to the individuals concerned), and engages no wider considerations as to public interest, the courts will almost certainly order disclosure if "production of a document would be likely to be
of litigious advantage to the applicant, or if its non-disclosure would result in the applicant being potentially at a litigious disadvantage". Where there is a wider public interest in the maintenance of confidentiality (e.g. maintaining the confidentiality of individuals who provide information under compulsion to prosecuting authorities), the position is not as clear-cut. The court should take into account further factors, such as the fact the document would probably not exist at all but for the authority's powers of compulsion.
However, the judge concluded that disclosure will still usually be required: "it is probably only in circumstances where the judge is not only persuaded of strong or 'weighty' considerations against disclosure (whether by reference to confidentiality or 'the compulsion principle') but also unpersuaded of there being any litigious advantage to be gained by disclosure which could not be obtained in some other less intrusive way that the Court will refuse production in a party/party case". This would suggest that the situation might be different where the same information is available from another source, without disproportionate difficulty.
In this case, disclosure of the documents was ordered, subject to the possibility of imposing some restrictions (for example, the redaction of the personal information of the third parties irrelevant to the civil proceedings).
Judge considers whether earlier expert's report would have had to be disclosed
The claimant submitted an advisory report from a consultant urological surgeon ("A") with its claim form. The claimant then obtained a further draft report from A. However, at a conference with counsel, the claimant lost confidence in the expert evidence of A. It subsequently instructed another consultant urological surgeon ("B") and then obtained permission to rely on B's expert evidence. When the defendant then approached A to act as its expert, A responded that he had a conflict and the defendant inferred that A must have produced a report for the claimant earlier on. Accordingly, the defendant sought disclosure of A's draft report.
Dingemans J held that, as the order had given permission to the claimant to rely on B's report and expert evidence, there was no vehicle for
imposing a condition that A's report should be disclosed under the existing order. He also held that, had he had a discretion to vary the order, he would not have found it appropriate to do so. The judge also confirmed that had he been prepared to order disclosure of the earlier report, it would have been irrelevant that the report was in draft. However, the fact that the earlier, advisory, report by A had been disclosed on a without prejudice basis was not a reason for ordering disclosure of A's later report: "[t]hat is because the court is not going to be misled by the disclosure of the first report because no reliance has been placed on the first report and it has been disclosed only for this application. If it had been intended to rely on it, different considerations would arise".
Judge refuses to edit inadmissible section of expert report
Sections of the claimant's expert report (and sections of the joint expert report produced thereafter) were alleged to contain inadmissible consideration of how foreign law applied to the facts of the case. The defendant sought an order declaring those sections inadmissible.
Reference was made to the Court of Appeal's decision in Hoyle v Rogers & Anor [2014], which had held that the rule in Hollington v Hewthorn [1943] (that the factual findings of judges in civil cases are inadmissible in subsequent proceedings) did not apply to findings by experts. The defendant sought to argue that Hoyle was confined to expert reports outside CPR r35 and should be distinguished as it had been addressing causation rather than foreign law.
That argument was rejected by Moulder J. She held that "the principle to be derived from Rogers v Hoyle is not limited to consideration of the rule in Hollington but clearly stated that there is nothing to be gained, except in very clear cases, from excluding or excising opinions where the expert's report opines on inadmissible matters; such an exercise is unnecessary and disproportionate. As is also clear in my view from the judgment, the proper course is for the whole document to be before the court and for the judge at trial to take account of the report only to the extent that it reflects expertise and to disregard it in so far as it does not".
Judge allows non-party access to documents and questions relevance of the reason for the request
CPRr 5.4C provides that non-parties can obtain statements of case (which includes the claim form, particulars of claim, defence and reply but not documents filed with them), but the court's permission is required to obtain "from the records of the court a copy of any other document filed by a party...".
In the recent decision of Cape Intermediate Holding v Dring [2018], the Court of Appeal held that "records of the court" are documents kept by the court office as a record of the proceedings, principally "communications between the court and a party or other person" for example, the list of documents but not the disclosed documents themselves. However, there is no inherent jurisdiction to allow nonparties to obtain access to trial bundles and trial documents even if they have been referred to in skeleton arguments/written submissions, witness statements, expert reports or in open court.
In this case, the non-party sought the disclosure of expert reports and witness statements as well as other documents (e.g. submissions prepared by civil servants and sent to the defendant) referred to in the statements of case. Green J said that he had an inherent jurisdiction to order disclosure of the documents in question, even though they did not all fall within the scope of the CPR. Documents which are read by judges sitting in open court before the hearing starts remain an integral part of the court proceedings, even if those attending will be largely oblivious as to the content of that material.
The judge concluded that his "power should be exercised presumptively in favour of disclosure" in cases like this one. Furthermore "the principle of open justice by its very nature has a wide class of beneficiary". In Cape, the Court of Appeal had confirmed that the applicant needed a "legitimate interest" in inspecting documents before permission would be given. However, in this case, the judge observed that it was not evident why the reason for the request should be determinative: "Since, with only very limited exceptions, any member of the public is entitled to walk unhindered and without having to give an explanation, into a court to witness proceedings, it is hard to see why such a person making a request for documents which assists an understanding of those proceedings, should have to justify the request".
Judge holds that legal advice privilege could not be claimed where a communication was sent to both lawyers and non-lawyers
The defendant claimed legal advice privilege over various drafts of a letter sent to the claimant after the claimant sent an initial complaint to the defendant. Some drafts were sent internally before the in-house lawyers were involved, while others were sent to the defendant's in-house lawyers as well as other employees.
Morris J summarised the legal position as follows:
(1) Legal advice privilege does not apply to "raw materials" not created for the purpose of obtaining legal advice: "Documents which come into existence during the course of a transaction or event (for example created before legal advice is sought) and not created for the purpose of legal advice are not protected by legal advice privilege, (nor generally are copies of such documents even where the copies are forwarded to or made by the solicitor (unless issues arise as to selection))".
(2) Furthermore, although there is academic commentary suggesting that the point is not free from doubt, it was the judge's view that claims for legal advice privilege are, in principle, subject to a dominant purpose test (just as for litigation privilege). Accordingly, it must be shown that "the communication or document was brought into existence with the dominant purpose of it or its contents being used to obtain legal advice".
(3) The mere involvement of a lawyer is not enough to justify a claim for privilege. Problems can arise where material is sent to in-house lawyers, who may have a dual role in the company: "Where the in-house lawyer is clearly being asked for legal advice, privilege is likely to attach. However, where the in-house lawyer is being consulted also as an executive about a largely commercial issue, then the dominant purpose test will fall to be applied".
(4) Although there is no case law authority on the situation where communications (such as emails) are sent to multiple addressees (some of whom are lawyers, and others are not), the judge summarised the position as follows: "In my judgment, if the dominant purpose of the email is to seek advice from the lawyer and others are copied in for information only, then the email is privileged, regardless of who it is sent to. If on the other hand, the dominant purpose of the email is to seek commercial views, and the lawyer is copied in, whether for information or even for the purpose of legal advice, then the email, in so far as it is sent to the non-lawyer, is not privileged. Further, if sent to the non-lawyer for a commercial comment, but sent to the lawyer for legal advice, then, in my judgment, the email is not protected by privilege, unless it or the non-lawyer's response discloses or might disclose the nature of the legal advice sought and given".
Applying those principles to the facts of the case, Morris J concluded that drafts of the letter created before the in-house lawyers were consulted (or without any involvement of the inhouse lawyers) were not privileged. That was the case even if it was known that in due course legal advice would be taken on the draft, or if the in-house lawyers were later shown the draft (unless the dominant purpose of creating the draft was to seek legal advice).
Where a draft (or even a discussion about such a draft) was sent in one email to both in-house lawyers and other employees, "even assuming that in so far as the email was sent to the inhouse lawyer it is privileged, in so far as it is also sent to a non-lawyer, neither the email nor the response of the non-lawyer is protected by legal advice privilege, unless the content of the email, or the response from the non-lawyer, discloses or is likely to disclose the nature and content of the legal advice sought and obtained. If the email to the non-lawyer clearly seeks, and the response provides, commercial views, with no connection to the legal advice, then it is not
covered by legal advice privilege; here the dominant purpose of the email, as sent to the non-lawyer and any enclosed draft was to obtain commercial views".
This case is therefore a helpful reminder that care should be taken by a company when sending an email to both in-house lawyers and other employees within the company. It will often be prudent to send the email to the inhouse lawyers requesting legal advice separately and to discuss commercial matters with non-lawyers orally. However, the support in this case for a "dominant purpose" test allows some flexibility the in-house lawyers can give some commercial and strategic advice provided that the dominant purpose of their communication remains the provision of legal advice.
Judge rules that litigation privilege cannot be claimed
The claimant sought to claim litigation privilege in respect of correspondence passing between it and two expert advisers. Teare J held that litigation privilege could not be claimed over that correspondence. The judge rejected a suggestion that the recent Court of Appeal decision in SFO v ENRC [2018] had changed the law where a document has been brought into existence for two purposes (one of which is for litigation). The court must still ascertain whether the dominant purpose of the document was obtaining information or advice in connection with, or of conducting or aiding the conduct of, litigation.
On the facts, the correspondence had taken place for two purposes: the first, whether the
claimant had to rescind the sale to its buyer (a commercial decision); the second, whether the claimant could then sue the defendant in respect of its sale to the claimant. The judge held that both purposes were of equal importance and relevance and was unable to conclude that the pursuit of litigation had been the dominant purpose. Nor did it matter that litigation would inevitably follow from the commercial decision: "I do not read the ENRC case as deciding that whenever litigation is the "inevitable" consequence of taking a particular commercial decision, the dominant purpose of documents produced for the making of that decision is necessarily their use in the contemplated litigation".
Court of Appeal holds that litigation privilege cannot be claimed for documents discussing only settlement and considers the test for the court inspecting documents following a challenge to privilege
The appellant appealed against a decision that the respondent had correctly claimed litigation privilege in respect of certain documents. The Court of Appeal has now held as follows:
(1) Litigation privilege cannot be claimed for documents which are concerned with the settlement or avoidance of litigation (which is in contemplation) but which do not seek advice or information for the purpose of conducting litigation or reveal the nature of such advice or information. For litigation privilege to apply, the relevant communications must satisfy certain conditions, including that they "have been made for the sole or dominant purpose of conducting litigation". As has been recently confirmed by the Court of Appeal in SFO v ENRC [2018], "conducting litigation" includes avoiding or settling litigation. However, that is not a standalone condition: instead, any such settlement discussions must be "for the sole or dominant purpose of obtaining information or advice in connection with existing or contemplated litigation". The Court of Appeal noted that "We were not shown any authority which would extend the scope of litigation privilege to purely commercial discussions". It was accepted that if, in the document in question, advice or information obtained for the sole or dominant purpose of conducting litigation cannot be disentangled, or disclosure would otherwise reveal the nature of such advice or information, litigation privilege can be claimed in respect of that document. Furthermore, the Court of Appeal observed that "[w]e cannot see any
justification for covering all internal corporate communications with a blanket of litigation privilege". Accordingly, the appeal on this point was allowed.
(2) Although it was no longer necessary to consider the point in light of (1) above, the Court of Appeal also confirmed the correct test to be applied for deciding when a court should inspect documents to ascertain whether they are privileged. Contrary to the approach adopted in West London Pipeline v Total [2008] (that it is difficult to challenge an affidavit asserting privilege), the Court of Appeal said that "the power to inspect a document is a matter of general discretion". There was no need for the court to be "reasonably certain" that the test for privilege had been misapplied. However, the court should exercise caution (especially as it is dangerous to look at documents out of context) and should bear in mind the overriding objective of dealing with cases justly and at proportionate cost.
In light of this decision, care should be taken to ensure that any settlement discussions taking place within a company with a view to compromising ongoing litigation are not recorded in written form, to avoid the risk of having to disclose details of those discussions. That said, it might be arguable in any event that a party's view of the value of a claim is not disclosable on the basis that it is not relevant to the underlying dispute.
Service of claim form on process agent who is no longer authorised to act
In the contract entered into between the parties, there was a clause which provided that the defendant irrevocably appointed a certain process agent to receive service of any claim form on its behalf. When the claimant subsequently served its claim form on that process agent, it was informed that its appointment by the defendant had been terminated over 10 years ago. The issue therefore arose whether the defendant had been validly served.
The judge held that it had. The clause in the agreement constituted an irrevocable promise as between the claimant and the defendant that service on the process agent was good service for the purpose of proceedings in England. Service in accordance with the clause was therefore good service, and it made no difference that the defendant had withdrawn its authority from the process agent to accept service on its behalf.
This case serves as a reminder that parties should amend contracts containing a process agent service clause where the relationship between a party and its process agent has been terminated. This is particularly important in light of conflicting case law on the issue of whether the CPR still applies where a contract contains provisions regarding how a claim form is to be served in the event of a dispute under the contract.
Service where solicitor has come off the record and service on a company
One of the issues in this case was whether there had been valid service of a document on one of the parties. That party's solicitors had ceased to act for him (at which point, he became a litigant in person). CPR r42 provides that, in such circumstances, the party (or his solicitor) must file a notice of change and "the notice must state the party's new address for service". However, the party failed to comply with that rule.
Jones J held that there is no rule (nor any order made in the proceedings) to the effect that service is not required if the new address has not been provided. The other side had sought to serve an application by email on the solicitors who were no longer acting, as well as by first class post on the party's principal place of business (the party was a director of a company). It was held that service by email was not valid because the solicitors had not stated that they were willing to accept service by email and because service was no longer possible on the solicitors once they had ceased to act. Nor could service be made at the usual or last known address, as this case did not involve service of a claim form (and there is no equivalent rule for documents).
The serving party therefore sought to rely on section 1140 of the Companies Act 2006 and the decision in Key Homes Bradford v Patel [2014], which held that it is possible to bypass the CPR rules of service of the claim form within
the jurisdiction by serving at the address for service which every director of an English company must provide for each directorship and which is kept on the public record (even if the claim has nothing to do with the defendant's role as that company's director). The address for service required by the Companies Act can be any address, including the director's residential address, but also the company's registered office address.
In this case, the judge noted that, although Key Homes was not binding on him, it "has stood as law for nearly 5 years without appeal. Therefore, it should be followed absent obvious reason for not doing so". Accordingly, there had been good service when service was effected at the party's address for service which had been provided to Companies House.
