Waiver of legal professional privilege by sending documents to the Stock Exchange does not apply to conduct outside court proceedings.

THE SUPREME COURT

497/2004

Geoghegan J

Fennelly J

McCracken J

BETWEEN

Fyffes Plc

Plaintiff/ Appellant

and

DCC Plc, S&L Investments Ltd, James Flavin and Lotus Greene Ltd

Defendants/ Respondents

Judgment of Mr Justice Fennelly delivered on the 27th day of January, 2005.

1. This appeal relates to discovery in an action at hearing in the High Court. The plaintiffs/appellants (hereinafter “the Appellant”)

seek inspection of documents prepared in connection with the action. Though it was originally contested in the High Court, it is now

accepted that the documents are such as would normally be entitled to legal professional privilege. It is claimed that the Respondents

waived that privilege. The appeal is taken from the judgment of Smyth J.

2. In the action the Appellant claims damages against the Respondents by virtue of Part V of the Companies Act, 1990 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 enabled the first, second and fourth named

Respondents to make a very substantial profit. Section 109 imposes civil liability for such unlawful dealing in shares. Section 111

makes such dealing a criminal offence.

3. 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. It is, therefore, necessary to explain briefly the

role of the Stock Exchange.

4. Under section 115 of the 1990 Act, the relevant authority of a recognised stock exchange is obliged to report to the Director of

Public Prosecutions (hereinafter “the DPP”) if it “appears” to it “that any person has committed an offence under” that Part of the

Act.

5. In September 2000, the Stock Exchange wrote to the first named Respondent, stating that it was investigating dealings in shares

in the Appellant in the month of February that year and seeking certain information including details of all persons aware of any

information relevant to the disposals prior to their being made. The first named Respondent replied at some length and purported to

reply to the request. There was no further contact from the Stock Exchange prior to December 2001, when the first named

Respondent wrote to the Exchange as a result of certain media speculation. Some time prior to March 2002, the Respondents learned

that the Irish Stock Exchange had referred to matter to the DPP.

6. Thereafter, the first named Respondent, 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, with a view to persuading the DPP, with the

assistance of the Stock Exchange, 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. I will refer to the details of these

communications later.

7. I now return to the discovery history. 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 the 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 purpose of this

action.”

8. 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 the documents as disclosed.

9. 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.

10. Mr Paul Gallagher, Senior Counsel, for the Appellant, in a highly detailed written and oral submission claimed that the Respondents

had waived the right to claim privilege over the documents by communicating them to the Stock Exchange. He accepted that privilege

had not been waived either expressly or impliedly. Indeed, as will appear from the recital of the facts, the Respondents at all times

made explicit demands that the confidentiality (and hence the privilege) of the documents be maintained by the Stock Exchange.

11. A central plank of the Appellant’s submission, as stated in its written submissions at paragraph 59, was that:

“It follows from the necessity for a communication to be “confidential” before privilege can be properly claimed in respect of

it, that disclosure of material to a third party generally destroys any confidentiality and therefore any privilege, otherwise

attaching to that communication.”

12. Mr Gallagher 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 [1988] 1 WLR 1113 and Downey v Murray [1988] 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 in the manner envisaged by section 6 of

the Prosecution of Offences Act, 1974, the Respondents communicated instead with the Stock Exchange, which had no further public

or statutory role once it had referred the matter to the DPP in the first instance.

13. Mr Gallagher submitted, as an alternative, and in reliance on the Australian case of Goldberg v Ng and others [1994] 33 NSWLR

301; 132 ALR 57, that this Court should apply the “fairness test” developed in that and other Australian cases. The Respondent had

communicated the documents to the Stock 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 this Court in

Hannigan v DPP [2001] 1 I.R. 378. That case demonstrates, it was submitted, that, where a party deploys a document to his

advantage, disclosure will be ordered if it is just and equitable.

14. Mr Gallagher placed especial reliance on facts concerning the dealings between the Respondent and the Stock Exchange as shown

by the documents actually disclosed. He drew attention to what he described as the strategy adopted the Respondent as shown in

an internal memorandum:

“While there may not be a legal or procedural way in which the Stock Exchange can withdraw their file from the DPP (Alvin

Price’s point) [a reference to advice from the Respondents’ solicitor], we would win a tactical and strategic battle against the

DPP if the Stock Exchange conveyed to the DPP that, with the benefit of information that has come to light subsequent to their

original referral, they were unlikely to be helpful as prosecution witnesses. In order for them to come to this view, it is likely

that they would have to re-analyse the price sensitivity issue, probably by engaging (and properly briefing) another expert

witness as discussed above. Coupled with the mens rea issue, the undermining of Fyffes as a credible witness for the DPP and

the likely inadequacy of whatever expert opinion the Stock Exchange had procured, the undermining of the Stock Exchange

themselves as a helpful witness would be a further reason why the DPP would have difficulty prosecuting.”

15. The principal argument was that this attempt to influence the DPP via the Stock Exchange was sufficient to cause loss of the

privilege, though Mr Gallagher also submitted that it was possible that the evidence of any Stock Exchange witnesses in the civil

action might be influenced.

16. The Respondents, as they frankly accept, were engaged in an attempt to encourage the Stock Exchange to the view that they

had come to a premature decision and to re-open their original examination of the matter so that they might reconsider the

appropriateness of their decision to refer it to the DPP.

17. A number of meetings took place, with the full agreement of both sides, between representatives of the Stock Exchange and

experts engaged by the Respondents. By agreement, it was arranged that certain information would be provided to the Stock

Exchange on a confidential basis. In particular, an arrangement was made whereby important documents would be made available for

review by the Stock Exchange, in a “confidential data room,” while remaining physically in the possession and under the control of

Price Waterhouse Coopers, expert accountants engaged by the Respondents.

18. The Stock Exchange agreed to a number of written conditions imposing strict confidentiality upon it. Notably, it agreed that, when

they had completed their review, “any notes made [would] be promptly be destroyed.” It was accepted by counsel for both parties

that the essence of the arrangement was that the Stock 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, as mentioned above, destroy their notes. It is only fair to point out that the Stock Exchange insisted

that they could not be precluded from communicating with the DPP in the performance of their statutory supervisory functions.

19. The Appellant submits that the Respondent were, in the above circumstances, using the privileged documents to obtain a benefit

for themselves and that they should not, therefore, be permitted to retain the privilege.

20. The Respondents, according to Mr Michael Ashe, Senior Counsel, were entitled to maintain the privilege. They were admittedly

engaged in an attempt to influence the Stock Exchange to convey a favourable view to the DPP, but they were entitled to use the

privileged documents for that specific and limited purpose without sacrificing the privilege. The Stock Exchange may have stated that

they had no function from the legal point of view, but they were prepared to act as a conduit to the DPP. The Respondents are not

to be criticised if, instead of availing of the possibility opened by section 6 of the Prosecution of Offences Act, 1974, they mistakenly

went via the Stock Exchange.

21. Mr Ashe relied on passages from the judgments of the Court of Appeal in England in Paragon Finance plc v Freshfields [1999] 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.

Analysis and Conclusion

22. It will be crucial to the resolution of this 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.

23. I will return to that question having adverted to the general status and scope of legal professional privilege in our law. Finlay CJ in

Smurfit Paribas Bank v A.A.B. Export Finance [1990] 1 I.R. 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 to the client’s instructions. He identified, at page

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 traced that proposition to the

judgment of Jessel M.R. in Anderson v Bank of British Columbia (1876) 2 Ch. D. 644 and in particular the following passage at page

649:

“The object and meaning of the rule is this: that as, by reason of the complexity and difficulty of our law, litigation can only be

properly conducted by professional men, it is absolutely necessary that a man, in order to prosecute his rights or to defend

himself from an improper claim, should have recourse to the assistance of professional lawyers, and it being so absolutely

necessary, it is equally necessary, to use a vulgar phrase, that he should be able to make a clean breast of it to the

gentleman with whom he consults with a view to the prosecution of his claim, or the substantiating of his defence against the

claim of others; that he should be able to place unrestricted and unbounded confidence in the professional agent, and that the

communications he so makes to him should be kept secret, unless with his consent (for it is his privilege, and not the privilege

of the confidential agent), that he should be enabled properly to conduct his litigation. That is the meaning of the rule."

24. He 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 does not arise in the present case. Finlay CJ stated at page 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.”

25. The learned Chief Justice did not, in my 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.

He was referring to what the policy of the law should be. In my view, 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. I

would adopt the following dictum of Lord Bingham in Paragon Finance plc v Freshfields, cited above, at page 1188:

“The nature and basis of legal professional privilege has been often and authoritatively expounded……At its root lies the

obligation of confidence which a legal adviser owes to his client in relation to any confidential professional communication

passing between them. For readily intelligible reasons of public policy the law has, however, accorded to such communications

a degree of protection denied to communications, however, confidential between clients and other advisers. Save where client

and legal adviser have abused their confidential relationship to facilitate crime or fraud, the protection is absolute unless the

client (whose privilege it is) waives it, whether expressly or impliedly.” (emphasis added)

26. The law, therefore, attaches significant value and accords a high degree of protection to the principle of legal professional

privilege. It can, of course, be lost if it is clear that it is being used as a cloak to cover fraud. It may also be over-ridden by express

statutory provision.

27. Waiver is another matter. 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 client was held to

have waived privilege in respect of documents passing between it its former solicitors, whom it was suing, but not in relation to its

new firm of solicitors. Lord Bingham, at page 1192 of the report, approved the following dictum of Dillon LJ in Lillicrap v Nalder & Sons

[1993] 1 WLR 94:

“Waiver is not lightly to be inferred; although privilege is an aspect of the law of evidence and not of constitutional rights it is

firmly established in our law for sound reasons of public policy.”

28. The Appellant, nonetheless, argues for the broad proposition that any disclosure to a third party leads to loss of the privilege. No

authority has been cited in support of such a far-reaching principle. It is not to be found in Matthews and Malek on Discovery (Sweet

& Maxwell, London, 1992) dealing with the topic of waiver. Apart from the more specific cases of waiver, most of which have been

discussed in these proceedings, the authors pose the question whether relevant information was supplied “with the intention of

abandoning” the privilege. They footnote instances of communication to the public generally or to the media. Indeed, these

references are the only support for the general proposition that disclosure defeats the privilege.

29. It is true that both Neill LJ in British Coal Corporation v Dennis Rye Limited and Carswell J (as he then was) in Downey v Murray

grounded their decisions on the specific circumstances of the respective cases before them. In each case, the documents were

communicated to a prosecuting authority. There is, however, nothing in the text of either judgment which implies the existence of a

broader proposition. Neill LJ, having satisfied himself that the documents were privileged from discovery in the action, posed the

question: “Has anything happened which has caused that privilege to be waived or otherwise lost?” He thought the answer was

plainly “No.” Both Neill LJ and Carswell J were doing no more than following the sound practice of deciding only as much as was

necessary to dispose of the particular case. They did not lay 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.

30. The appellant has not established the existence of any such general principle as that privilege will be lost by any communication

to a third party or that, in order to avoid that result, the communication would have to be made in pursuance of a public duty. Indeed

Mr Gallagher conceded in argument that communication, for example, by a party to its bankers in negotiating a loan to fund the

litigation would not lose the privilege.

31. Before turning to Mr Gallagher’s alternative argument, based on the principle of fairness, it is interesting to note that, in the cases

cited principally in support of the latter proposition, Goldberg v Ng and others, Clarke JA denied the existence of any “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.” (page 676) I am quite satisfied that this is a correct statement of the law

and that it undermines 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 has been

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.

32. The second argument is based on the proposition that the matter should be governed by the principle identified in Goldberg v Ng

and others. There is, indeed, some support for the existence of a notion of fairness in the judgment of Lord Bingham in Paragon

Finance. He thought that:

“On the facts of the present case, the plaintiffs have undoubtedly brought their previously confidential relationship with

Freshfields into the public domain, and fairness requires that Freshfields should be free to relay on any communications

passing between them and the plaintiffs relevant to their defence of that claim.”

33. However, it is clear from the context that Lord Bingham was really speaking of waiver, because, at another point, he said:

“We would not wish to exclude the possibility that there may be factual situations in which a plaintiff who sues his solicitor may

be taken to have waived privilege in respect of written legal advice from other lawyers which he agreed to that solicitor seeing

for the purposes of the matter on which he was currently seeking advice from him.” (emphasis added in each case)

34. Up to this point in time and, 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. As will be seen, even in the Australian case, fairness comes into play only

when there has been some voluntary act of disclosure.

35. The facts of Goldberg need brief explanation. A solicitor was being sued by his former clients in the Supreme Court of New South

Wales. The dispute concerned payments made or alleged to have been made by the client to the solicitor or to his wife on account of

costs. The clients also informed the Law Society of New South Wales of the existence of the proceedings. The Law Society treated

the matter as a complaint against the solicitor as well as notice of “failure to account” for the purposes of making a claim against a

solicitors’ indemnity fund. It wrote to the solicitor seeking explanations. The solicitor, instead of providing a statement of his

response, furnished the Law Society, under strict conditions of confidentiality, with certain documents which were privileged as

having been prepared in defence of the civil litigation. The Law Society did not provide any of this material to the clients. Following

reference to a complaints’ committee, the Law Society wrote to the clients to say that it had been decided to dismiss the complaint.

Firstly, the committee was not satisfied that there had been any professional misconduct. Secondly, the clients should pursue their

own remedies.

36. The clients sought discovery, in the litigation, of the documents which the solicitor had disclosed to the Law Society. A majority

both in the Court of Appeal of New South Wales and the High Court of Australia overruled the solicitor’s claim of privilege. There were,

however, strong dissenting judgments in both courts.

37. It emerges from a reading of the judgments that the Australian courts had acted on a principle that a claim to privilege might be

disallowed where a party had made voluntary disclosure of privileged documents in circumstances where it would be unfair to deprive

the opposing party in the litigation of equal access to them. Of particular materiality 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.

38. It is clear that the Australian courts were deeply divided as to whether the solicitor in Goldberg had lost the right to privilege over

the documents he disclosed to the Law Society. He had expressly insisted on confidentiality. It does emerge, at the same time, that

the judges were concerned to apply a notion of fairness developed in earlier cases. Several of the judges cited a dictum from the pre-

eminent treatise on the American law of evidence, Wigmore, Evidence in Trial at Common Law (1961), vol 8, paragraph. 2327:

“When his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended it

or not. He cannot be allowed, after disclosing so much as he pleases, to withhold the remainder.”

39. Of especial importance also was the earlier Australian case, Attorney General (NT) v Maurice (1986) 161 CLR 475. The language

of the judges in the latter case is revealing: “the question of whether a waiver should be implied depends on whether it would be

unfair or misleading to allow a party to refer to or use material and yet assert that that material, or material associated with it is

privileged from production (Gibbs CJ); The holder of privilege should not be able to abuse it by using it to create an inaccurate

perception of the protected communication…” “In order that the opposing litigant is not misled by an inaccurate perception of the

disclosed documentation, fairness will usually require that waiver as to one part …should result in waiver as to the rest….” (Mason

and Brennan JJ); “…ordinary notions of fairness require that an assertion of the effect of privileged material or disclosure of part of

its contents in the course of proceedings……be treated as waiver of any right to resist scrutiny of the propriety of the use he has

made of the material by reliance on professional privilege.” (Deane J). These dicta all concern attempts to abuse privilege by making

partial and selective disclosure.

40. This is not an entirely antipodean notion. The High Court of Australia referred to some established English precedent, notably

Great Atlantic Insurance v Home Insurance Co [1981] All ER 485 where the headnote states:

“……the introduction by the plaintiffs of part of the memorandum into the trial record waived privilege in regard to the whole

document, since a party was not entitled to disclose only those parts of a document that were to his advantage, and both the

court and the opposing party were entitled to know whether the material released from privilege represented the whole of the

material relevant to the issue in question.”

41. All of this fits in very neatly with the decision of this Court in Hannigan v Director of Public Prosecutions, cited by Mr Gallagher. In

that case, 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 dealt with the effect of that act as follows at

page 383:

“…...[t]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.”

42. Hardiman J cited Matthews and Malek, op. cit. at paragraph. 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, it is of note that Kirby P, in his dissenting judgment in Goldberg, explained Attorney General (NT) v

Maurice as being concerned with unfair conduct before the particular tribunal which would ultimately determine the rights of the

parties. His own view was that implied or imputed waiver did not apply to “conduct outside the court or quasi-judicial tribunal”

deciding the issue between the parties. The effect is that a party may not approbate and reprobate, or more colloquially, “blow hot

and cold.” A party will not be permitted to lift the corner of the veil of secrecy only to replace it when his opponent asks to see what

is underneath.

43. The main controversy in Goldberg was as to whether the principles so developed should be applied to the documents disclosed by

the solicitor to the Law Society. The dissenting judges were strongly of the view that they should not. It is unnecessary to express

any view on that matter, which was for the responsible courts in that jurisdiction to decide. I would conclude, however, 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. I do not deny that the partial

disclosure which has that effect might, in some circumstances, be made to a third party, but it would have to be for the purpose of

gaining an advantage in that action. I would add that 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.

44. In the present case, as Mr Ashe has submitted, 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 criminal investigation, it is true, concerned

precisely the same subject matter as the civil action. The basis of civil and criminal liability flows from the same section of the

Companies Act. On the other hand, criminal and civil proceedings are entirely distinct. Mr Gallagher could not argue, nor did he, 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. To the extent that Mr Gallagher suggested that there might have been some indirect effect on the views of Stock

Exchange officials, it has not been demonstrated that this was other than an incidental aspect of the transactions with the Stock

Exchange or that it could affect the civil action in any way.

45. 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 is 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.

46. In my view, the Respondents did not commit any act amounting to an implied or imputed waiver of their privilege. I would dismiss

the appeal.