Fyffes Plc v D.C.C Plc

• Jurisdiction: Ireland
• Judge: Mr Justice Fennelly,Mr Justice McCracken
• Judgment Date: 27 January 2005
• Neutral Citation: [2005] IESC 3
• Date: 27 January 2005
• Court: Supreme Court
• Docket Number: 497/2004,[S.C.

Between

Fyffes Plc

Plaintiff/Appellant

and

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

Defendants/Respondents

2005 IESC 3

Geoghegan J

Fennelly J

McCracken J

497/2004

THE SUPREME COURT

Privilege - Inspection of documents - Legal professional privilege - Disclosure to third party - Waiver - Whether disclosure of privileged documents to third party implied waiver of privilege - Whether test of fairness applied - Paragon Finance v Freshfields[1999] 1 WLR 1183 approved - Rules of the Superior Courts 1986 (SI 15/1986), O 31, r18 - Companies Act 1990 (No 33), ss 108,109, 111 and 115 - Inspection refused

under section 115 of the Companies Act 1990, the stock exchange has a statutory obligation to report certain information to the DPP in relation to insider dealing allegations. The plaintiff claimed that the third defendant had been in possession of price sensitive and confidential information which he allowed to be disclosed to the other defendants leading to the sale by them of shares in the plaintiff at a price above their full value and that this constituted the use of insider information contrary to the Companies Act 1990. In the course of preparing for the litigation and for a parallel criminal prosecution relating to the insider dealing allegations, the defendants had obtained expert advice over which the plaintiff claimed the defendants had impliedly waived their privilege due to the fact that it had disclosed that information to the Stock Exchange in the hope that such disclosure would assist its defence in the criminal proceedings. The High Court refused to make an order for the inspection of certain documents, the existence of which had previously been disclosed by the defendants to the plaintiff but in respect of which privilege had been claimed. The plaintiff appealed the High Court refusal to the Supreme Court. The plaintiff claimed that it followed from the necessity for a communication to be confidential before privilege could properly be claimed in respect of it, that disclosure of material toa third party destroyed any confidentiality and therefore any privilege otherwise attaching to that communication.

Held by the Supreme Court in dismissing the appeal that the principle of privilege arising in the preparation of a case was based on the proper administration of justice which required that a litigant be in a position to communicate freely with his legal advisors and had to be in a position to obtain expert evidence from third parties. Privilege existed not merely for the protection of a party, but also to ensure the proper administration of justice. There should be as great a degree of certainty as possible in relation to waiver of privilege, so that parties could reasonably foresee the result of actions of disclosure taken by them. There was no relevant nexus between the transactions between the defendants, the Stock Exchange and the DPP on the one hand and the civil action on the other and the disclosure to the Stock Exchange did not place the plaintiff at any disadvantage in the civil action.

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...