Walters and Another v Lexington Services Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Butler
• Judgment Date: 31 July 2023
• Neutral Citation: [2023] IEHC 493
• Court: High Court
• Docket Number: Record No. 2018/206P

Between

Mortimer John Walters and Ronan Campbell

Plaintiffs

and

Lexington Services Limited

Defendant

and

Lexington Services Limited

Counterclaim Plaintiff

and

Anthology S.A., Mortimer John Walters, Ronan Campbell, Florian Karrer and Brian Connell

Counterclaim Defendants

[2023] IEHC 493

Butler J.

Record No. 2018/206P

THE HIGH COURT

Legal professional privilege – Disclosure – Discovery – Defendant seeking orders confirming the privileged status of material in respect of which it claimed privilege – Whether the unintentional disclosure of the material was sufficient to amount to a waiver of any privilege that may have attached to it

Facts: The defendant/counterclaim plaintiff, Lexington Services Ltd (Lexington), applied to the High Court for orders relating to documents inadvertently disclosed by it in the course of inspection following the making of discovery pursuant to an agreement between the parties. The disputed material was included on a USB stick along with material which Lexington intended to provide pursuant to its affidavit of discovery. The underlying dispute between the parties concerned ownership of a valuable U.S. patent (the 807 patent). The proceedings arose out of a settlement reached between some of the parties in earlier proceedings, the interpretation of crucial terms of that settlement and of a related agreement and whether Lexington had defaulted in its obligations under the settlement such as to forfeit ownership of the 807 patent. The material inadvertently disclosed included material listed in the First Schedule, Second Part of the affidavits of discovery sworn on behalf of Lexington in which legal professional privilege was claimed. It also included additional material not listed in the affidavits of discovery, some of which Lexington claimed was privileged and some of which was not privileged but all of which Lexington argued fell outside the agreed categories of discovery and thus was not relevant. Lexington sought orders confirming the privileged status of the material in respect of which it claimed privilege, restraining the counterclaim defendants from using the material and a declaration that two of the counterclaim defendants, Anthology S.A. and Mr Connell, were in breach of an implied undertaking to the court in respect of the discovered material in that they had passed it to third parties for use in litigation in other jurisdictions.

Held by Butler J that she did not regard the inclusion of privileged material on the USB key as a waiver of the privilege attaching to that material by Lexington. She did not accept that, on receipt of the replacement USB key, a hypothetical solicitor could reasonably have believed that the claim of privilege originally made had been waived or that Lexington intended to provide access to the additional material which had then been removed from the USB key. She did not think that it had been established that Lexington was aware that copies of the documents had been made and retained by the opposing parties so as to place an onus on it either to seek the return of those documents or to make a claim of privilege in respect of their contents. She was satisfied that the period of delay which the court should consider was one of just under four months (19 November 2020 – 12 March 2021) rather than one of seven to eight months. She did not think that a delay of that magnitude would warrant the refusal to Lexington of equitable relief in the motion. She was not satisfied that the privilege claimed by Lexington should be refused to it on the basis of the crime/fraud exception or any broader exception derived from it. Whilst in other circumstances Lexington’s previous conduct in the discovery process might well have acted as an impediment to the grant of equitable relief to it, because Anthology S.A. and Mr Connell had been involved in conduct which she regarded as equally grave, she did not propose withholding relief from Lexington on equitable grounds.

Butler J proposed granting the relief sought by Lexington in its notice of motion.

Relief granted.

Judgment of Ms. Justice Butler delivered on 31 ^st day of July 2023

Introduction

1 . This is an application by Lexington, which is the defendant in the main proceedings and the plaintiff in the counterclaim, for orders relating to documents inadvertently disclosed by it in the course of inspection following the making of discovery pursuant to an agreement between the parties. The disputed material was included on a USB stick along with material which Lexington intended to provide pursuant to its affidavit of discovery.

2 . The underlying dispute between the parties concerns ownership of a very valuable U.S. patent (“ the 807 patent”) and has been ongoing for a considerable period of time. In fact, these proceedings arise out of a settlement reached between some of the parties in earlier proceedings, the interpretation of crucial terms of that settlement and of a related agreement and whether Lexington has defaulted in its obligations under the settlement such as to forfeit ownership of the 807 patent. For convenience, in this judgment I shall refer to the defendants to the counterclaim collectively as “Anthology” unless I am referring specifically to any one of them. Although the issues dealt with in this judgment have arisen primarily between Lexington and the first, fourth and fifth defendants to the counterclaim, the third defendant appeared at the hearing of the motion and submissions were made on his behalf in support of the stance taken by the first, fourth and fifth defendants.

3 . The material inadvertently disclosed includes material listed in the First Schedule, Second Part of the affidavits of discovery sworn on behalf of Lexington in which legal professional privilege was claimed. It also includes additional material not listed in the affidavits of discovery, some of which Lexington claims is privileged and some of which is not privileged but all of which Lexington argues falls outside the agreed categories of discovery and thus is not relevant. Lexington seeks orders confirming the privileged status of the material in respect of which it claims privilege; restraining the defendants to the counterclaim from using the material and a declaration that two of the defendants to the counterclaim, namely Anthology and Mr. Connell, are in breach of an implied undertaking to the court in respect of the discovered material in that they have passed it to third parties for use in litigation in other jurisdictions.

4 . The counterclaim defendants (not all of whom are plaintiffs in the main proceedings) oppose the application on a number of grounds, although these grounds have shifted somewhat in the course of the hearing. Principally they contend that once the material was disclosed by Lexington, any privilege attaching to it was waived and thus lost and if Lexington wished to continue to rely on the privileged status of the material, the onus lay on Lexington to immediately re-assert that privilege, which it did not do either at all or in a timely manner. In making this argument, the counterclaim defendants rely on the contention that it was not obvious to them or their solicitors that the inclusion of additional and privileged material was a mistake on the part of Lexington. Further, Lexington have never explained how this mistake came to be made. In addition, these parties argue that insofar as privilege is claimed over some of the material, it is not properly claimed or the Court should, as an exception to the privilege claimed, allow the counterclaim defendants to use the material of which they have retained possession. Initially they seemed to argue that the Court should disallow the claim of privilege as the documents relate to the malicious prosecution of the counterclaim by Lexington as part of an abusive litigation strategy in this and other jurisdictions. Midway through the exchange of affidavits this changed and the ground advanced as the basis for disregarding the claim of privilege became the “crime-fraud” exception recognised in the jurisprudence of the Supreme Court most notably in Murphy v. Kirwan [1993] 3 IR 501. Much of the argument in the case concerned the scope of this exception and the test to be met in order for it to apply.

5 . Finally, throughout the exchange of affidavits and in the written submissions the parties alleged to be in breach of the applied undertaking to the court regarding the use of the disclosed material, Anthology and Mr. Connell, maintained a detailed argument under a number of different headings as to why no such breach had occurred. Some of the arguments made were unsustainable and seemed to proceed from the premise that once privilege was waived (itself a disputed issue) the parties were at liberty to use the discovered material as they thought appropriate. In normal course privileged material will not be disclosed at all and the implied undertaking regarding the use of discovered material necessarily refers to non-privileged material disclosed following discovery and not usually to privileged material. Waiver of privilege would allow an opposing party access to otherwise privileged documentation for the purposes of the trial. It would not allow that party to use the privileged material for purposes outside of the trial, or at least not without the express permission of the Court. Other arguments pointed to the purposes for which the disclosed material was to be used, e.g. in related proceedings between the same or related parties in other jurisdictions. Whilst in principle this may be permitted, it is only with the leave of the Court obtained prior to the use of such material, which was not the case here. It was also argued in respect of the additional non-privileged material that as it was not listed in the affidavits of discovery, it was not caught by the implied undertaking.

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