Waterford Credit Union Ltd v J & E Davy

• Jurisdiction: Ireland
• Judge: MR. JUSTICE MICHAEL PEART
• Judgment Date: 05 June 2019
• Neutral Citation: [2019] IECA 157
• Date: 05 June 2019
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2019] IECA 157 Record Number: 2017 No. 139

BETWEEN:

WATERFORD CREDIT UNION LIMITED

PLAINTIFF/RESPONDENT

- AND -

J & E DAVY

DEFENDANT/APPELLANT

[2019] IECA 157

Neutral Citation Number: [2019] IECA 157

Record Number: 2017 No. 139

THE COURT OF APPEAL

Discovery – Confidentiality – Breach of undertaking – Appellant seeking to appeal from an order for discovery in respect of three categories of documents made against it by the High Court – Whether the trial judge took appropriate account of the fact that the respondent’s solicitors had breached its implied undertaking as to confidentiality in relation to discovery of documents by the appellant made in other proceedings in which the same firm had previously acted

Facts: The defendant/appellant, J & E Davy (Davy), appealed to the Court of Appeal from an order for discovery in respect of three categories of documents made against it by the High Court (Keane J) on the 3rd February 2017. The three disputed categories of discovery were set out in the order under appeal as follows: “(i) the separate reports furnished by the Irish Stock Exchange to the defendant in June 2007 and February 2008 with regard to the investigation carried out by the Irish Stock Exchange into the defendant’s conduct of its business with regard to the sale by the defendant of investment bonds to Credit Unions including the plaintiff; (ii) all notes, memorandum (sic), documentation (whether in written or electronic form) comprising all documents relating to the defendant’s alleged disclosure to the plaintiff that the defendant was acting as principal on the sale of the bonds subject matter of the proceedings in which the plaintiff invested; and (iii) all notes, memorandum (sic), documentation (whether in written or electronic form) relating to meetings (to include all minutes and notes taken at or subsequent to the meetings) between the plaintiff and the defendant in August 2006 and March 2008 and which are expressly referred to in paragraph 26 (d) of the defendant’s amended defence at which it is alleged by the defendant that the defendant disclosed to the plaintiff that it had acted as principal in the sale of the bonds the subject matter of the proceedings and had earned a sum in that regard.” Davy contended firstly that the trial judge erred in his application of the well-known discovery principles of relevance and necessity, and secondly, and most unusually, an issue arose as to whether the trial judge took appropriate account of the fact, which was acknowledged during the hearing, that the solicitors of the plaintiff/respondent, Waterford Credit Union Ltd (Waterford), had breached its implied undertaking as to confidentiality in relation to discovery of documents by Davy made in other proceedings in which the same firm had previously acted. Davy submitted that the trial judge’s approach to this serious and acknowledged breach of undertaking, and the delay by the firm in acknowledging same over a two year period despite inquiry by Davy’s solicitors as to the source of the firm’s knowledge of a certain bond (the Jyske bond), was erroneous, and that this of itself was sufficient to warrant a refusal of the respondent’s application for discovery, even if, absent such breach as occurred, the Court might consider that the order should be made.

Held by Peart J that it was open to the Court on the facts and in the circumstances of the case not only to recognise that a breach of undertaking given in other proceedings had occurred (which was admitted), but to prevent the party against whose interests the breach had been committed from suffering a litigious disadvantage as a consequence thereof. Peart J held that the Court’s powers under its inherent jurisdiction were as ample as may be required for its intervention to be effective and appropriate, and to maintain absolute fairness in the administration of justice. In Peart J’s view, therefore, despite the trial judge’s conclusion, reached without regard to the wrongfully deployed information, that the two Irish Stock Exchange reports were relevant and necessary, the Court should as a matter of discretion refuse to order discovery of those reports firstly in order to ensure that Davy does not suffer a litigious disadvantage as a result of the breach, and secondly to mark in a meaningful way the serious breach of undertaking that occurred.

Peart J held that he would allow the appeal, and vary the order of the High Court by refusing an order for discovery of the two Irish Stock Exchange reports referred to.

Appeal allowed.

JUDGMENT OF MR. JUSTICE MICHAEL PEART DELIVERED ON THE 5TH DAY OF JUNE 2019

1 This is an appeal by J & E Davy (‘Davy’) from an order for discovery in respect of three categories of documents made against it by the High Court (Keane J.) on the 3rd February 2017. I will refer to the respondent as ‘Waterford’.

2 By their letter dated 25th October 2012 to Davy's solicitors, Waterford's solicitors sought ten categories of documents by way of voluntary discovery. In response Davy agreed to provide eight categories, but declined the remaining two. Subsequently by further letter dated 9th September 2014 following receipt of an amended defence, Waterford sought an additional three categories of documents. No agreement was reached in relation to those additional categories. Waterford issued a notice of motion on the 13th April 2012 seeking an order for discovery of five categories of documents. In the course of submissions to the trial judge, Waterford abandoned its application in respect of two of these five categories, leaving just three categories remaining for determination.

3 Davy contends firstly that the trial judge erred in his application of the well-known discovery principles of relevance and necessity, and secondly, and most unusually, an issue arises as to whether the trial judge took appropriate account of the fact, which was acknowledged during the hearing, that Waterford's solicitors had breached its implied undertaking as to confidentiality in relation to discovery of documents by Davy made in other proceedings in which the same firm had previously acted. Davy has submitted that the trial judge's approach to this serious and acknowledged breach of undertaking, and the delay by the firm in acknowledging same over a two year period despite inquiry by Davy's solicitors as to the source of the firm's knowledge of a certain bond (the Jyske bond), was erroneous, and that this of itself was sufficient to warrant a refusal of the respondent's application for discovery, even if, absent such breach as occurred, the Court might consider that the order should be made.

4 Before addressing these issues, I will set out briefly the factual background to these proceedings.

5 Waterford is a credit union. Davy is a firm of stockbrokers and investment advisers with whom Waterford entered into a contract in January 2005 by which it retained Davy as its investment adviser, and also agreed to provide funds to Davy for investment into such investments as Davy advised as suitable and appropriate for a credit union. Over €5 million was so provided by Waterford which was invested in certain bonds which, it is alleged, Waterford was advised by Davy and were led to believe were bonds which guaranteed the capital sum invested, and also complied with the Trustee (Authorised Investments) Order 1998 (‘the 1998 Order’). Waterford discovered subsequently that the bonds in which Davy invested its funds did not comply with the 1998 Order, did not guarantee the capital sum invested, and provided no definite maturity date.

6 Waterford's case is that it would not have invested in these bonds had Davy not advised it to do so, and if it had known of the matters just referred to. It is alleged that Davy is guilty of misrepresentation, breach of warranty, breach of contract, breach of fiduciary duty, breach of statutory duty and negligent mis-statement, and Waterford seeks an indemnity and/or compensation in respect of the sums invested together with interest. In an amended statement of claim Waterford also claim that Davy failed to disclose that it was acting a principal in the sale of bonds into which it advised Waterford to invest its funds, and was making a secret profit which it failed to disclose.

7 Davy's defence and amended defence contain a general traverse of the allegations and claims made by Waterford, specifically in relation to the claim that it did not disclose to Waterford that it acted as a principal and that it had earned a secret profit Davy pleads at para. 26(d) of its amended defence:

(d) without prejudice to the foregoing, in meetings between the plaintiff and the defendant in or around August 2006 and March 2008, the defendant confirmed to the plaintiff that it had acted as a principal in the sale of bonds and had earned a sum in that regard. In the premises, the defendant will contend that the plaintiff's claim in relation to an alleged ‘secret profit’ (which claim is denied) is statute barred having regard to the provisions of the Statute of Limitations and/or that the plaintiff has acquiesced in and/or waived the said claim and/or is estopped from raising the said claim and/or is guilty of laches and/or inordinate delay in respect of the said claim.’

The three disputed categories of discovery:

8 The three categories of documents ordered to be discovered by Davy are set out in the order under appeal as follows:

‘(i) the separate reports furnished by the Irish Stock Exchange to the defendant in June 2007 and February 2008 with regard to the investigation carried out by the Irish Stock Exchange into the defendant's conduct of its business with regard to the sale by the defendant of investment bonds to Credit Unions including the plaintiff;

(ii) all notes, memorandum (sic), documentation (whether in written or electronic form) comprising all documents relating to the defendant's alleged disclosure to the plaintiff that the...