Two bites of the apple- limitation in professional negligence cases
The decision of the Court of Appeal in DSM SFG Group Holdings & Ors –v- Kelly provides a reminder of the tension between the law of confidence, and the principle of English law providing that evidence remains admissible in civil proceedings regardless of whether it has been obtained unlawfully.
The Appellant company, DSM SFG Group Holdings Ltd (“DSM”), had acquired various business interests from the Respondent, John Thomas Kelly (“JTK”), and members of his family. JTK came to suspect that he had been misled in the transaction, and so arranged for a covert recording device to be planted in the office of DSM’s in-house solicitor. The device was soon discovered and DSM commenced action against JTK for harassment and breach of confidence.
JTK gave undertakings to the Court that he would not make use of the recordings except for the purpose of defending DSM’s claims. An expedited trial was ordered to determine whether the recorded material was in fact confidential. In the course of proceedings, independent counsel was appointed to review the recordings in order to remove legally privileged material, so that JTK’s legal team could make use of the remainder (“the Reviewed Material”) for his defence.
At a hearing on 16 July 2019, Murray J granted an application from JTK allowing him to be released from parts of his original undertakings and to provide new undertakings allowing him to use the Reviewed Material to pursue claims against DSM and other third parties, and to provide the Reviewed Materials to different lawyers instructed to pursue those new claims (cf. defending DSM’s claim). The judge reasoned that independent counsel’s review of the recordings was a material change of circumstance which justified releasing JTK from his original undertakings, and that the original undertakings would unjustly hamper JTK from investigating any counterclaims or related third-party claims. Murray J also felt that the trial judge could control the deployment of the confidential material through case management directions at trial. DSM appealed this decision on the basis that, amongst other things, it effectively gave summary judgment in JTK’s favour on the issue of confidentiality of the Reviewed Material.
Simon LJ and Davis LJ allowed the appeal, citing one case of particular relevance, which was a decision of the Supreme Court of New South Wales in Australia: British American Tobacco Australia Ltd v Gordon & Or  NSWSC 30 (this case had been before Murray J, but he did not consider himself bound by it.). In that case, confidential documents from an earlier litigation in which British American Tobacco Australia (“BATA”) had been a defendant were leaked (“the Leaked Materials”) by BATA’s former lawyer, to a lawyer at the firm who had represented the claimant (who had subsequently died) in the earlier litigation and was now representing the claimant’s executor. It was contended that the Leaked Materials contained grounds to reopen the earlier judgment. BATA brought a breach of confidence claim against the executor and recipient lawyer, and sought an interim injunction to prevent them from making use of the Leaked Materials in the meantime.
Granting the interim injunction in favour of BATA, Brereton J held that the defendants could only use the Leaked Materials if and when they had successfully defended BATA’s breach of confidence claim. He reasoned that if BATA was successful, it would be entitled to an injunction prohibiting the defendants from using the Leaked Materials to bring legal proceedings against it. The interim injunction should be no less protective. Further, the detriment to BATA of being subject to a claim from the executor founded upon the Leaked Materials could not be undone after such proceedings had been instituted, even if BATA subsequently succeeded with its breach of confidence claim. In contrast, the executor could use the Leaked Materials if she successfully defended BATA’s breach of confidence claim, undoing any prejudice suffered in the meantime.
Simon LJ summed up:
47… Brereton J’s judgment set out a clear and principled approach to the issue that faced the Judge: that the issue of confidentiality of documents should be resolved before they were deployed, and not at the same time or afterwards.”
The Court of Appeal decision (and the decision of the Australian Court which guided it) does appear to be a logical and sensible outcome. However, it demonstrates the tension between duties of confidence as a substantive right (or obligation) and the general English law principle which provides that evidence obtained unlawfully is not, by default, inadmissible (“the Principle”), see Jones v University of Warwick  EWCA Civ 904.
The rationale for the Principle is that, in order to achieve justice in any particular case, it is desirable that the Court has access to all relevant evidence when making its decision. Pursuant to the Principle, the English Court can decide whether to exercise its discretion to exclude evidence obtained unlawfully, but if it does not do so, it can then decide what weight to give it in view of its provenance. Such decisions will be made with a view to discouraging nefarious conduct amongst litigants. For example, the Court might admit unlawfully obtained evidence and give it due weight in determining the issues before it, but might apply a heavy costs sanction upon the party tendering it.
However, these cases suggest that confidentiality as a substantive right trumps the Principle and, seemingly, the rationale underpinning it. The Court of Appeal judgment makes clear that a party that has obtained confidential information cannot use it until they have established a right to do so. If a duty of confidence is asserted in respect of any particular information or documentation, the party asserting the duty can seek an interim injunction restraining the party purportedly bound by the duty from using the relevant material to commence or support civil litigation. This would appear to be the case whether or not the material had in fact been unlawfully obtained, provided that the confidence claim is at least arguable (which may well be the case for many instances of whistle-blowing, for example). As such, breach of confidence claims may be a powerful tool to suppress evidence.
Further, the fact that evidence is admissible before the Court is not a defence to an action for breach of confidence. This was the clear verdict of the Court of Appeal in Imerman v Tchenguiz – in that case, the Court confirmed that the “Hildebrand Rules” (the family court practice of admitting improperly obtained evidence where it related to the other party’s assets) were not a defence to an action brought by an individual against his ex-wife and others, where the latter had accessed the individual’s office and computers in order to find information regarding his assets for use in ancillary relief proceedings. The defendants were found to have obtained the evidence unlawfully and were required to deliver it up and to destroy copies of the same, notwithstanding that the evidence may have had a significant impact upon the ancillary relief proceedings.
Advocates of the current “DSM/Tchenguiz” approach say that would-be spies should rely upon their opponent’s disclosure obligations to flush out the evidence they require, rather than resort to unlawful means to obtain it. However, where a party is determined to suppress evidence, their honesty in providing disclosure is certain to be lacking. It would therefore be incumbent upon their opponent to show that they have failed to discharge their disclosure obligations, and proving a negative in this way can be very difficult, and very costly.
“DSM/Tchenguiz” enthusiasts may also argue that it is well established that if a piece of information discloses details of a crime or a tort, any claim to confidentiality in the information is outweighed by the public interest in disclosure of that information (see Lion Laboratories Ltd v Evans  2 ALL ER 417). This is the typical justification a party might seek to use when relying on whistle-blower evidence. However, from a practical perspective, as the law stands the party seeking to rely on such information may have to successfully defend a breach of confidence claim first, before being able to rely on the information in order to advance, substantiate or defend proceedings. If that party has only limited resources available, this may be fatal to their ability to pursue their case.
There is therefore some doubt as to whether the current state of the law is optimal. The law of confidence evolved to protect secret and commercially sensitive information from financial and/or other forms of exploitation, not to stifle the production of evidence in litigation. Further, the English Court has an array of tools at its disposal to protect confidentiality and control the use of evidence. It can, for example, order that statements of case filed be made unavailable to non-parties, or direct that the proceedings (or particular parts of the proceedings) be heard in private so as to ensure that the confidential material is protected from public disclosure, or that a ‘confidentiality club’ is set up to control the scope of disclosure of material. The party asserting confidence is also protected by the general prohibition on the collateral use of evidence submitted in English civil proceedings for other purposes. By allowing a party to effectively exclude evidence against it under the auspices of confidentiality, the Court denies itself the ability to assess all relevant evidence when determining cases.
There is no question that the Court must do all it can to protect the integrity of the civil litigation process by emphatically discouraging parties from obtaining evidence by unlawful means and/or not readily permitting unlawfully obtained material into evidence where no injustice would be caused. But in instances where evidence is obtained by a party from, for example, a bona fide whistle-blower, there is a clear interest in putting such evidence before the Court in order to ensure that justice is done.
DSM clearly does not fall within the “whistle-blower” category, however the Court of Appeal’s decision highlights the tension between the law of confidence and the Principle. While there is no suggestion of improper motivation on the part of DSM in this case, it seems that breach of confidence proceedings could be instigated by a party to prevent key evidence against them from being submitted, or to preclude a claim from being brought altogether, at least for a period of time until the breach of confidence action is determined – which may be all that is needed to exhaust their opponent’s resources, and/or kill off a meritorious claim.
Such outcomes would plainly not be in the interest of justice, and given that the Court has a variety of other means to control the use of evidence, it might be time to reconsider the approach in Tchenguiz and DSM SFG Group Holdings Ltd, so that the Court is mindful not to grant interim injunctions pursuant to breach of confidence claims, where the clear purpose of those claims is to suppress the production of evidence and stifle good arguable claims.
Richard Clayman is a Senior Associate in the Dispute Resolution team. Richard’s experience covers a broad range of commercial disputes, acting for claimants and defendants, often in complex, multi-jurisdiction and high value claims.
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