Using documents disclosed in English proceedings to seek legal advice in related foreign proceedings – caution required

 Restrictions on collateral use – a reminder

Disclosed documents may only be used for the “purpose of the proceedings in which they are disclosed” (CPR 31.22) except in certain circumstances including where the court’s permission is granted (CPR 31.22(1)(b)).  CPR 31.22 covers, not just use of the documents themselves, but also any information derived from those documents.  CPR 31.22 is one of the few provisions to be retained by the Disclosure Pilot Scheme in the Business and Property Courts which commenced on 1 January 2019. 

The ECU Group v HSBC Bank  

The ECU Group (ECU) obtained documents (the Documents) from various HSBC Bank entities (HSBC) by way of pre-action disclosure. ECU’s solicitors shared their analysis and conclusions in relation to them (but not the Documents) with two U.S. law firms in order to seek advice on: (i) possible claims in the U.S. against HSBC U.S. N.A. (HSBC U.S.); and (ii) guidance on dealing with the U.S. authorities.

ECU’s solicitors wrongly believed that using information derived from the Documents did not constitute “use” of the Documents themselves under CPR 31.22. Upon realising their mistake, they applied for retrospective permission for the prior use of the Documents. Since there were not yet any proceedings on foot, the “proceedings” for the purposes of the application were the proceedings yet to be commenced against HSBC. 

Retrospective permission

Whilst acknowledging that it does have the power to grant retrospective permission, the court agreed with counsel for HSBC that this will rarely be granted.  The question of whether permission would have been granted prospectively is very important, but a positive answer is not, of itself, sufficient to justify granting retrospective permission; nor is it a necessary element of an application for retrospective permission. However it will be rare for the court to grant permission retrospectively where it would not have granted it prospectively. 

Purpose of U.S. advice

The court emphasised that CPR 31.22 operates by reference to the purpose for which there is or has been collateral use.  The judge observed that it was possible for there to be a breach of the collateral use rule if the advice was obtained for one purpose, but that the same advice could have been obtained without there being a breach if the purpose had been different.

One of ECU’s avowed “purposes” for which the Documents were used in seeking the U.S. advice was in order to consider and, depending on the advice, commence U.S. proceedings against HSBC U.S. This was, the court said, a collateral use of the Documents. However, given that English proceedings had not yet been commenced, the court pointed out that ECU could have obtained the same advice from the same U.S. lawyers without breaching CPR 31.22; this was because, in considering what claims to bring in the contemplated English proceedings, it would have been “perfectly permissible” for it to consider where else, and against whom, claims could be brought. Had this been the purpose in seeking U.S. advice, then there would have been no collateral use of the Documents.  In concluding that the advice was unlikely to have gone further than it might have done if ECU had limited itself to a proper purpose, the court was reassured that the advice which ECU’s solicitors had sought and obtained (leaving aside their improper purpose in doing so) was limited to where claims against HSBC U.S. could be brought.  Furthermore, ECU had no current intention to commence U.S. proceedings and ECU had confirmed that HSBC U.S., if sued, would be added as a co-defendant in the English proceedings.   The court therefore granted retrospective permission for the prior collateral use of the Documents to obtain the U.S. advice, but only in so far as it could be used in relation to the contemplated English proceedings.  

The court was concerned that ECU should not be allowed to benefit from the U.S. advice in so far as it had been sought for an improper purpose (the possible commencement of U.S. proceedings) in case it should commence U.S. proceedings in the future. Therefore ECU was required to terminate its retainer with the U.S. attorneys, could not reinstruct them and could not share their advice with any third parties without the court’s leave. 

Glaxo Wellcome v Sandoz 

In this case, the key question was whether documents, obtained in English proceedings, could be made available to the claimants’ foreign legal advisors for advice regarding on-going related IP litigation in a civil law jurisdiction (where disclosure is very limited in scope). Unlike the ECU case, this was an application for prospective (not retrospective) permission.

There is related IP litigation between members of the GlaxoSmithKline and Sandoz groups across several jurisdictions.  The claimants applied, under CPR 31.22, for permission to use around 50 documents (the Documents), out of a total of 75,000 documents disclosed by the defendants in the English proceedings, to obtain Belgian legal advice in connection with related Belgian proceedings against Sandoz Belgium.  The claimants wanted the advice in order to decide whether to adduce any of the Documents in the Belgian proceedings and whether they should commence further proceedings in Belgium against any of the defendants in the English proceedings. The Belgian court had already indicated that it would abide by the English court's decision in this application. 

Likely relevance of the Documents to the Belgian proceedings 

The English court said it first needed to be satisfied that the Documents were likely to be of relevance to the Belgian proceedings by way of an “initial threshold”.  Each of them needed to be individually reviewed as a sampling approach was not appropriate because the Documents did not fall into homogenous classes, they were sought for two distinct uses (depending on the legal advice) and there were nine different reasons for relevance put forward by the claimants. The court found that, with a few exceptions, all the Documents were of likely relevance to the Belgian proceedings therefore the initial threshold was satisfied. 

The fact that the claimants were very selective in identifying the Documents was a key factor.  The claimants’ initial application sought permission for 100 documents, but it later halved that figure in light of the court’s decision that the Documents would first have to be individually reviewed. 

Special circumstances required to obtain permission 

In applications for the court's permission to use documents for a collateral purpose, the overarching requirement is for the court to balance the parties’ competing interests of justice; the court will only grant permission if the applicant demonstrates "special circumstances" which constitute a compelling reason for permitting collateral use. 

The court concluded that there were ample special circumstances which meant that the interests of justice came down firmly in the claimants’ favour in permitting them to use the Documents:

• the parties are very substantial businesses, with equal resources; therefore the application was not oppressive;
  
• given that the majority of the Documents were of likely relevance to the Belgian proceedings, it was in the interests of justice that the claimants should be allowed to obtain legal advice: the court should be slow to stand in the way of a party who wishes to seek advice about pursuing a lawful course of action; and 
  

• the number of the Documents was relatively small and not disproportionate to what was at stake in the Belgian proceedings; there was therefore “no real danger” that the Belgian proceedings would be overwhelmed with additional documents – even taking into account that the defendants might have to adduce additional documents to counter any of the Documents which might deployed in the Belgian proceedings. 

The court acknowledged that the marked contrast in the way litigation is conducted in England and Belgium (and other civil law countries), particularly in relation to the ability to obtain disclosure of documents adverse to the other party’s claim, was a relevant – but not a material – factor. There was no suggestion that the documents obtained in the English proceedings were an abuse of the process (as would be the case if a claim were brought in England for the principal purpose of obtaining disclosure and using it elsewhere). The court also felt that the risk of the Belgian court’s procedures being undermined by the introduction of any of the Documents was marginal, particularly given the Belgian lawyers’ involvement. 

Comment 

These are both cases in which a litigant is trying to use (or has already used) documents, disclosed in on-going English proceedings, or by way of pre-action disclosure, in order to obtain foreign legal advice concerning contemplated or on-going related foreign proceedings.  Whilst these cases are particularly pertinent to cross-border proceedings, the same principles derived from these cases will apply equally to documents, disclosed to a party in one set of English proceedings, which are then provided to that party’s lawyers to advise on different English proceedings – perhaps against a different party and/or in relation to a different cause of action. 

In the first we see ECU trying to get retrospective permission and the court focussing on “purpose”, and in the second we see Glaxo trying to get prospective permission and the court focussing more on whether Glaxo could demonstrate any special circumstances which constitute a compelling reason for permitting collateral use.                   .

The ECU decision is a reminder of the importance of organisations not using an opponent’s disclosed documents, and information derived from them, whether stored in writing or ‘in the mind’, to instruct lawyers in relation to foreign proceedings without obtaining the court’s permission first.  Although this case involved an inadvertent disclosure, a party that deliberately decides to take this course of action, without obtaining permission first, risks retrospective permission being declined, having to terminate the foreign lawyer’s retainer (wasted costs) and having to pay indemnity costs (more waste).  

The ECU decision turned very much on the fact that, had permission been prospectively sought and the purpose reframed (ie in order to decide which claims to bring in England, rather than to decide on possible claims in the U.S.), the result could well have been to allow the information to be used to obtain U.S. advice very similar to that actually obtained.  In cross-border litigation there is often an analysis of where claims should be brought and against whom; this often requires foreign legal advice.  In practical terms, this ruling highlights that a litigant, or prospective litigant, needs to take care when using disclosed documents (or information derived from them) to seek legal advice from foreign lawyers, unless the purpose is to help understand which claims can be bought in England. This purpose will obviously be easier to show in a pre-action context (ie before English proceedings have been commenced).

The Glaxo case shows an altogether more informed approach to the rules on collateral use.  Of importance here was the fact that there were already related proceedings on foot in Belgium, and the claimants only wanted to disclose a small number of documents to their Belgian lawyers.   Had the number of Documents not been so reasonable, the court may well have attached more importance to the differences in the approach to disclosure and the likely effect of the Documents on the Belgian proceedings in coming to its decision.

Further information

This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication.  If you wish to receive this publication, please contact Amy Edwards, amy.edwards@allenovery.com.