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High Price Paid for Errors in Disclosure: Court of Appeal Permits use of Inadvertently Disclosed Privileged Documents

In Rawlinson and Hunter Trustees S.A. & ors v Director of the Serious Fraud Office [2014] EWCA Civ 1129, 31 July 2014, the Court of Appeal held that the inadvertent disclosure of a privileged document must be an obvious mistake in the eyes of a reasonable recipient before the court will refuse permission to use it. The mere fact that a document is privileged is not evidence of such an obvious mistake having been made, notwithstanding the scale of the disclosure process, nor the attempted reservations of the SFO's right to claim privilege. The case operates as a warning: the risk that a recipient will be able to rely on inadvertently disclosed documents is high. The main protection for parties will be to ensure that such documents are not disclosed. Appreciating the potential costs of the outcome of the case, Longmore LJ favourably commented on the potential adoption of the more simplistic Australian approach.

Robert and Vincent Tchenguiz (and certain associated parties) (the Tchenguiz parties) are claiming damages from the Serious Fraud Office (the SFO) for financial loss and reputational damage caused by its execution of arrest and search warrants (in the course of the investigation into the collapse of the Icelandic bank Kaupthing Bank hf) that were subsequently quashed in judicial review proceedings.

Given the existence of the antecedent investigation and judicial review proceedings and consequent volume of documents, it was a "very onerous exercise" for the SFO to undertake its disclosure in defending the damages claim. The process involved a team of over 100 reviewers. In providing each electronic tranche of disclosure the solicitors for the SFO stated in the covering letter that "the SFO [did] not intend that there should be any waiver of the SFO's rights to withhold from disclosure and/or inspection documents or information…which may have been inadvertently disclosed in these Proceedings".

After disclosure and inspection had simultaneously occurred, the SFO claimed privilege over four particular documents inadvertently disclosed: three on the basis of legal professional privilege (LPP), and one on the basis of public interest immunity (PII). The Tchenguiz parties applied to the court under CPR 31.20 for permission to use the privileged documents. CPR 31.20 provides that

"[w]here a party inadvertently allows a privileged document to be inspected, the party who has inspected the document may use it or its contents only with the permission of the court."

At first instance, Eder J refused permission to use any of the four documents, finding that that it would have been obvious to a reasonable solicitor (standing in the shoes of the solicitor who read the documents) that they had been disclosed by mistake. The judge's conclusion, in part, was based on the size and complexity of the disclosure (which meant that mistakes were inherently likely) and the reservation of rights in the covering letters.

When is there an obvious mistake?

The Court of Appeal allowed the appeal (in part) and permitted the Tchenguiz parties to use the three inadvertently disclosed documents the subject of the SFO's claim for LPP.

The court noted that legal professional privilege is a private right capable of waiver, and that it therefore could not be assumed that production of a privileged document was "inevitably" inadvertent. Rather, the "starting point", developed in the pre-CPR context, is that a party permitted to inspect documents is entitled to assume that those documents were voluntarily produced. Use of those documents would only be restrained where a production had been obtained by fraud or where it was obvious to the recipient of the disclosure that the document had been disclosed by mistake.

Per Al-Fayed v Commissioner of Police for the Metropolis [2002] EWCA Civ 780, a mistake is likely to be held to be obvious where a solicitor in receipt of documents in fact appreciates that a mistake has been made before making some use of the documents; or "where it would be obvious to a reasonable solicitor in his position that a mistake has been made". If the recipient solicitor had in fact given detailed consideration to the issue of whether or not the documents had been made available by mistake, and had honestly concluded that they had not, this would be a relevant and important (though not conclusive) factor against the court finding that there had been a mistake that would have been obvious to a reasonable solicitor. In the present case, the lawyers for the Tchenguiz parties had read the three documents in question, and had concluded in each case that the document had been intentionally disclosed. Applying Al-Fayed, the court commented that "once it is accepted that the person who inspected a document did not realise that it had been disclosed by mistake, despite being a qualified lawyer, it is a strong thing for the judge to hold that the mistake was obvious".

Emphasis was placed on the two-stage enquiry: first, whether the document was privileged; second, whether, even if privileged, it had obviously been disclosed by mistake. Of course, it is necessary for the document to be privileged. However, the privileged nature of the document alone will often not be enough to demonstrate that an obvious mistake was made in disclosing it – although the court accepted that the sensitive nature of a document may be enough in "some cases". The "general assertions" of privilege contained in the covering correspondence in this particular case were not sufficient to make it "obvious" that any privileged documents had been disclosed by mistake.

Finally, the court noted that parts of the documents had been redacted for relevance and/or privilege which suggested that they had been considered by a lawyer for the SFO, and that a decision had been taken to disclose the remaining contents.

Accordingly, overturning Eder J, the Court of Appeal found that there was no obvious mistake in the disclosure of the three LPP documents, and that they could be relied upon by the Tchenguiz parties.

Different Approach to Public Interest Immunity

The Court of Appeal considered itself not to be bound by the comments on PII in Al-Fayed, since it had not been the specific subject of argument or decision. PII was recognised as a "public duty" (rather than the private right to claim LPP) concerned with maintaining the confidentiality of documents which would harm the public interest if in the public domain.

The court held that, given the fundamentally different basis of PII, if a document which is the subject of a claim of PII is inadvertently disclosed, it is not necessary for the party seeking to restrain use of the document to show that the disclosure of the document occurred because of an obvious mistake. Rather, the court should simply consider, in accordance with well-established principles, where the balance of the public interest between confidentiality and due administration of justice lay in the circumstances of each case.

In light of the unchallenged certificate issued by the Director of the SFO (after the inadvertent disclosure had occurred) stating that he considered the public interest to be in favour of maintaining confidentiality of the document, Eder J's decision to refuse permission to use this document in the proceedings was upheld by the Court of Appeal.

Comment: With the Court of Appeal setting such a high bar for an "obvious mistake" sufficient to justify refusing a party permission to use an inadvertently disclosed document, the responsibility will fall more keenly on parties to ensure that inadvertent disclosure of privileged documents does not occur at the outset. This will likely incentivise parties to undertake their review for disclosure in a way that is cautious and error-free (rather than proportional to the scale of the required disclosure, which was expressly recognised as irrelevant in the case) and increase the time and associated cost of disclosure.

While proportionality may not be relevant when considering the documents in the eyes of the recipient solicitor under the traditional test, it is difficult to reconcile this overall approach with the focus and overarching spirit of the Jackson reforms. Lord Justice Longmore recognised this discrepancy, and commented favourably on the more simplistic Australian approach to cases of inadvertent disclosure. In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46, the High Court of Australia declined to follow the English authorities on obvious mistake. Instead, relying on case management powers directed at the "just, quick and cheap resolution of the real issues", the court held that where a privileged document was inadvertently disclosed, the court should ordinarily permit the correction of the mistake and order the return of the document. Such a rule would prevent costly satellite litigation as occurred in this case, generate certainty around solicitors' obligations in such cases and encourage a more proportionate approach to review in the disclosure process more generally due to the reduced penalty of any inadvertent disclosure