England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Hon Mr Justice Lewison
HC07C00978

		Royal Courts of Justice Strand, London, WC2A 2LL
		06/06/2008

Lord Phillips of Worth Matravers LCJ:

This is the judgment of the Court.

Introduction.

1. This appeal is an incident in a battle between two groups of companies that compete in the provision of pay TV in the United Kingdom. It is common ground that, for present purposes, no distinction falls to be made between individual members of each group. Accordingly we will describe the protagonists simply as Sky and Virgin, without attempting to identify which individual companies are involved.
2. The battle is being conducted in three separate sets of proceedings. In each Virgin is alleging that Sky is offending against rules designed to ensure, for the benefit of consumers, that competition is fair. They are as follows:

i) 'The High Court Proceedings' : the Action in which this appeal is brought. It was commenced on 12 April 2007 when Virgin brought a claim alleging that Sky was abusing a dominant position contrary to Article 82 EC and section 18 of the Competition Act 1998. One issue in these proceedings is the motive for and the effect of the acquisition by Sky in November 2006 of a 17.9% shareholding in ITV.

ii) 'The Ofcom Review': an investigation being carried out by Ofcom (the Office of Communications) into the Pay TV industry. This was initiated pursuant to a request made on 16 January 2007 by Virgin and three other pay TV operators. They have alleged anti-competitive behaviour by Sky. Ofcom is carrying out a consultation in relation to these allegations, and in particular to the allegations made by Virgin in the High Court Proceedings, and may decide to make a market investigation reference to the Competition Commission ('CC').

iii) 'The CAT Proceedings': The CC investigated the acquisition by Sky of the 17.9% interest in ITV and made a Report. In accordance with recommendations in that Report the Secretary of State for Business, Enterprise and Regulatory Reform decided to impose a partial divestment of Sky's shareholding to a level below 7.5%. Both Sky and Virgin have, pursuant to section 120 of the Enterprise Act 2002, each made an application for a review of the CC's Report and the Secretary of State's decision. Each has been granted permission to intervene in the other's application. Sky is contending that the requirement that it be divested of part of its shareholding in ITV is unjustified. Virgin is contending that the divestment should be total.

3. Sky and Virgin have been required to make disclosure of relevant documents in the High Court Proceedings pursuant to the provisions of Part 31 of the CPR. This was done by electronic exchange of a large number of documents on 25 March 2008. CPR 31.22 provides:

"(1) A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where-

(a) the document has been read to or by the court, or referred to, at a hearing which has been held in public;

(b) the court gives permission; or

(c) the party who disclosed the document and the person to whom the document belongs agree."

Many of the disclosed documents are, however, of such commercial sensitivity ('the sensitive documents') that the parties have agreed to put in place exceptional measures of a kind now well established where disclosure of commercial secrets is concerned. Disclosure of the sensitive documents will be restricted to identified external legal advisers who will give express undertakings not to disclose them or their contents to anyone, including their own clients, and only to use them for the purpose of the High Court Proceedings. It has been implicit in the argument of counsel for both parties that these undertakings will be subject to the power of the court to give permission for a document, or the information in it, to be used for a purpose other than that for which it was disclosed, in accordance with CPR 31.22(1)(b).

4. Sky contend that this agreement does not go far enough. They submit that if lawyers acting in the High Court Proceedings, who have seen the sensitive documents, act in either of the other sets of proceedings they will be unable to avoid, in the manner in which they represent their clients or in the advice that they give to their clients, being influenced by the knowledge that they have acquired from the sensitive documents. This alleged problem does not arise in the case of Sky's lawyers, for Sky have chosen to instruct different lawyers to represent them in the High Court Proceedings from those instructed in relation to the CAT Proceedings. Virgin, however have instructed the same solicitors, Ashurst, to represent them in all three sets of proceedings. Of that firm, two partners, Ben Tidswell and Nigel Parr, are currently acting in both the High Court Proceedings and the CAT Proceedings. The same is true of one of their counsel, Nicholas Green QC. These lawyers have not yet seen the sensitive documents. Virgin have made it plain that there are also individual lawyers who are representing them both in the High Court proceedings and the Ofcom Review, although they have not disclosed the identity of these.
5. On 19 March 2008 Sky applied for an order restricting inspection of their sensitive documents, which amount to 89% of the documents disclosed in the High Court Proceedings, to lawyers who are not acting for Virgin in the Ofcom Review or the CAT Proceedings. On 4 April 2008 Lewison J dismissed this application. He gave permission to appeal, however, because of the unusual nature of the facts of this case and of the order sought. We heard the appeal on 14 May and, at the end of the hearing, dismissed it, stating that we would give our reasons later. These are those reasons.

The implications of the order sought

6. Not only is the order sought unusual it is, so far as we are aware, without precedent in this jurisdiction. Its effect would be that Virgin would be prevented from continuing to use the individual lawyers of their choice in more than one set of proceedings. The timing of the application would make this particularly serious. The High Court Proceedings are far advanced. Witness statements are due to be exchanged on 20 June 2008. Sky and Virgin's applications to the CAT are due to be heard, concurrently, early next month. The Ofcom Review may lead to a reference to the CC which may last for up to two years. The partners of Ashurst common to the High Court Proceedings and the CAT Proceedings, are their senior litigation partner and their senior competition partner. Mr Green is counsel who enjoys a high reputation in the field of competition law. If these three lawyers are to play a meaningful part in the High Court Proceedings, they must see the sensitive documents that have been disclosed. Yet, if they do so, the order sought will preclude them from further providing the benefit of their services to Virgin in relation to the other two sets of proceedings.

The judgment

7. Lewison J was referred by counsel for Sky to a number of authorities, but was not persuaded that they supported Sky's entitlement to the relief claimed. He held that Sky were adequately protected by the Civil Procedure Rules and the additional safeguard which would be imposed by the confidentiality undertakings that Virgin's lawyers were prepared to enter into. He did not consider that there was any other than a fanciful risk that those lawyers would make any unauthorised use of the information that they might glean from the disclosed documents. The order sought would be "extremely disruptive" of trial preparations in the High Court Proceedings and it would be disproportionate to require Virgin to change their legal team.

Sky's submissions

8. Mr Glick QC submitted, on behalf of Sky, that the duty not to use disclosed documents for any purpose other than that for which they are disclosed is a duty of confidence that does not differ in principle from that which arises in other situations of confidentiality. That duty could have the effect of precluding a solicitor or other agent from acting for a party whose interests were in conflict with those of the party who had given disclosure.
9. Mr Glick referred us to a number of authorities in support of this proposition. The earliest, and the most relevant of these, was Riddick v Thames Board Mills Ltd [1977] 1 QB 881. That action was one of a series brought by a disgruntled ex-employee against the company that had employed him. He had been summarily dismissed and had been escorted from the premises of his employers. In the first action he claimed damages for wrongful arrest and false imprisonment based on the latter conduct. That action was settled on terms that included the withdrawal of the allegations of wrongful arrest and false imprisonment. The plaintiff then brought a second action for damages for defamation "flowing from the wrongful manner" of his dismissal. That action was struck out on the basis that it was in respect of the same matters that had been the subject of the first action. He then brought a third action, again for defamation, acting in person. This was based on an internal report to the defendant's chief personnel manager, made after his dismissal, which alleged that he had not been up to his job. This had come to the plaintiff's knowledge as a result of being disclosed in the earlier litigation.
10. The action was allowed to proceed, despite the defendant's attempt to strike it out, and succeeded. The jury awarded damages of £15,000, wrongly reflecting in part, as the Court of Appeal held, the consequences of the plaintiff's dismissal. The Court of Appeal allowed the appeal, however, on a more fundamental point. The plaintiff should not have been permitted to make use of the memorandum disclosed in the earlier litigation to found his claim for defamation. In giving the leading judgment, Lord Denning MR observed at p. 896:

"The principle was stated in a work of the highest authority 93 years ago by Bray J., Bray on Discovery, 1^st ed. (1885), p.238:

'A party who has obtained access to his adversary's documents under an order for production has no right to make their contents public or communicated them to any stranger to the suit:…nor to use them or copies of them for any collateral object… If necessary an undertaking to that effect will be made a condition of granting an order:…'

Since that time such an undertaking has always been implied, as Jenkins J. said in Alterskye v. Scott [1948] 1 All E.R. 469, 471. A party who seeks discovery of documents gets it on condition that he will make use of them only for the purposes of that action, and no other purpose."

11. Stephenson LJ gave judgment to similar effect, stating at p. 901 that the obligation not to make ulterior use of a disclosed document was owed both to the party giving discovery and to the court. He added, however, at p. 902:

"There may be cases in which a plaintiff would be justified in bringing an action on a document disclosed in an earlier action. I do not say that it could never be done without abusing the process of the court. But generally speaking it would be an abuse of its process and in the circumstances of this case the plaintiff's use of this memorandum is an improper use which the court should not countenance."

12. Waller LJ agreed that the use of the memorandum to found a claim in defamation had been an abuse of the process of court. He commented at p. 912:

"In my opinion it is highly desirable that there should be no discouragement to full and frank disclosure on discovery. If there be a risk that disclosures may produce new causes of action parties may be deterred from disclosing the document."

13. Riddick was approved by the House of Lords in Home Office v Harman [1983] AC 280. In that case a solicitor to a party made ulterior use of documents disclosed by the opposing party. The documents had been read out in open court. A majority of their Lordships held that, despite this fact, the use of the documents had been a contempt of court. In the course of his speech, Lord Keith of Kinkel, who was one of the majority, differed from the observations of Stephenson LJ referred to above, as to the nature of the obligation that had been breached. He said at p. 308:

"The implied obligation not to make improper use of discovered documents is, however, independent of any obligation existing under the general law relating to confidentiality. It affords a particular protection accorded in the interests of the proper administration of justice. It is owed not to the owner of the documents but to the court, and the function of the court in seeing that the obligation is observed is directed to the maintenance of those interests, and not to the enforcement of the law relating to confidentiality."

14. Lord Scarman, one of the minority, speaking for himself and Lord Simon of Glaisdale, had some difficulty with the principle. He observed at p. 319:

"We turn now to another proposition advanced on behalf of the respondent. Counsel formulated the implied undertaking as follows: not without leave of the court or the other party to use the other party's documents as disclosed on discovery for any purpose other than the immediate purposes of the action for which they have been disclosed. We feel some difficulty about the words we have italicised. If the undertaking is to the court (as it is common ground it is) the other party cannot arrogate the power to release (and yet it is conceded that such other party may waive what would be a 'civil' contempt). On the other hand, how can the court fairly relieve from the undertaking if the party making discovery did so in reliance that the document would only be used for the purpose of litigation?"

15. In Crest Homes Plc v Marks [1987] 1 AC 829, giving the only speech, with which the remainder of the House agreed, Lord Oliver of Aylmerton, at p. 854, addressed the question that had puzzled Lord Scarman:

"…the implied undertaking applies not merely to the documents discovered themselves but also to information derived from those documents whether it be embodied in a copy or stored in the mind. But the implied undertaking is one which is given to the court ordering discovery and it is clear and is not disputed by the appellants that it can, in appropriate circumstances, be released or modified by the court."

16. Mr Glick accepted that the lawyers acting for Virgin were well aware of the duty not to make use of disclosed documents for an ulterior purpose and made it plain that he did not suggest that any of them would deliberately do so in the proceedings with which we are concerned. He submitted, however, that the court should also guard against the risk of inadvertent use of the documents. In this context he referred us to Bolkiah v KPMG [1999] 2 AC 222. In that case the issue was whether a firm of accountants, that had been employed by the plaintiff and thereby acquired highly confidential information about his affairs, could, by erecting 'Chinese walls', properly accept instructions from the Government of Brunei which was investigating those affairs. In the course of his speech Lord Millett said this about the duty of a solicitor in such circumstances:

"The extent of the solicitor's duty

Whether founded on contract or equity, the duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential not merely to take all reasonable steps to do so. Moreover, it is not merely a duty not to communicate the information to a third party. It is a duty not to misuse it, that is to say, without the consent of the former client to make any use of it or to cause any use to be made of it by others otherwise than for his benefit. The former client cannot be protected completely from accidental or inadvertent disclosure. But he is entitled to prevent his former solicitor from exposing him to any avoidable risk; and this includes the increased risk of the use of the information to his prejudice arising from the acceptance of instructions to act for another client with an adverse interest in a matter to which the information is or may be relevant."

Mr Glick submitted that these words were equally applicable in the present context.

17. Mr Glick submitted that lawyers with knowledge of the contents of the sensitive documents would inevitably be influenced by this knowledge, if only sub-consciously, in advising Virgin and acting for them in the CAT Proceedings and the Ofcom Review. In these circumstances they could not properly act in those proceedings. The position was similar to that which arose in Adex International v IBM ( Transcript 17 November 2000). In that case Judge Hallgarten QC, sitting in the Central London County Court, held that solicitors who had acted for one claimant in concluding a settlement on confidential terms could not properly act for another claimant, with a similar claim against the same defendant. This was because the solicitor would be unable to put out of his mind the terms to which the defendant had been prepared to agree in respect of the first claimant when advising the second claimant.
18. Mr Glick also relied upon the decision of the Court of Appeal of New Zealand in Carter Holt Forests Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343. Solicitors and counsel had acted for a claimant in mediation proceedings with a defendant in respect of which they had signed a comprehensive confidentiality agreement. The mediation resulted in a settlement. They were then instructed by another claimant in respect of a very similar dispute against the same defendant. The Court of Appeal held that because there was a risk that the lawyers would make use of confidential information acquired in the earlier proceedings in the subsequent action, they should not be permitted to continue to act. In the course of giving the judgment of the court, Blanchard J said:

"Certainly a party seeking the exclusion of the other side's legal adviser must first show that there is an appearance of risk, going beyond the remote or merely fanciful, of conscious or unconscious use or disclosure by the lawyer of something relevant to the current dispute of which the lawyer gained knowledge as a result of participation in an earlier mediation. But if that threshold is reached, it is then for the lawyer to demonstrate that in fact no such risks exists or that, if it does, no damage, other than de minimis, could possibly result from use or disclosure."

Mr Glick submitted that this passage could properly be applied to the facts of the present case.

Virgin's submissions

19. Sir Sydney Kentridge QC for Virgin accepted that there was likely to be information in the sensitive documents that would be relevant to the CAT Proceedings and the Ofcom Review. He submitted, however, that the lawyers with knowledge of that information would be well aware of their duty not to use that information without the permission of the Court. The analogy that Mr Glick had drawn between solicitor and own client confidentiality and the duty not to make ulterior use of disclosed documents was not valid. The difference was that the court had a discretion under CPR 31.22 to permit disclosed documents to be used for a purpose other than the litigation in which they were disclosed. It was not likely that, on the facts of the present case, the three lawyers involved in both the High Court Proceedings and the CAT Proceedings would have occasion to deploy information gained from the sensitive documents in the CAT Proceedings. It was possible to envisage, however, circumstances when they might wish to do so. It was desirable that, should such circumstances arise, they should be in a position to apply to the court for permission to place sensitive documents, or information contained in them, before the CAT.

Discussion

20. We start with the proposition that it is desirable that a litigant should be free to instruct the lawyer of his choice. This is particularly true if the lawyer is already acting for the client and the client wishes the lawyer to continue to act in a related manner. The knowledge that Mr Tidswell, Mr Parr and Mr Green must have acquired about Virgin's own position in the context of the High Court Proceedings, makes it desirable, and economical, from Virgin's viewpoint that they should also be able to act for Virgin in the CAT Proceedings and this may also be true of them or other lawyers, in relation to the Ofcom Review.
21. We do not accept Mr Glick's submission that the duty not to make ulterior use of disclosed documents is identical in principle to the obligation of confidentiality that exists between a solicitor and his own client. The difference is that in the former case the court can give permission for the use of a disclosed document for a purpose other than the action in which it was disclosed. This is an important distinction in the context of the present case. The absolute terms of the judgment of Lord Denning in Riddick were subsequently qualified by statement of Lord Oliver in Crest Homes and by CPR 31.22. Riddick was a case of extreme facts. The plaintiff was pursuing an almost obsessive campaign against his previous employers. The defamation action that he had sought to start as the third set of proceedings was in respect of a publication that had not been widely disseminated and which had caused him little damage. It would not be right to treat Riddick as authority for the proposition that, if discovery discloses that the defendant has caused the claimant an injury other than that in respect of which the action has been brought, it will never be appropriate for the court to permit the claimant to seek redress in respect of it. In Riddick itself, at p.903, Stephenson LJ suggested that the plaintiff might properly have sought to use the memorandum, once disclosed, by applying for permission to amend his claim in the first action so as to add the claim eventually asserted in the third action.
22. The passage in the speech of Lord Millett in Bolkiah v KPMG relied upon by Mr Glick cannot be applied to a solicitor who has obtained information from an opponent by the process of disclosure. It is usually enough to rely upon the recognition by a solicitor of the duty not to make any ulterior use of information obtained by disclosure. Adex International was correctly decided, but it is a rare example of a situation where a solicitor was precluded from acting for a different claimant against the same defendant in respect of a similar claim as a result of confidential information obtained about the defendant in the earlier proceedings. The approach of the Court of Appeal of New Zealand in Carter Holt Harvey Forests was adopted in a case involving an express confidentiality agreement in mediation. It is not an approach that can be generally applied whenever information has been obtained by lawyers in a case as a result of disclosure.
23. The distinction between the duty of confidentiality that exists between solicitor and client and the duty that arises in respect of information obtained from an opponent in the course of litigation was made by Giles A.S.P. in the Federal Court of Canada in Merck & Co v Interpharm [1992] 3 F.C. 774, a decision relied upon by Sir Sydney that concerned information obtained as a result of an Anton Piller order. Dealing with the effect of the implied undertaking to the court not to make ulterior use of such material, Giles A.S.P. said this:

"Solicitor and client privilege is one of the basic principles which permit the operation of our justice system and public confidence in it. In order to support the public interest in the inviolability of the solicitor and client relationship the courts have imposed great inconvenience and have overridden without question personal rights such as the right of a person to choose his own counsel. In this case there is no suggestion that a lawyer who once acted for the defendant is now with the plaintiffs' firm. There is no suggestion of a solicitor and client relationship having been established between the defendants and anyone at Gowling's. The public interest in solicitor and client relationship is not engaged.

In my view the implied undertaking would be most impractical if it resulted in an ability to remove from a case any solicitor who was bound by an implied undertaking. The implied undertaking is not of sufficient public interest when balanced against the right of a party to choose his own solicitors and the public interest in the efficient administration of justice to require the court to disqualify any solicitor who might wrongly deploy information subject to the undertaking. If a solicitor fails to observe the undertaking the remedy is to cite him for contempt, not to remove him.

A lawyer who takes cases regularly must have acquired a great deal of information subject to implied undertakings. In these days of specialized education and long work hours for junior lawyers, it is possible that a significant percentage of a lawyer's general knowledge will have been acquired in his practice of law, there having been little other opportunity for him to acquire the same. It is equally possible that a large portion of that general knowledge will be subject to implied undertakings. If the defendant's submissions are correct, few lawyers who have been called for any length of time will be able to take part in litigation. It is to be remembered that the undertaking is to the Court and is not limited to deploying information in cases involving one or more of the same parties."

We endorse those observations.

24. Turning to the facts of this case, we agree with Mr Kentridge, and with Lewison J, that it is unlikely that Mr Tidswell, Mr Parr and Mr Green will wish, in the CAT Proceedings to make use of information obtained from the sensitive documents. Nor did Mr Glick persuade us that they were likely to find themselves in a position where their conduct in the CAT Proceedings was, consciously or unconsciously, influenced by the knowledge of such information. The CAT Proceedings are judicial review proceedings. The relevant overlap between the issues in those proceedings and the issues in the High Court Proceedings appears to be as to Sky's motive for acquiring the shareholding in ITV. As to that issue, Virgin are supporting the conclusions reached by the CC and the Secretary of State. They rely on these conclusions when contending that the Secretary of State did not go far enough in his reaction to Sky's conduct. No witnesses will be called, so there will be no question of information in the sensitive documents being used, consciously or sub-consciously, in cross-examination. The judge was right to hold that the risk that information disclosed in the High Court Proceedings would be improperly used in the CAT Proceedings was fanciful.
25. For this reason alone we consider that there is no justification for preventing the three lawyers who Virgin have instructed to represent them both in the High Court Proceedings and the CAT Proceedings from seeing the sensitive documents that have been disclosed in the former proceedings. Sky's application is only possible because of the special arrangements that have been made to restrict disclosure to external lawyers. Those arrangements have been made because the documents are commercially sensitive. But for that sensitivity disclosure would have been made to the parties themselves and to their in-house lawyers. They would then necessarily have carried that knowledge with them when participating in the other sets of proceedings. We can see no reason why the external lawyers should not be in the same position.
26. As for the Ofcom Review, Virgin (with others) made submissions which led to Ofcom undertaking the review, and has made further submissions in response to the consultation. However, Ofcom's process being investigative, the initiative lies with it. Ofcom, as regulator, is entitled to have all Sky's material documents in question in any event, and we were told, and would in any event assume, that it has obtained from Sky all such documents as it considers relevant to the issues arising on its review. It will make such use of them as it thinks appropriate, and the same will be true of the CC, if Ofcom refers the matter to it, subject to compliance with sections 237 and following of the Enterprise Act 2002, and other relevant legislation, which impose constraints on the publication by a regulator such as Ofcom of confidential information. Regulators and the CAT are accustomed to dealing with issues of this kind in a practical way. The evidence shows that there has been mutual disclosure of confidential submissions, on a confidential basis, as between Sky and Virgin.
27. The judge did not deal in terms with the position as regards the Ofcom Review, but it seems to us that he was right, implicitly, to reject Sky's contention that there was a material risk of misuse of Sky's confidential documents in relation to it, if lawyers within the confidentiality ring for the High Court Proceedings also act for Virgin in relation to the Ofcom review. Mr Glick was unable to suggest any practical example of a way in which such a risk might arise in relation to the Ofcom Review, any more than he had as regards the CAT Proceedings. Looking into the future, it seems to us equally unjustified to assume that, if there is a reference to the CC, there will be any risk of misuse of the documents in relation to that. It is certainly no more than a speculative and fanciful basis, at this stage, for contending that the possibility of a reference to the CC gives rise to such a risk of misuse that Mr Parr, Mr Tidswell and Mr Green must be kept out of the confidentiality ring as regards the Sky protected documents disclosed in the High Court Proceedings.
28. There is a further point. Each set of proceedings is concerned with ensuring fair competition in relation to the supply of pay TV. That aim justifies the requirement that the parties give disclosure in the High Court Proceedings. It is in the public interest that the court should have regard to the contents of the parties' confidential documents, in so far as these are material. It seems to us that the same public interest would be served by the tribunals in the other sets of proceedings having regard to the information in those documents, in so far as material in those proceedings. Indeed, had the documents been disclosed to the parties themselves in the High Court Proceedings, it would have seemed sensible for them to agree that each should be free to deploy the information in them in the two other sets of proceedings.
29. In the unlikely event that information in the sensitive documents were to suggest that the CAT, Ofcom or the CC were proceeding on a false basis in one of the other sets of proceedings, it seems to us desirable that the lawyers should be aware of this and in a position to apply to the High Court for permission to draw the documents in question to the attention of the relevant tribunal. When we asked Mr Glick why it was undesirable that they should be able to do so, his reply was that this would give Virgin an unfair advantage over Sky, who had instructed different lawyers in the different sets of proceedings. We do not know why Sky have chosen to take this course, but we do not see that the fact that they have done so can properly require the court to order that Virgin should do the same.
30. In a rare case, the fact that documents have been disclosed to solicitors acting for a party in one set of proceedings might conceivably preclude those solicitors from acting for a different party in another set of proceedings. We find it hard to conceive of circumstances where disclosure in one set of proceedings would preclude lawyers from acting in other proceedings between the same parties.
31. It was for all these reasons that we dismissed this appeal at the conclusion of the hearing.