England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Queen's Bench Division, Leeds District Registry
His Honour Judge Klein (sitting as a High Court Judge)
C50LS538

		Royal Courts of Justice Strand, London, WC2A 2LL
		19/07/2017

Lord Justice Jackson :

1. This judgment is in eight parts, namely:

Part 1 – Introduction	Paragraphs 2 – 5
Part 2 – The facts	Paragraphs 6 – 17
Part 3 – The present proceedings	Paragraphs 18 – 25
Part 4 – The appeal to the Court of Appeal	Paragraphs 26 – 29
Part 5 – The law	Paragraphs 30 – 34
Part 6 – Inadvertent disclosure	Paragraphs 35 – 38
Part 7 – Was the mistake obvious?	Paragraphs 39 – 50
Part 8 – Decision	Paragraphs 51 - 57

Part 1 – Introduction

2. This is an appeal by the defendants in ongoing litigation against an interlocutory judgment refusing to order the deletion of a privileged email which had been disclosed to the claimants. The issue in this appeal is whether the judge correctly applied the legal principles governing inadvertent disclosure.
3. The claimants in the litigation and respondents in the present appeal are Atlantisrealm Limited. I shall refer to them as "Atlantisrealm". The defendants in the litigation and appellants in the present appeal are Intelligent Land Investments (Renewable Energy) Limited. I shall refer to them as "ILI".
4. Atlantisrealm's solicitors are Newtons. ILI's solicitors are Goodman Derrick LLP, to whom I shall refer to as "GD". During 2014 ILI's solicitors were Shepherd and Wedderburn to whom I shall refer as "SW".
5. After these introductory remarks I must now turn to the facts.
Part 2 – The facts

6. ILI and its subsidiaries are in the business of constructing and operating onshore wind farms. Two of its subsidiaries in 2014 were ILI (Low Waterhead) Limited and ILI (Cleughhead) Limited. I shall refer to those two companies as respectively "Low Waterhead" and "Cleughhead". Those two subsidiary companies embarked upon developing wind farms at the two locations in Lanarkshire from which they took their names.
7. By a share purchase agreement dated 7^th April 2014, ILI agreed to sell to Atlantisrealm the entire issued share capital of Low Waterhead and Cleughhead. Schedule 1 to the share purchase agreement contained warranties. Clause 1.11 of the warranties provided:

"Cleughhead has the necessary rights and consents to develop, construct and operate an onshore windfarm which is eligible for participation in the FIT scheme."

8. Clause 2.11 of the warranties provided:

"Low Waterhead has the necessary rights and consents to develop, construct and operate an onshore windfarm which is eligible for the participation in the FIT scheme."

9. Following completion of the purchase, Atlantisrealm brought proceedings in the Chancery Division of the High Court, claiming damages for breach of warranty. The essence of the claim was that Low Waterhead and Cleughhead did not have the necessary rights of way over land in order to deliver the turbines and other necessary components to site. ILI denied that there was any breach of the warranties, if properly construed.
10. ILI pleaded in its defence:

"11. In light of those matters and of the actual words used, the "necessary rights and consents to develop, construct and operate an onshore windfarm which is eligible in participation with the FIT scheme" meant such rights and consents as reasonable persons (equipped with the knowledge of AR and defendant) would have considered it necessary be in place when the SPA was made, excluding such rights and consents as AR knew were yet to be obtained.

12. But ILI –

i. Did not warrant the existence of those rights and consents which both parties knew had yet to be obtained.

ii. Did not warrant the existence of all rights and all consents which might become necessary as the project unfolded according to the particular decisions and solutions which AR devised or upon which the Council or other interested parties insisted in response to the matters mentioned in paragraphs 9 and 10(viii) above.

iii. Did not warrant that the wind turbines could be delivered to site at any particular cost.

13. For the avoidance of doubt ILI contends for the construction mentioned in paragraphs 11 and 12 above on two alternative bases:

i. The objective basis of construction: the meaning of the warranties is that which they would convey to a reasonable person having all the background knowledge available to the parties at the time of the contract.

ii. The shared subjective basis of construction: both parties shared the subjective understanding that the warranty bore the meaning set out in paragraphs 11 and 12 above. As a matter of law if both parties to a contract share a common subjective belief as to its meaning, then that is its meaning."

11. Atlantisrealm denied those paragraphs in its reply. The action was transferred to the Technology and Construction Court.
12. Disclosure took place in the autumn of 2016. ILI served its list of documents on 9^th September 2016. The list identified 4,891 documents. ILI provided those documents for inspection on 18^th October 2016.
13. Amongst those documents were many emails between SW and ILI. One of them was an email from John Morrison, a corporate solicitor at SW, to Mark Wilson, chief executive of ILI, dated 26^th March 2014. I shall refer to this as "the March email". Mr Morrison was commenting on the current draft SPA and Atlantisrealm's proposed amendments. Mr Morrison's final comment was:

"The only other point I had was that they have reinserted the warranty on the site having all necessary development rights which would in effect be a guarantee from ILI of the whole project, which is not acceptable and was not in the framework agreement."

14. This document, whilst not fatal to ILI's case, provided useful ammunition for Atlantisrealm in relation to the issue of what was the shared subjective understanding of the parties.
15. On 20^th January 2017 Mr Christopher Newton of Newtons wrote to Mr Nicholas Cook of GD concerning arrangements for a settlement meeting. In the last sentence he wrote:

"I don't know whether you have started your consideration of disclosure yet? The email below will be of interest to you."

Mr Newton attached a copy of the March email.

16. Mr Cook immediately responded, stating that the March email was privileged and had been disclosed inadvertently. He asked Mr Newton to delete all copies.
17. Mr Newton maintained that ILI had waived privilege in the March email. He refused to delete it. In those circumstances ILI applied for an injunction.
Part 3 – The injunction application

18. By an application notice issued on 13^th February 2017, ILI applied for an injunction (a) requiring Atlantisrealm to give up or destroy all copies of the March email and (b) restraining Atlantisrealm from using or referring to the email in the course of the proceedings.
19. Mr Cook of GD filed a witness statement in support of that application, explaining how the March email came to be disclosed. At paragraphs 6 to 8 he said:

"6. The Document mistakenly disclosed was one email out of a disclosure comprising a total of 4,891 documents. The reasonably large nature of this disclosure made it possible that mistakes could occur. To the best of my knowledge, the Document was the only email disclosed that attracted privilege, out of all 4,891 documents disclosed. For the record, during the disclosure exercise we specifically sought to exclude privileged Shepherd and Wedderburn emails, but to disclose those Shepherd and Wedderburn emails to which no privilege could be said to attach, rather than simply to exclude all Shepherd and Wedderburn emails, which would have been improper. In the region of 1,000 emails were excluded on the basis of privilege.

7. There were around 150 emails involving Shepherd and Wedderburn disclosed; as explained above, these emails were all intentionally disclosed as they were either common to the parties or were simply progressing elements of a transaction involving the parties and did not contain any element of advice. The Document clearly falls into a different category from those emails intentionally disclosed.

8. I will now explain the process by which the disclosure exercise was undertaken. Our client provided us with online access to its entire email folder relating to this transaction. There were 7,389 emails contained in this folder. We then undertook a "two-tier" review process, under which the initial review was conducted by a combination of 0-2 year PQE solicitors, and trainees. These junior fee-earners were instructed to categorise documents as "disclose", "privileged" or "not relevant", and to flag electronically every document which they were not entirely sure about, on grounds of either privilege or relevance. I then reviewed every flagged document, of which there were around 1,000 – 1,500. The Document was not one of them. I, in turn, flagged a handful of documents for discussion with Stephen Hornsby, the partner in charge of the case. At the end of the process, every document had been categorised as either disclosable, or not disclosable on the basis of privilege (primarily) or non-relevance. A list of all disclosable documents was automatically created (i.e. it was not prepared by hand, but generated by the computer), which became the schedule to the Defendant's disclosure list."

20. Mr Stephen Fallon of Newtons filed a witness statement in response to the application. He said that he was principally responsible for reviewing the documents disclosed. These included many emails passing between SW and Atlantisrealm. The March email was one of them. Mr Fallon formed the view that Atlantisrealm had waived privilege in relation to any advice contained in such documents.
21. Mr Newton of Newtons filed a witness statement stating that Mr Fallon had drawn the March email to his attention on 5^th December 2016. Mr Newton clearly regarded the email as significant. The email was circulated to the claimants and their witnesses. Those witnesses commented on it. In his witness statement for this application, Mr Newton said he did not believe that the disclosure of the March email was a mistake. He also said that he "assumed" Mr Cook had not seen it. It is not easy to reconcile those two comments. If Mr Newton genuinely believed that ILI and their solicitors had taken a deliberate decision to waive privilege in such a significant document, he would surely have expected Mr Cook to be aware of it. He would not have "assumed" that Mr Cook had not seen the document.
22. ILI's application came on for hearing before HH Judge Klein sitting in the Technology and Construction Court at Leeds, on 24^th February 2017. The judge noted that a junior lawyer had categorised the March email as "disclose", without flagging it for the attention of Mr Cook. That junior lawyer had not given evidence. The judge said at [20] - [21]:

"20. Because there is no evidence at all from the lawyer who initially considered the 2014 email and whose decision in fact it was which caused the 2014 email to be disclosed, it would be quite legitimate to infer that that lawyer made a deliberate and conscious (informed) decision to cause the 2014 email to be disclosed.

21. Put another way, and bearing in mind always that the burden is on the defendant to establish that the disclosure of the 2014 email was mistaken, I am not satisfied, on Mr. Cooke's evidence and in the absence of evidence from the lawyer in question, that, in the circumstances, in this case there was mistaken disclosure of the 2014 email, in the sense that Lord Justice Clarke meant mistake in Al-Fayed. I am not satisfied, on the limited evidence on the defendant's behalf, that, in this case, there was not a deliberate and conscious (informed) decision to disclose, which, on reflection by Mr. Cooke and others, was a disclosure made in error. So to my mind the application fails on this basis."

23. The judge went on to hold that if he was wrong about that, the mistake was not an obvious one. He reached that conclusion because he accepted the evidence of Mr Fallon. Accordingly he dismissed the application.
24. The judge added at the end of his judgment:

"23. But had the disclosure in this case been mistaken I would have concluded, in this case, that the document has not been used, in the sense Lord Justice Clarke contemplated in Al-Fayed. That a document disclosed by mistake has not been used is a second basis on which its deployment in litigation may be restrained.

24. On the hypothesis that the 2014 email had been disclosed by mistake, because it has not been used in the litigation I would next have had to consider whether it would, nevertheless, have been unjust or inequitable to grant an injunction. I do not think that it would have been unjust or inequitable to grant relief in such circumstances, but I do not need to say any more about that because, as I have indicated, on reflection I agree with Ms. Linklater that, in this case, the defendant has not established that the disclosure was mistaken and so I dismiss the application."

25. ILI were aggrieved by the judge's decision. Accordingly they appealed to the Court of Appeal.
Part 4 – The appeal to the Court of Appeal

26. By a notice of appeal dated 6^th March 2017, ILI appealed to the Court of Appeal on grounds which I would summarise as follows:

i) It was not open to the judge on the evidence to find that disclosure of the March email was deliberate.

ii) The judge ought to have held that the mistake was obvious.

iii) It was clear from Mr Newton's email of 20^th January 2017 that he was aware that the email had been disclosed by mistake.

27. Atlantisrealm served a respondent's notice arguing that they have now made use of the email. After such a long period of time, it would be unjust to prohibit use of the email.
28. The appeal was argued on 4^th July 2017. Mr Charles Hollander QC, who did not appear below, represented ILI. Ms Lisa Linklater represented Atlantisrealm, as she has done throughout the litigation. I am grateful to both counsel for their assistance.
29. Before tackling the issues in this appeal, I must first review the law.
Part 5 – The law

30. CPR rule 31.20 provides:

"Where 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."

31. In Al-Fayed & Ors v The Commissioner of Police for the Metropolis & Ors [2002] EWCA Civ 780 the Court of Appeal reviewed the authorities on the operation of that rule. Clarke LJ delivered the judgment of the court. He formulated the relevant principles as follows at [16]:

"i) A party giving inspection of documents must decide before doing so what privileged documents he wishes to allow the other party to see and what he does not.

ii) Although the privilege is that of the client and not the solicitor, a party clothes his solicitor with ostensible authority (if not implied or express authority) to waive privilege in respect of relevant documents.

iii) A solicitor considering documents made available by the other party to litigation owes no duty of care to that party and is in general entitled to assume that any privilege which might otherwise have been claimed for such documents has been waived.

iv) In these circumstances, where a party has given inspection of documents, including privileged documents which he has allowed the other party to inspect by mistake, it will in general be too late for him to claim privilege in order to attempt to correct the mistake by obtaining injunctive relief.

v) However, the court has jurisdiction to intervene to prevent the use of documents made available for inspection by mistake where justice requires, as for example in the case of inspection procured by fraud.

vi) In the absence of fraud, all will depend upon the circumstances, but the court may grant an injunction if the documents have been made available for inspection as a result of an obvious mistake.

vii) A mistake is likely to be held to be obvious and an injunction granted where the documents are received by a solicitor and:

a) the solicitor appreciated that a mistake has been made before making some use of the documents; or

b) it would be obvious to a reasonable solicitor in his position that a mistake has been made;

and, in either case, there are no other circumstances which would make it unjust or inequitable to grant relief.

viii) Where a solicitor gives detailed consideration to the question whether the documents have been made available for inspection by mistake and honestly concludes that they have not, that fact will be a relevant (and in many cases an important) pointer to the conclusion that it would not be obvious to the reasonable solicitor that a mistake had been made, but is not conclusive; the decision remains a matter for the court.

ix) In both the cases identified in vii) a) and b) above there are many circumstances in which it may nevertheless be held to be inequitable or unjust to grant relief, but all will depend upon the particular circumstances.

x) Since the court is exercising an equitable jurisdiction, there are no rigid rules."

32. In Rawlinson & Hunter Trustees SA & Ors v Director of the Serious Fraud Office (No 2) [2014] EWCA Civ 1129; [2015] 1 WLR 797 the Court of Appeal applied those principles in the long running litigation between Vincent Tchenguiz and the Serious Fraud Office. The detailed facts are not material. On the issue of obvious mistake, Moore-Bick LJ, giving the leading judgment, said this:

"15. In my view the finding of an obvious mistake cannot be sustained on the basis of the material before the court. Not all those who were employed by the VT parties to inspect the documents were solicitors or barristers, and most if not all of them were quite junior. Nonetheless, 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. Those reviewing the documents were engaged on an enormous task, in the course of which they had been required to consider many thousands of documents, some of which were, or at any rate may arguably have been, privileged. The judge laid some emphasis on the letters to which I have referred, but the essence of his thinking seems to have been that it was obvious that the document had been disclosed by mistake because it was obvious that it was privileged. That seems to me to confuse two things: whether the document was privileged and whether, even if privileged, it had obviously been disclosed by mistake. It is only if the court is satisfied of the latter that it will consider whether to prevent the use of the document in the litigation. No doubt in some cases the sensitive nature of the document will be enough to make it obvious that it has been disclosed by mistake, but often that will not be the case. Given the scale of the disclosure and the range of documents involved, I do not think that general assertions in correspondence that the SFO did not intend to waive privilege are sufficient to make it obvious that any document arguably privileged must have been disclosed by mistake."

33. Gloster and Longmore LJJ agreed with Moore-Bick LJ. Longmore LJ expressed regret, because he would have wished the law to allow greater indulgence when privileged documents were disclosed by mistake.
34. For present purposes I do not need to delve further into the jurisprudence on the law of discovery. I must now address the issues in this appeal, starting with the question of inadvertent disclosure.
Part 6 – Inadvertent disclosure

35. The judge did not indicate any disbelief of Mr Cook's evidence. That is unsurprising. Mr Cook's account of how GD carried out disclosure is in line with what one would expect in any case where people, rather than machines, are carrying out the disclosure exercise.
36. What happened was that a small team of trainees and junior lawyers carried out a preliminary sift. They identified documents which were obviously disclosable or obviously privileged and referred up to Mr Cook any documents about which they were unsure. One of those young lawyers made a mistake. He or she put the March email into the "disclosed" category. He or she ought either to have classified it as privileged or alternatively to have referred it to Mr Cook for a decision.
37. In my view (contrary to paragraph 20 of the judgment) the fact that the young lawyer who made the mistake has not given evidence is irrelevant. It is perfectly clear what happened. Neither Mr Cook, nor the relevant partner, nor the client ever took a considered decision to waive privilege in respect of the March email. That document appeared in Atlantisrealm's list of documents purely as the consequence of a mistake made by a junior lawyer.
38. I therefore conclude, contrary to the judge, that this was a case of inadvertent disclosure within the meaning of CPR rule 31.20. I must now turn to the question whether that mistake was obvious.
Part 7 – Was the mistake obvious?

39. Mr Hollander urged upon the court that it must have been obvious to Mr Fallon that the March email had been disclosed by mistake. I do not agree.
40. Mr Fallon gave an explanation for why he personally did not appreciate that there had been a mistake. ILI had disclosed a number of emails from SW. Mr Fallon thought this was based upon a decision to waive privilege. The judge accepted that evidence in paragraph 22 of his judgment.
41. In my view it is not open to this court to go behind that finding of fact. I shall therefore proceed on the basis that when Mr Fallon reviewed the disclosed documents, he did not appreciate that the March email had been disclosed in error.
42. The next significant event occurred on 5^th December 2016 when Mr Fallon had a meeting with Mr Newton. It is clear from Mr Newton's email that he appreciated the significance of the March email. He identified it as a crucial document to brandish at the opposition in the forthcoming settlement meeting. He or his firm also circulated the email to the client and their witnesses, so that everyone could comment on it in their witness statements.
43. Did Mr Newton appreciate that GD's disclosure of this significant document was a mistake? It is clear from his email of 20^th January 2016 that he did appreciate that fact. Mr Newton was drawing the email to Mr Cook's attention in the belief that Mr Cook was unaware of it. If there had been a deliberate decision to waive privilege in respect of such an important document, it is hardly likely that Mr Cook would have been unaware of it: see paragraph 21 above.
44. Mr Newton's witness statement on this issue is marred by contradiction and is unconvincing. The judge does not discuss that statement in his judgment. So in the case of Mr Newton (unlike Mr Fallon) there is no finding of the first instance judge upon which Ms Linklater can rely.
45. There was some debate at the hearing as to whether all that mattered was the opinion of Mr Fallon. He was the first solicitor to review the documents disclosed by ILI.
46. In Rawlinson at [15] Moore-Bick LJ referred to the understanding of "the person who inspected a document". In that case, however, the person conducting inspection did not put the relevant documents to a more senior colleague before acting upon them.
47. Mr Hollander points out that the "two solicitors" situation has not been considered in the authorities. He submits that we must address that issue, if (as we do) we reject his case in respect of Mr Fallon.
48. In my view, the facts of this case make it necessary to add a modest gloss to the principles formulated by the Court of Appeal in Al-Fayed and applied in Rawlinson. If the inspecting solicitor does not spot the mistake, but refers the document to a more percipient colleague who does spot the mistake before use is made of the document, then the court may grant relief. That becomes a case of obvious mistake.
49. In the present case there is very little evidence as to the internal dealings within Newtons. Such evidence as there is leads to the conclusion that Newtons must have actually spotted the mistake before putting the March email to use. I therefore come to the opposite conclusion from the judge.
50. I must now come to a decision on the appeal.
Part 8 – Decision

51. Where a party discloses privileged documents inadvertently and that mistake is obvious to the opposing party, the court has a discretion. The court may permit the receiving party to make use of the document or it may prohibit such use. See CPR rule 31.20 and Al-Fayed at [16]. As Clarke LJ observed at the end of that paragraph, since the court is exercising an equitable jurisdiction there are no rigid rules.
52. Atlantisrealm argue in their respondent's notice that they have now made extensive use of the March email. Their witnesses are well aware of it. Atlantisrealm would suffer and perceive an injustice if they are not permitted to use it at trial.
53. I do not accept that argument. All those matters on which Ms Linklater relies occurred after 5^th December 2016. That does not make it unjust to grant the injunction sought.
54. It is clear from the judgment at [23] - [24] that if the judge had discretion to restrain the use of the March email, he would have exercised that discretion in favour of ILI. In my view, this court should approach the exercise of discretion in the same way as the judge would have done.
55. Before parting with this case, I wish to add three general comments:

i) In the electronic age, even with the help of sophisticated software, disclosure of documents can be a massive and expensive operation. Mistakes will occur from time to time.

ii) When privileged documents are inadvertently disclosed (as is bound to happen occasionally), if the mistake is obvious, the lawyers on both sides should co-operate to put matters right as soon as possible.

iii) The disclosure or discovery procedure in any common law jurisdiction depends upon the parties and their lawyers acting honestly, even when that is against a party's interest. The duty of honesty rests upon the party inspecting documents as well as the party disclosing documents.

56. It should not be necessary for either the parties or the courts to devote their resources to resolving disputes of this nature between solicitors.
57. If Simon LJ agrees, this appeal will be allowed.

Lord Justice Simon :

58. I agree.