England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE SENIOR COURTS COSTS OFFICE

		Royal Courts of Justice Rolls Building Fetter Lane London, EC4A 1NL
		24/10/2014

MR JUSTICE ROTH:

Introduction

1. Eurasian Natural Resources Corporation Ltd ("ENRC") has applied pursuant to section 70 of the Solicitors Act 1974 ("SA 1974") for an order for the taxation of the bills delivered by its former solicitors, Dechert LLP ("Dechert"). Should that application before the costs judge (along with the detailed assessment of the bills if the application is granted) be heard in private? On 24 April 2014, in a short unreserved judgment, Master Haworth declined ENRC's request that the application be heard in private but gave permission to appeal.
2. The issue is clearly of importance for both parties. That is evident from the fact that for the hearing of this appeal, which took one day of court time, ENRC was represented by Lord Pannick QC, leading Richard Lissack QC, Benjamin Williams and Tamara Oppenheimer, whereas Dechert was represented by Charles Hollander QC, leading Simon Browne QC and Tony Singla.

The factual background

3. In December 2010, ENRC received a report from a whistleblower indicating that there may have been fraud involving some of its overseas operations. ENRC was at that time listed on the London Stock Exchange and it instructed outside lawyers to conduct an investigation. Initially, DLA Piper UK LLP was instructed but in April 2011 the partner there with conduct of the matter moved to Dechert and ENRC instructed Dechert to take over the investigation.
4. Following a leak of the whistleblower report and resulting articles in the press, the Serious Fraud Office ("SFO") contacted ENRC and reminded it of the so-called self-reporting process which they operate in such circumstances. ENRC and Dechert, together with ENRC's general corporate law advisors, Jones Day, held meetings with the SFO in late 2011, and ENRC thereafter agreed to a considerable expansion of the scope of Dechert's investigation as part of a possible self-reporting process. ENRC entered into a formal written retainer with Dechert in April 2011.
5. The scale and range of the expanded investigation is apparent from the level of Dechert's fees. In total, Dechert has billed ENRC over £16.3 million, of which some £11.7 million was invoiced in the period from 23 July 2012 to 11 April 2013. ENRC became increasingly concerned about the level of Dechert's fees and what it perceived to be serious over-charging. On 27 March 2013, ENRC terminated Dechert's retainer and instructed other lawyers. It is unnecessary to decide to what extent the decision to terminate Dechert's retainer was due to the level of its fees or made for other reasons.
6. Subsequent to termination of its retainer, Dechert submitted invoices in the total amount of some £5.1 million. ENRC agreed to pay those invoices in order to obtain a release of Dechert's lien over its files, in return for the express agreement by Dechert that it would not object to a detailed assessment of those costs. The balance of the £11.7 million had been paid prior to ending the retainer, and Mr Ehrensberger, the General Counsel of ENRC, explains in his witness statement that this was because the company was concerned not to do anything that might delay or jeopardise the self-reporting process with the SFO, or be perceived to be obstructing that process.
7. ENRC's application under sect 70 SA 1974 was issued on 18 October 2013. In opposition to that application, Dechert served in February 2014 detailed evidence from two partners and two associate solicitors employed by the firm. Those four witness statements, which in themselves exceed 220 pages, are accompanied by 13 lever arch files of exhibits. Altogether, Dechert's evidence gives what purports to be a very full account of the various practices at ENRC being investigated, identifying many of the individuals involved and describing the way they conducted themselves in response to Dechert's investigations.
8. It is not in dispute that much of Dechert's evidence comprises a mass of otherwise confidential and sensitive information which had come into its hands only as a result of its instruction by ENRC and the work done on ENRC's behalf. Subject to the considerations discussed below, this is information and comprises documents that would be covered by legal professional privilege ("LPP").
9. The SFO investigation has since developed into an active criminal inquiry. It is clear that if ENRC's application for taxation, and the detailed evidence served, were heard in public, the SFO would attend that hearing in order to glean information of assistance to its inquiry. For present purposes it can be assumed, and Dechert does not seriously dispute, that at least some of the material set out in Dechert's evidence could potentially and significantly prejudice the interests of ENRC in the SFO inquiry. Indeed, so concerned is ENRC about the disclosure of this information that it has made clear that if its application for taxation is not heard in private it will rather withdraw the application than proceed.

Section 70 of SA 1974

10. Sect 70 SA 1974 provides, insofar as material:

"(1) Where before the expiration of one month from the delivery of a solicitor's bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.

(2) Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment), order—

(a) that the bill be assessed; and

(b) that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.

(3) Where an application under subsection (2) is made by the party chargeable with the bill—

(a) after the expiration of 12 months from the delivery of the bill, or

(b) after a judgment has been obtained for the recovery of the costs covered by the bill, or

(c) after the bill has been paid, but before the expiration of 12 months from the payment of the bill,

no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the assessment as the court may think fit.

(4) The power to order assessment conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill."

11. In the present case, the application by ENRC was made within 12 months of the delivery of the bills but after the bills had been paid. Accordingly, the application falls under sect 70(3)(c) and it is necessary for ENRC to show "special circumstances". As explained above, Dechert has accepted that there should be a detailed assessment as regards the £5.1 million paid after the termination of their retainer. However, the burden is on ENRC to show special circumstances justifying such an assessment for the balance of about £6.6 million. ENRC's application therefore effectively involves two stages:

i) determination of whether there are special circumstances to order a taxation for the bills in the amount of c. £6.6 million, which cover work done in the period 17 May – 30 November 2012;

ii) detailed assessment of the bills submitted after termination of the retainer (in the amount of c. £5.1 million) and, depending on the answer to (a), of the earlier bills.

12. "Special circumstances" are not defined in the statute but have been considered in the authorities. The question whether special circumstances exist has been described as essentially a value judgment in which both the size of the bill and the fact that the bill called for an explanation are relevant factors: see generally Civil Procedure 2014, Vol 2, para 7C-118.
13. Prior to the coming into force of the Civil Procedure Rules ("CPR"), applications for detailed assessment were ordinarily heard in private. That changed with the CPR and it is common ground that they are now heard in public, albeit that it is only in a very rare case that anyone other than the parties chooses to attend. However, such an application, in particular as between a solicitor and its (present or former) client, is not litigation in the ordinary sense. It is appropriate to consider the background to this special jurisdiction of the court.
14. The power of the court to order a taxation of a solicitor's bill has its origins in the disciplinary control which the court exercised as part of its inherent jurisdiction over its own officers. That jurisdiction became subject to successive statutory provisions, culminating in the SA 1974 which now prescribes exclusive time limits for an application for taxation: see the historical exposition in the judgments of the Court of Appeal in Harrison v Tew [1989] QB 307 (appeal dismissed, [1990] 2 AC 523). Although now subject exclusively to statutory control, in substance it remains a form of regulation by the court of the conduct of its officers, which explains why there is no remotely equivalent regime applicable to the fees billed by other professionals.
15. In Pamplin v Express Newspapers [1985] 1 WLR 689, concerning a review by the court of a taxing master's decision on a party-and-party taxation following a libel action, Hobhouse J observed (at 694-695):

"Taxation is a hybrid procedure; it can include situations which are more administrative or supervisory than adversarial; but there can be no doubt that on a taxation inter partes arising out of civil litigation the proceedings are essentially adversarial. One party is claiming money from another. The outcome of the proceedings is a quantified monetary liability of one party to another."

I would respectfully add that the adversarial nature of an inter partes taxation is also indicated by the fact that it arises out of an order of the court establishing a liability of the one party to the other for costs. By contrast, a solicitor-and-own-client taxation, although of course adversarial in the literal sense that the two sides are arguing against each other, is more supervisory: it flows from the long-established jurisdiction of the court to supervise its officers, now subject to a detailed statutory regime.

Open justice

16. Dechert stresses the fundamental principle that the courts should sit in public. There can be no doubt that this is a basic principle of English law. However, although statements of high authority have repeatedly emphasised its importance, they have also referred to its potential limitation. In Al Rawi and Others v The Security Service [2011] UKSC 34, [2012] 1 AC 531, Lord Dyson JSC stated at [10]-[11]:

"There are certain features of a common law trial which are fundamental to our system of justice (both criminal and civil). First, subject to certain established and limited exceptions, trials should be conducted and judgments given in public. The importance of the open justice principle has been emphasised many times ...

The open justice principle is not a mere procedural rule. It is a fundamental common law principle. In Scott v Scott [1913] AC 417, Lord Shaw of Dunfermline (p 476) criticised the decision of the lower court to hold a hearing in camera as constituting a 'violation of that publicity in the administration of justice which is one of the surest guarantees of our liberties, and an attack upon the very foundations of public and private security.' Viscount Haldane LC (p 438) said that any judge faced with a demand to depart from the general rule must treat the question 'as one of principle, and as turning, not on convenience, but on necessity'."

17. Very recently, in A v BBC [2014] UKSC 25, [2014] 2 WLR 1243, Lord Reed JSC, with whose judgment the other members of the Supreme Court agreed, said at [23]:

"It is a general principle of our constitutional law that justice is administered by the courts in public, and is therefore open to public scrutiny."

He continued, at [27]:

"Since the principle of open justice is a constitutional principle to be found in the common law, it follows that it is for the courts to determine its ambit and its requirements, subject to any statutory provision. The courts therefore have an inherent jurisdiction to determine how the principle should be applied."

Lord Reed referred at [29] with approval to the recognition by Viscount Haldane LC in Scott v Scott at 437-438 that the principle is subject to exceptions. Viscount Haldane there stated:

"While the broad principle is that the Courts of this country must, as between parties, administer justice in public, this principle is subject to apparent exceptions, such as those to which I have referred. But the exceptions are themselves the outcome of a yet more fundamental principle that the chief object of Courts of justice must be to secure that justice is done. ... As the paramount object must always be to do justice, the general rule as to publicity, after all only the means to an end, must accordingly yield. But the burden lies on those seeking to displace its application in the particular case to make out that the ordinary rule must as of necessity be superseded by this paramount consideration. The question is by no means one which, consistently with the spirit of our jurisprudence, can be dealt with by the judge as resting in his mere discretion as to what is expedient. The latter must treat it as one of principle, and as turning, not on convenience, but on necessity."

18. In Ambrosiadou v Coward [2011] EWCA Civ 409, [2011] FLR 617, which concerned injunctive relief to restrain dissemination of information contained in an application previously made in proceedings between the parties in Greece, Lord Neuberger MR (with whose judgment Leveson and Pitchford LJJ agreed) said at [50]:

"As has been stated on many occasions, court hearings should take place in public and should be freely reported unless justice cannot be done on that basis in the particular case, and in that event, the court should ensure that the restrictions on access and reporting are the minimum necessary to enable justice to be done in that case."

Addressing the particular situation in that case, Lord Neuberger continued:

"In this case, we took the view that we should order that there should be no reporting of the contents of the [Greek court] application notice, whether or not mentioned in court, without the permission of the court or the written agreement of both parties (or their solicitors). On that basis, we could see no objection to the hearing proceeding in open court, on the basis that counsel could be expected to be able to avoid revealing any private information in their oral submissions. If, for some reason it had been necessary to do so, counsel could have asked the court to sit in private temporarily; if counsel had accidentally revealed any private information orally, the court could have made an appropriate order preventing its reporting."

19. The general rule as to public hearings is now set out in CPR r. 39.2 but, in accordance with the judicial statements set out above, that provision sets out exceptional circumstances where the court may depart from the general rule:

"39.2 General rule – hearing to be in public

(1) The general rule is that a hearing is to be in public.

…

(3) A hearing, or any part of it, may be in private if–

(a) publicity would defeat the object of the hearing;

(b) it involves matters relating to national security;

(c) it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality;

(d) a private hearing is necessary to protect the interests of any child or protected party;

(e) it is a hearing of an application made without notice and it would be unjust to any respondent for there to be a public hearing;

(f) it involves uncontentious matters arising in the administration of trusts or in the administration of a deceased person's estate; or

(g) the court considers this to be necessary, in the interests of justice."

The parties' contentions

20. Here, ENRC relies in particular on CPR 39.2(3)(c) and (g) together, on the basis that the greater part of the material in Dechert's evidence is subject to LPP and therefore confidential. ENRC submits that whilst LPP has by implication been waived to enable Dechert to place relevant material before the costs judge to resist the challenge to its bills, that waiver is limited to that particular purpose and does not constitute a general waiver of LPP. On the facts of the present case, it is in the interests of justice to preserve the confidentiality from any wider disclosure and thus protect the documents and information from scrutiny by the SFO.
21. Moreoever, the waiver of LPP is only as regards material that is relevant and necessary for Dechert to contest the application under sect 70 SA 1974. ENRC contends that much of the copious material in Dechert's evidence is not relevant either to the issue of special circumstances or, ultimately, the justification of the bills, and therefore not subject to any waiver of LPP at all. Lord Pannick for ENRC accepted that this is an issue for determination by the costs judge. However, if the hearing to determine relevance, and thus what material is covered by any waiver, were heard in public, then any ruling that some of the material remained fully confidential might prove otiose since the subject-matter would have been revealed in the course of the argument. On that basis, Lord Pannick relied in the alternative on sub-rule (3)(a): that publicity would defeat the object of the hearing.
22. For Dechert, it was submitted that by pursuing an application for taxation and arguing special circumstances, the implied waiver by ENRC of LPP as regards whatever was relevant for Dechert to oppose the application was complete. There was no basis for finding a limited waiver in circumstances where the solicitor already had all the documents in its possession. Limited waiver arises where a party holding privileged documents provides them to another for an expressly limited purpose: in that event, the disclosing party can restrict the use of the documents to the purpose for which they were being disclosed. But those are not the circumstances of the present case, nor can any special rule concerning an inter partes costs assessment here apply.
23. By its Respondent's Notice, Dechert also advanced an alternative ground for upholding the decision of the costs judge: that Master Haworth stated in a public hearing that he had read the evidence. I shall elaborate on that below.

Waiver of LPP

24. As ENRC emphasises, protection of LPP is also a central principle for the administration of justice. In R v Derby Magistrates' Court, Ex p B [1996] AC 487, Lord Taylor CJ, with whom the other members of the Appellate Committee of the House of Lords agreed, reviewed the authorities and explained (at 507D):

"The principle which runs through all [the cases] is that a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests."

Lord Taylor rejected the argument that LPP must be balanced against other considerations, since if that were so "the purpose of the privilege would thereby be undermined" in that the client could not be sure that his confidence would be maintained.

25. More recently, in R (Morgan Grenfell Ltd) v Special Commissioners [2002] UKHL 21, [2003] 1 AC 563, Lord Hoffmann (with whose opinion the other members of the Appellate Committee agreed) stated at [7]:

"… LPP is a fundamental human right long established by the common law. It is the necessary corollary of the right of any person to obtain skilled advice about the law. Such advice cannot be effectively obtained unless the client is able to put all the facts before the adviser without fear that they may afterwards be disclosed and used to his prejudice."

26. However, it is well recognised that as the privilege is that of the client, he is free to waive it. Such a waiver may be express or implied. The circumstances and potential scope of an implied waiver are at the heart of the present dispute.
27. In Lillicrap v Nalder & Sons [1993] 1 WLR 94, a solicitor was sued for alleged negligent advice regarding the purchase of a property for development. Since the solicitor admitted negligence, the critical issue was causation of loss and in that regard the solicitor wished to rely on previous retainers by the same client, in which he had ignored the solictor's advice, in order to resist the claimant's assertion that with proper advice he would not have bought the property. The Court of Appeal held that in bringing the proceedings the claimant had impliedly waived privilege as regards those prior transactions. Dillon LJ, adopted (at 99) the formulation of the scope of waiver set out by May J at first instance:

"A client who sues his solicitor invites the court to adjudicate the dispute and thereby, in my judgment, waives privilege and confidence to the extent that is necessary to enable the court to do so fully and fairly in accordance with the law including the law of evidence. I suspect that at the fringes each case will depend on its own facts. Normally the waiver will extend to facts and documents material to the cause of action upon which the plaintiff sues and the defendant's proper defence to that cause of action. The bringing of a claim for negligence in relation to a particular retainer will normally be a waiver of privilege and confidence for facts and documents relating to that retainer, but not without more for those relating to other discrete retainers."

Dillon LJ continued:

"The waiver can only extend to matters which are relevant to an issue in the proceedings and, privilege apart, admissible in evidence. There is no waiver for a roving search into anything else in which the Solicitor or any other solicitor may have happened to have acted for the clients. But the waiver must go far enough, not merely to entitle the plaintiff to establish his cause of action, but to enable the defendant to establish a defence to the cause of action if he has one. Thus, it would extend to matters under earlier retainers, … which established that the experience of the client, was, to the knowledge of the solicitor, such that the solicitor was not in breach of duty as alleged."

28. Russell LJ expressed the test as follows (at 101G):

"…by bringing civil proceedings against his solicitor, a client impliedly waives privilege in respect of all matters which are relevant to the suit he pursues and, most particularly, where the disclosure of privileged matters is required to enable justice to be done. This is another way of expressing the view that May J expressed in his judgment in the passage to which Dillon LJ has referred."

And Farquharson LJ said this (at 103A):

"A proper interpretation of the waiver in this case is, in my judgment, one that embraces not only the documents and advice arising from the [particular] transaction, but also documents or information otherwise subject to privilege which are relevant to the issues between the parties and which it would be unfair to exclude."

29. In NRG v. Bacon & Woodrow [1995] 1 All ER 976, a Dutch corporation began proceedings in negligence against its non-legal advisors regarding a purchase of share capital in three insurance companies. The defendants argued that by commencing those proceedings the claimant had impliedly waived privilege in respect of documents passing between it and its solicitors who effectively formed part, along with the defendants, of the advisory team. In his judgment refusing disclosure, Colman J considered (at 986) the nature of the implied waiver principle, in a passage subsequently approved by the Court of Appeal in Paragon Finance v Freshfields (see below):

"The true analysis of what the courts are doing in such cases of so-called implied waiver of privilege is, in my judgment, to prevent the unfairness which would arise if the plaintiff were entitled to exclude from the court's consideration evidence relevant to a defence by relying upon the privilege arising from the solicitor's duty of confidence. The client is thus precluded from both asserting that the solicitor has acted in breach of duty and thereby caused the client loss and, to make good that claim, opening up the confidential relationship between them and at the same time seeking to enforce against that same solicitor a duty of confidence arising from their professional relationship in circumstances where such enforcement would deprive the solicitor of the means of defending the claim. It is fundamental to this principle that the confidence which privilege would otherwise protect arises by reason of the same professional relationship between the parties to the litigation. The underlying unfairness which the principle aims to avoid arises because the claim is asserted and the professional relationship opened for investigation against the very party whose duty of confidence is the basis of the privilege. It is against the unfairness of both opening the relationship by asserting the claim and seeking to enforce the duty of confidence owed by the defendant that the principle is directed."

And Colman J added (at 987c):

"… as I have already explained, the foundation of the waiver is not merely that the assertion of privilege leads to the inaccessibility of evidence relevant to a defence. It is the inconsistency of the plaintiff on the one hand opening the professional relationship to the inspection of the court and on the other hand seeking to enforce confidentiality so as to exclude communications to which the professional relationship between the same parties has given rise."

30. In Paragon Finance v Freshfields [1999] 1 WLR 1183, the defendant solicitors had acted for the plaintiffs in a series of mortgage securitisation transactions and in obtaining related insurance. Subsequently, the plaintiffs sought to make claims under the policies which the insurers declined to meet. The plaintiffs instructed new solicitors who eventually compromised the claims, and then the plaintiffs commenced proceedings against the defendants for negligence. In those proceedings, the defendants inter alia contested causation and argued that the plaintiffs had failed to mitigate their loss. They sought disclosure of privileged documents between the plaintiffs and the new solicitors and counsel relating to the pursuit and settlement of the claims. The Court of Appeal reversed the decision of the judge to order such disclosure. In giving the judgment of the Court of Appeal, Lord Bingham stated (at 1188D-G):

"When a client sues a solicitor who has formerly acted for him, complaining that the solicitor has acted negligently, he invites the court to adjudicate on questions directly arising from the confidential relationship which formerly subsisted between them. Since court proceedings are public, the client brings that formerly confidential relationship into the public domain. He thereby waives any right to claim the protection of legal professional privilege in relation to any communication between them so far as necessary for the just determination of his claim; or, putting the same proposition in different terms, he releases the solicitor to that extent from the obligation of confidence by which he was formerly bound. This is an implication of law, the rationale of which is plain. A party cannot deliberately subject a relationship to public scrutiny and at the same time seek to preserve its confidentiality. He cannot pick and choose, disclosing such incidents of the relationship as strengthen his claim for damages and concealing from forensic scrutiny such incidents as weaken it. He cannot attack his former solicitor and deny the solicitor the use of materials relevant to his defence. But, since the implied waiver applies to communications between client and solicitor, it will cover no communication to which the solicitor was not privy and so will disclose to the solicitor nothing of which he is not already aware."

31. Thus, the Court held that by bringing the proceedings the claimants had impliedly waived any claim to LPP as regards communications with Freshfields while they were its clients, but not as regards communications with their subsequent solicitors. In reviewing the authorities, Lord Bingham observed that the language of Russell and Farquharson LJJ in Lillicrap must be read with some limitation by reference to the context of that case, and concluded (at 1194A-B):

"Fairness is an important part of the reason why a solicitor who is sued cannot be required to respect the confidentiality of his relationship with the client who is suing him; but, save as between the client and the solicitor he is suing, fairness is not the touchstone by which it is determined whether a client has or has not impliedly waived his privilege."

32. Mr Hollander, for Dechert, further relied on Quinn Direct Insurance Ltd v Law Society [2010] EWCA Civ 805, [2011] 1 WLR 308. The appellant ("Quinn") was the professional indemnity insurer of a firm of solicitors ("SBS"), in whose practice the Law Society intervened pursuant to its powers under the SA 1974. A number of claims were made against SBS by former clients and notified to Quinn in the year covered by the policy, which Quinn declined to meet on the ground of a fraud exception in the policy. Quinn sought an order that the Law Society should permit it to take copies of "all documents of [SBS] within [its] power and control" in order to consider whether it was obliged to indemnify the solicitor under the policy.
33. In his judgment (with which Rimer and Jackson LJJ agreed) Sir Andrew Morritt C stated, at [21]:

"It is clear that neither the Law Society nor the client of SBS is a party to the Policy. Accordingly Quinn can have no contractual claim to production of the privileged documents it seeks based on clause 6.2 a) 4) or any other provision of the Policy unless the client has consented either expressly or by implication from its claim against SBS. It follows that the refusal of the Law Society in the exercise of its public functions, to disclose the documents sought by Quinn can only be challenged by Quinn on public law grounds, namely that the Law Society is acting unlawfully in refusing to comply with Quinn's request. As I have pointed out, the request for production is a blanket request in respect of all documents but is only material in relation to privileged documents where privilege has not been waived by the client of SBS because no claim against SBS and by SBS under the Policy has been made. The Law Society claims to be not only entitled to withhold production of them but to be bound to withhold them to preserve client confidentiality in accordance with its primary concern to protect the interests of the former clients of SBS and in accordance with the Code of Conduct."

34. The Chancellor proceeded to hold that any duty on the solicitor vis-à-vis its insurer to disclose privileged material to its insurer cannot override the client's right to LPP, which only the client can waive, and this principle was not affected by the regulatory scheme under the statute. Accordingly, Quinn's application was refused.
35. In his judgment, the Chancellor noted, at [6]:

"There is no issue in respect of files in respect of transactions where the client has made a claim against SBS which has been notified to Quinn. In such a case the Law Society takes the view that the making of the claim constitutes a waiver of client confidentiality and privilege and has allowed Quinn to have access to those files. In addition copies of all bank statements of SBS have been provided to Quinn. As to the remainder of the documents of SBS in the possession of the Law Society it appears to be common ground that they all contain information confidential to one or more former clients of SBS whose privilege has not been waived."

However, that is no more than a recital of what had occurred and not a ruling on the scope of the implied waiver, which was not in issue. It is true that the Chancellor appears to approve of the view of implied waiver which the Law Society had taken (see at [29]), but the judgment goes no further than that. I do not find it of particular assistance on the issue I have to decide. Where there is an implied waiver by reason of proceedings brought against a solicitor, it is established that it extends to such documents concerning the advice and conduct of the solicitor as are relevant to his defence and, it seems to me, the solicitor must therefore be entitled to use them in such a manner as he fairly requires for the purpose of his defence. That will therefore include showing them to potential witnesses, experts, and his professional indemnity insurers.

36. It has also been held that the implied waiver will cover advice by counsel instructed by the solicitors in the matter which gives rise to the claim: Hellard v Irwin Mitchell [2012] EWHC 2656 (Ch). That is unsurprising. Since it is very relevant to the defence of a solicitor facing a professional negligence claim that he has relied on the advice of appropriate counsel properly instructed (see Ridehalgh v Horsefield [1994] Ch 205), it would be both illogical and anomalous if the implied waiver that applied to communications between the client and solicitor did not extend to communications between the solicitor and counsel on the client's behalf.
37. Mr Hollander made the point that in none of these authorities is it suggested that the implied waiver is of limited scope. However, it is equally the case that in none was there any suggestion that use of the documents by the solicitor in proceedings in open court would damage the legitimate interests of his former client, or that all or part of the negligence action should therefore be heard in private. The issue simply did not arise. Accordingly, I do not think that such weight as Mr Hollander urged can be put on the phrase in Lord Bingham's judgment in Paragon, that I have quoted, where he refers to subjecting the relationship "to public scrutiny". The passage must be read in context, just as Lord Bingham himself observed regarding the passages from the judgments of Russell and Farquarhson LJJ in Lillicrap.^[1] Accordingly, it is important to consider the cases where the courts have expressly addressed the question of limited waiver.
38. It is well-established that although an application for detailed assessment of costs inter partes may necessarily entail some waiver of privilege, that waiver is (i) limited; (ii) temporary; and (iii) extends only to the opposing party and the judge. Those principles were clarified by the judgment of a very strong Court of Appeal (Lord Donaldson MR, Taylor and Woolf LJJ) in Goldman v Hesper [1988] 1 WLR 1238. The case concerned a party-and-party taxation pre-CPR, where the assessment proceedings themselves were heard in private. The issue was the extent to which the paying party on an assessment was entitled to see all the documents which the party claiming payment of costs lodged before the registrar conducting the assessment, which would of course include many documents otherwise covered by LPP.
39. In his judgment with which the other members of the court agreed, Taylor LJ referred to the requirements regarding the documents to be lodged with the court, then set out in RSC Ord 62, r 29(7) [of which the equivalent are now at CPR PD 47, para 13.12] and stated as follows, at 1244:

"It is therefore clear that there is now a statutory requirement on a claimant for costs to disclose privileged documents to the court. Normally, where privilege exists it applies to protect disclosure not only to the opposing party, but also to the court. So the rule clearly makes inroads into that general protection. It follows that once a party puts forward privileged documents as part of his case for costs some measure of their privilege is temporarily and pro hac vice relaxed. In most cases, as Hobhouse J. observed in Pamplin's case [1985] 1 WLR 689, 695, no problem would arise on taxation about privilege. However, when the problem does arise the taxing officer has the duty of being fair to both parties: on the one hand, to maintain privilege so far as possible and not disclose the contents of a privileged document to the paying party unnecessarily; on the other hand, he has to see that that party is treated fairly and given a proper opportunity to raise a bona fide challenge. The contents of documents will almost always be irrelevant to considerations of taxation which are more concerned with time taken, the length of documents, the frequency of correspondence and other aspects reflecting on costs.… There may be instances in which a taxing officer may need to disclose part, if not all, of the contents of a privileged document in striking the appropriate balance. He will no doubt use all his expertise and tact in seeking to avoid that situation wherever he can. I do not envisage it occurring, except very rarely."

40. Referring to the flexible approach which the taxing officer might take, such as restricting disclosure to the lawyers of the paying party, Taylor LJ continued:

"Any disclosure of privileged documents which does have to be made in the exercise of the taxing officer's discretion would in my judgment be only for the purposes of the taxation. That it is possible to waive privilege for a specific purpose and in a specific context only is well illustrated by the decision of this court in British Coal Corporation v. Dennis Rye Ltd. (No. 2) [1988] 1 WLR 1113. In that case documents which had been created for the purpose of civil proceedings were disclosed to the police for the purposes of criminal investigation. The question arose as to whether the waiver of privilege in favour of the police amounted to a waiver in favour of the defendant for the purposes of the civil proceedings. Neill L.J., giving the first judgment, said, at p. 1121.

"Nevertheless it is clear that the plaintiff made the documents available for a limited purpose only, namely to assist in the conduct first of a criminal investigation and then of a criminal trial. This action of the plaintiff, looked at objectively as it must be, cannot be construed as a waiver of any rights available to them in the present civil action for the purpose of which the privilege exists."

By the same token voluntary waiver or disclosure by a taxing officer on a taxation would not in my view prevent the owner of the document from reasserting his privilege in any subsequent context."

41. This principle was approved by the Court of Appeal in Bourns Inc v Raychen Corp [1999] 3 All ER 154, where a submission that the above passage was obiter was rejected. In that case, an American company that received documents by way of voluntary disclosure as part of the taxation of the costs of English patent proceedings argued that it should be free to use them in separate proceedings in the United States. Dismissing that contention, Aldous LJ (with whom Sir Stephen Brown P and Swinton Thomas LJ agreed) stated (at 162):

"It is possible to waive privilege for a specific purpose and in a specific context without waiving it for any other purpose or in any other context. Documents disclosed on taxation in the manner contemplated in Goldman are disclosed for the purposes of that taxation and, perhaps absent special circumstances, the privilege is only waived for the purpose for which the documents are disclosed.

If Bourns had disclosed the documents after an order made by the taxing master under RSC, O. 62, r. 20(d), the reasoning of Taylor LJ in Goldman would have been decisive. The privilege attaching to the documents would only have been waived for the purpose of the taxation proceedings. Does the fact that no such order was made result in the privilege being waived generally? In my judgment the answer is 'No'."

42. After stating that it should make no difference that the documents had been disclosed voluntarily and not pursuant to an order, Aldous LJ continued:

"There is good reason to encourage voluntary disclosure of relevant documents in taxation proceedings. A party who claims payment may have to elect whether to pursue that claim in the light of knowledge that it might require disclosure of privileged documents. If he decides to pursue such a claim with the result that natural justice requires disclosure, he should not lose his right of confidentiality more than justice requires. Justice only requires that right to be lost for the taxation proceedings."

43. Finally, B v Auckland District Law Society [2003] UKPC 38, [2003] 2 AC 736, concerned the question whether the applicable New Zealand statute entitled the respondent law society to require a law firm to produce privileged documents for the purpose of an inquiry into allegations of professional misconduct. The Judicial Committee of the Privy Council held that the statute did not override LPP. However, the firm had already provided some documents to the independent counsel appointed by the law society to conduct the investigation, and the question therefore arose whether LPP in those documents had thereby been lost. Under the heading, "Limited waiver", Lord Millett, delivering the opinion of the Board, stated, at [68]:

"The society's argument, put colloquially, is that privilege entitles one to refuse to let the cat out of the bag; once it is out of the bag, however, privilege cannot help to put it back. Their Lordships observe that this arises from the nature of the privilege; it has nothing to do with waiver. It does not follow that privilege is waived generally because a privileged document has been disclosed for a limited purpose only: see British Coal Corpn v Dennis Rye Ltd (No 2) [1988] 1 WLR 1113 and Bourns Inc v Raychem Corpn [1999] 3 All ER 154. The question is not whether privilege has been waived, but whether it has been lost. It would be unfortunate if it were. It must often be in the interests of the administration of justice that a partial or limited waiver of privilege should be made by a party who would not contemplate anything which might cause privilege to be lost, and it would be most undesirable if the law could not accommodate it."

After explaining that production of the documents did not deprive them of their privileged character, Lord Millett continued, at [71]:

"A lawyer must be able to give his client an unqualified assurance that, not only that what passes between them shall never be revealed without his consent in any circumstances, but that should he consent to disclosure for a limited purpose those limits will be respected…."

44. Mr Hollander submitted that all the cases dealing with limited waiver concerned the provision of privileged documents to a third party, where that provision was expressed to be for a limited purpose or, if it were not expressed - as in the case of inter partes taxation - that was recognised as a special circumstance. None of those cases concerned privileged documents that were already in the possession of the party prior to the waiver. In the latter circumstances, he argued, where a waiver of privilege was to be implied, it could not be limited but was complete.
45. However, in my judgment there is no reason as a matter of principle, practicality or authority why the circumstances giving rise to a limited waiver should be restricted in the manner which Mr Hollander suggested. Although the leading cases concerning professional negligence actions against a solicitor speak of an implied waiver of privilege in general terms, in my view, that simply reflects the fact that in none of those cases was this question raised for consideration. In none of them was there any issue about holding the hearing in public. More significantly, the authorities which have directly considered limited waiver do not suggest that the concept has an inherently restricted application. The words of Lord Millett, speaking for the Privy Council in B v Auckland District Law Society, set out above, are of general scope ("It must often be in the interests of the administration of justice…."). Since it is established that a waiver of privilege may be express or implied, I consider that in appropriate circumstances an implied waiver can be limited in the same way as an express waiver.
46. I note that the conclusion I have reached is consistent with that of Lindsay J in National Westminster Bank Plc v Bonas [2003] EWHC 1821 (Ch). That case involved a Part 20 claim by Mr Bonas against his former solicitors alleging, inter alia, breach of confidence in acting for a fellow borrower in proceedings brought against both of them by the claimant bank. The solicitor in question (a Mr Brice) had previously acted for Mr Bonas in ancillary proceedings arising from his divorce, but Mr Bonas had refused to pay his firm's fees. In response to a claim commenced by the solicitors for their fees, Mr Bonas had entered a defence and counterclaim alleging that they had been negligent in their conduct of his ancillary relief case. Those subsequent proceedings ("the Fee Proceedings") were then compromised. One argument advanced by the solicitors in the Part 20 Claim was that by reason of his defence to the Fee Proceedings Mr Bonas had waived the privilege that would otherwise apply to the material held by the solicitors, so that they were then free to use that material in the Part 20 proceedings. Rejecting that argument, Lindsay J said this (at [130]):

"[Counsel for the solicitors], basing himself on Lillicrap -v- Nalder [1993] 1 WLR 94 C.A. argues that by reason of his entering a defence to the Fee Proceedings Mr Bonas thereby waived confidence and that Mr Brice thereafter became free to use against Mr Bonas material which otherwise would have been denied him under solicitor-and-client confidence and under the rules under which solicitors practice. I do not doubt that if the Fee Proceedings had been fought further Mr Brice would have been able to use otherwise confidential solicitor-and-client material in those proceedings. The reason would have been that without such an implied waiver justice would not have been capable of being done in that suit. But it would be quite disproportionate to achievement of that end to enlarge that limited form of implied waiver in such a way as to free Mr Brice to use the otherwise confidential material wherever he might choose, including in these proceedings." [emphasis in the original]

47. National Westminster Bank Plc v Bonas was not cited to me by either side, and I have reached my judgment as regards a limited waiver independently. However, the reasoning of Lindsay J, with which I respectfully agree, reinforces me in the conclusion to which I have arrived.
48. In the present case, it is common ground that there is an implied waiver of privilege so as to enable Dechert to resist the argument of special circumstances under sect 70(3) SA 1974, and then contest the challenge to its charges on a detailed assessment. However, I consider that there is no ground for finding that privilege was thereby waived completely and for any use of the documents that is wholly irrelevant to that assessment. For example, the affairs of ENRC, as a former public company, have attracted some media interest and I think that the implied waiver to which the sect 70 application gave rise could not possibly entitle Dechert to hand over all the documents concerning their former client to an inquiring journalist. Once the potential of an implied waiver being limited is recognised, this seems to me a classic case for its application.
49. In the court below, the costs judge did not have the benefit of the extensive citation of authority deployed on this appeal. His unreserved judgment does not consider the concept of a limited waiver and I find that his reasoning cannot be upheld.

The effect of the hearing below

50. If, contrary to its main argument, the application for detailed assessment did not have the effect of completely waiving privilege, Dechert submitted by its Respondent's Notice that the circumstances of the hearing before Master Haworth had the effect of depriving its evidence of its former confidentiality. Mr Hollander argued that this was the ineluctable consequence of the facts that the hearing below was in public and that Master Haworth said that he had read at least parts of the witness statements.
51. The principle that documents which have been read by a judge and relied upon in reaching his judgment are to be regarded as having entered into the public domain was said to be established by two decisions of the Court of Appeal: SmithKline Beecham v Connaught Laboratories [1999] 4 All ER 498 and Barings plc v Coopers & Lybrand [2000] 1 WLR 2353.
52. SmithKline Beecham v Connaught Laboratories involved a challenge by the claimants ("SKB") to the validity of the defendant's patent. Shortly before trial, the defendant gave notice that it intended to surrender the patent and at the subsequent hearing in open court, the defendant did not resist SKB's application for an order that the patent be revoked. The judge said that he had read all the material and was satisfied that the grounds for revocation were made out. Subsequently, SKB applied for a declaration that it was free to use certain documents, including experts' reports and documents annexed, which had been in the reading material for the judge, on the basis that they had effectively been referred to in open court. The Court of Appeal allowed that application.
53. Delivering the judgment of the Court, Lord Bingham LCJ stated (at 508-509):

"When … documents or the material parts of them are read aloud in open court it is plain that the implied obligation binding on the party to whom compulsory disclosure had been made comes to an end, in the absence of any contrary order by the court. The same result must follow if counsel in open court draws the attention of the judge to a document which the judge then reads to himself. These are the simplest cases. The present appeal obliges the court to consider the application of the rule in less obvious cases, and in doing so to take account of changing forensic practice. For reasons which are very familiar, it is no longer the practice for counsel to read documents aloud in open court or to lead the judge, document by document, through the evidence. The practice is, instead, to invite the judge to familiarise himself with material out of court to which, in open court, economical reference, falling far short of verbatim citation, is made. In this new context, the important private rights of the litigant must command continuing respect. But so too must the no less important value that justice is administered in public and is the subject of proper public scrutiny."

54. Addressing the circumstances of the particular case, the Court concluded (at 510g-h):

"It is significant that the judge's order was not made by consent; he held that the proceedings had come to trial for the purposes of Ord 62, App 2, r 3; and he felt able to certify SmithKline's particulars of objection as reasonable, a step he could not have taken had he not informed himself what the objections were and what was relied on in support of them. We do not regard this conclusion as infringing the private rights of Connaught; but we do think that any other decision would give recent procedural changes a very restrictive effect on the publicity properly attaching to the administration of justice and on SmithKline's rights under art 10 of the European Convention on Human Rights."

55. In Barings, the issue arose in professional negligence proceedings brought by the claimant (in liquidation) against its accountants and auditors. The defendants sought disclosure of transcripts of interviews conducted on behalf of the Board of Banking Supervision into the collapse of the Barings Group. One of the grounds relied on was that those transcripts had been exhibited to an affidavit filed in disqualification proceedings brought against former directors of Barings, and thus, it was said, had been "made available to the public" so that the statutory prohibition on disclosure did not apply. Delivering the judgment of the Court, Lord Woolf MR stated (at [43]) that:

"the starting point should be that practices adopted by the courts and parties to ensure the efficient resolution of litigation should not be allowed to adversely affect the ability of the public to know what is happening in the course of proceedings."

56. Noting that judges increasingly read affidavits and documents out of court in advance of a hearing, Lord Woolf concluded:

"52. … If the transcripts had been read in open court they would have been in the public domain. If they were read by the judge, in or out of court, as part of his responsibility for determining what order should be made, they should be regarded as being in the public domain. This is subject to any circumstances of the particular case making it not in the interests of justice that this should be the position.

53. When documents are put before the court for the purpose of being read in evidence as here the onus is no longer on the person contending they have entered the public domain to show this has happened. The onus is on the person contesting this is the position to show that they did not enter the public domain because, for example, the judge did not in fact read them or because of the need to protect the ability of the court to do justice in a particular case. This is the only practical solution. The judge cannot be cross-examined as to what he has or has not read."

57. However, although these authorities demonstrate that when a judge has read, or is presumed to have read, documents for the purpose of a hearing that proceeds in open court, those documents may thereby enter the public domain, they also show that this is only the prima facie position. In some general observations at the conclusion of the judgment in the SKB case, Lord Bingham referred to the need for "suitable safeguards" in the context of enabling public access to documents referred to (but not read) in open court. And in the Court of Appeal's subsequent judgment in Barings, as Lord Pannick emphasised, the Court included a proviso in para [52], where Lord Woolf expressly referred to "any circumstances of the particular case making it not in the interests of justice that this should be the position."
58. An example can be found in the frequent practice of the court when evidence contains commercially sensitive information. The judge states that he or she has read the evidence in advance, and counsel in argument refers to the relevant passage or paragraph that contains the information without reading it out. This approach is adopted specifically so as to prevent that information entering the public domain. Where the confidential information is in a disclosed document, the court can make an order under CPR rule 31.22(2), but that is not always the position. It may, for example, be included in a witness statement.
59. I have no doubt that the present case is one where the interests of justice require that the reading by the costs judge of the papers should not have the effect of putting them into the public domain. It is notable that Master Haworth made an order pursuant to CPR 5.4C(4) that a non-party may not obtain a copy of any of the documents on the court file: see para 1 of his judgment. That order would have been futile if by reason of his stating that he had read the papers they had thereby entered into the public domain. So also would Master Haworth's grant of permission to appeal against his refusal to direct that the costs application be heard in private. The purpose of seeking a hearing in private was of course to prevent public access to the documents but, if Dechert's submission were correct, the pass had been sold on that issue once Master Haworth heard in public the application to decide whether the subsequent hearing should be in private. ENRC's right of appeal, which the costs judge granted, would be rendered nugatory.
60. Even if I were wrong in that conclusion, I consider that this court can still issue an order preventing further dissemination of the documents. Mr Hollander resisted that position, arguing that since the documents had "entered the public domain" they were effectively out in the open and could no longer be subject to restriction. I regard that submission as misconceived. When I put it to Mr Hollander that in that case once a judge entered court and said to the parties at the start of the hearing that he had read the papers, the documents were thereby in the public domain and could no longer be subject to restriction, he submitted that the court would retain power until the conclusion of the hearing to restrain dissemination. But I do not see any logical reason why a cut-off should come at that point, so as to deprive an appellate court from imposing a restriction if, for example, it considered that the judge below had wrongly decided this very point.
61. The power of the High Court with respect to injunctions is set out in sect 37(1) of the Senior Courts Act 1981. It may grant an injunction

"in all cases in which it appears to the court just and convenient to do so."

62. If the court clearly did not intend by virtue of its statement that it had read the papers to place them in the public domain, or even if it did so and an appellate court held that it had been mistaken in its approach, I see no reason in principle why the court then lacks jurisdiction to make an order against disclosure or dissemination of the material in question, provided always that it is 'just and convenient to do so'. Clearly, if there had already been widespread dissemination of the material, such an order would be inappropriate. But in a case like the present where no third party attended the hearing and there is no suggestion that any third party has yet obtained access to this material, if the interests of justice required that no disclosure or dissemination should be made, I consider that the court retains the power to make an order accordingly.
63. However, as I have held that the fact that Master Haworth said that he had read some of the evidence did not in the particular circumstances here have the effect of bringing the evidence into the public domain, it is unnecessary to make a further order restricting its dissemination.

The dispute regarding relevance of the documents

64. In the light of my conclusions above, it is unnecessary to reach a final view on ENRC's alternative argument based on CPR rule 39.2(3)(a), i.e. that this was a case where publicity would defeat the object of the hearing. As explained above, that was advanced on the basis that many of the voluminous documents relied on and exhibited in Dechert's evidence were not relevant to the issues on taxation and so remain subject to LPP, but that determination of that issue at the hearing would inevitably involve reference being made to those documents: see para 21 above. I would only say that I doubt that this aspect alone could justify a decision that the entire hearing should be in private. This seems to me just the kind of concern that can be addressed by a less extreme and more targeted approach, as set out by Lord Neuberger in Ambrosiadou v Coward: see para 18 above.

Should the hearing be in private?

65. Although I have found that the waiver of LPP was only limited, so that the material remains protected by LPP as regards third parties, there remains the question whether the court here should therefore order that the costs application be heard in private. CPR rule 39.2(3) gives the court a discretion, which I consider must be exercised in the interests of justice and the parties.
66. Here, ENRC has a very real concern that a public hearing will expose much of the material to the SFO and thereby prejudice its position. Part of the retainer of Dechert in this case was to assist ENRC in the fraud investigation and its dealings with the SFO, and so some of the privileged documents were created for that very purpose. I consider that there is the potential for very real prejudice to ENRC if the matter were heard in public. That is illustrated by the declared position of ENRC that if the order below stands, it will not proceed with its application. The effective protection of ENRC's rights therefore requires that the matter be heard in private.
67. By contrast, what legitimate interest has Dechert that the application should be heard in public? This is addressed in a brief witness statement from Mr Richard Harrison, who is not himself a solicitor at Dechert but at its external solicitors instructed for the purpose of this action. Mr Harrison exhibits a bundle of press articles which he says include reports that ENRC is "suing Dechert for overcharging millions of pounds". Mr Harrison continues:

"These proceedings, and the complaints being made by the Claimant about Dechert in relation to its fees, are accordingly so well documented in the press that it is vital that Dechert has the ability to clear its name of the allegations of gross and deliberate overcharging in a public court and that it is not dealt with by evidence and a judgment which are kept in private. Therefore, it is important to Dechert that these proceedings be heard in public."

68. I have read the exhibited articles, which mostly concern allegations about ENRC in a letter from Dechert to ENRC that was mysteriously leaked to the press. They do also report complaints by ENRC about Dechert's "improper billing", although I note that only one of the 11 articles exhibited includes the specific allegations to which Mr Harrison refers. Nonetheless, I recognise Dechert's understandable concern to vindicate its reputation. But I consider that this concern will be entirely met by a public judgment determining the costs application. There is no question of this court directing that the costs judgment itself should be kept private, as Mr Harrison infers. I can see no need for the hearing itself to be in public, which is the issue on this appeal, in order adequately to protect Dechert's interests. Indeed, I would have thought that a public hearing might have a contrary effect since all the allegations advanced by ENRC regarding its overcharging would then be rehearsed before a public audience.
69. Finally, it is not suggested that there is some particular public interest on the facts of this case for holding the hearing in public. I also consider it of some relevance that this is not adversarial litigation but the exercise of a supervisory jurisdiction by the court over its officers.
70. Accordingly, the appeal will be allowed and the court will order that the hearing of the application and any subsequent assessment pursuant to sect 70 SA 1974 be heard in private.

Note 1   Nor in my view can any far-reaching principle be derived from one sentence at [11] in the unreserved judgment of Judge Purle QC (sitting as a Deputy High Court Judge) inHellard v Irwin Mitchell.    [Back]