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Clarke C.J.

MacMenamin J.

Dunne J.

Charleton J.

O'Malley J.

BETWEEN/

THE SUPREME COURT

[Appeal No: 2019/188]

Waterford Credit Union

PLAINTIFF / APPELLANT

AND

J & E DAVY

DEFENDANT / RESPONDENT

Judgment of Mr. Justice Clarke, Chief Justice, delivered the 24th of March, 2020.

1. Introduction

1.1 Ordinarily the private papers of any person or body are just that, private. There are,

however, circumstances where a legal obligation may arise which can oblige such a

person or body to make certain private papers available to other parties. In the public

sector, the Freedom of Information Act 2014 allows members of the public to gain access,

in certain circumstances, to documents held by relevant bodies. Certain provisions of the

Data Protection Act 2018 allow persons to obtain information held about themselves by

third parties.

1.2 However, in the context of civil litigation it has always been recognised that the fair

resolution of civil cases may well require a party to disclose to its opponent relevant

documents within its possession. While the criminal law recognises a right to avoid self-

incrimination, there is no equivalent entitlement of a party to civil litigation to refrain from

making relevant if unfavourable evidence available. This Court has, in Tobin v. Minister

for Defence [2019] IESC 57, recently emphasised the importance of the discovery process

in ensuring a fair result in civil proceedings, while also acknowledging that there can be

circumstances where the process becomes so burdensome that it operates to defeat,

rather than to enhance, justice.

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1.3 However, it has also always been recognised that the reason why a party may be entitled

to have access to its opponent’s documents, often including confidential documents, is for

the very specific purpose of enhancing the prospects of justice being done in the case in

question. Given that very limited focus of the discovery process, it has also always been

recognised that a party who gains access to documentation through the discovery process

is obliged to use that documentation only for the purposes of the litigation. It is said that

a party obtaining such documentation is subject to an implied undertaking only to make

use of the documentation in question in that limited fashion. That principle is not in

dispute on this appeal.

1.4 The specific issue which does arise stems from the fact that while both the High Court

(Waterford Credit Union Ltd v. J&E Davy [2017] IEHC 8) and the Court of Appeal

(Waterford Credit Union Ltd. v. J&E Davy [2019] IECA 157) took the view that certain

documents which the plaintiff/appellant (“Waterford”) had requested in the discovery

process were relevant and necessary for the purposes of satisfying the provisions of O.

31, r. 12 of the Rules of the Superior Courts, the Court of Appeal concluded that discovery

should be declined arising out of what was said to be a breach by the solicitor acting on

behalf of the requesting party of an implied undertaking of the type just described in

previous proceedings involving a different client. The core issue which arises for

consideration on this appeal is as to the extent, if any, of the discretion which a court

enjoys to decline discovery in such circumstances. For reasons which I hope will become

clear, that issue breaks down into a number of subsidiary issues and it is also appropriate

to note that there is a cross-appeal which seeks to question the underlying decision of

both the High Court and the Court of Appeal to the effect that the documents in question

should have been found to be ordinarily subject to discovery in the first place.

1.5 In order to understand the issues in more detail, it is necessary to set out the procedural

history of these proceedings insofar as relevant to the issues which arise on this appeal.

2. Procedural History

2.1 Waterford carries on the business of a credit union for the benefit of its members. The

defendant/respondent, J & E Davy (“Davy”), is a firm of stockbrokers and investment

advisors which, at the material time, is said to have held itself out as having an

established expertise to advise credit unions concerning appropriate investments for their

funds. Underlying this discovery application is a claim for damages brought by Waterford

for financial losses which it is alleged were incurred as a result of certain investments

made by Waterford in reliance on the advice provided by Davy.

2.2 It is Waterford’s case that, on the basis of a contract between the two parties entered into

in January 2005, Waterford acted in reliance on Davy’s representations and advice with

regard to suitable bonds in which Waterford could invest its monies and that, as a result,

over €5 million of Waterford’s monies were invested in certain perpetual Constant

Maturity Swap (“CMS”) bonds throughout the course of 2005 and 2006. It is alleged that

Waterford was advised and was led by Davy to believe that these were bonds which

guaranteed the capital sums invested and which complied with the Trustee (Authorised

Investments) Order 1998 (“the 1998 Order”). Waterford claims that it subsequently

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discovered that the bonds in which Davy invested its funds did not comply with the 1998

Order, did not guarantee the capital sum invested and did not provide for a definite

maturity date in the future.

2.3 In the statement of claim issued by Waterford on 4 July 2011, it was maintained that

Waterford would not have invested in these bonds had Davy not advised it to do so and

had Davy advised it of the matters just referred to. It is alleged that Davy is guilty of

wrongdoing in that regard under various headings such that Waterford is entitled to an

indemnity and damages in respect of the financial losses it incurred as a result. Of

particular relevance, for the purposes of this discovery application, is Waterford’s claim of

breach of statutory duty, to the effect that Davy had failed to comply with its statutory

obligations and duties under the Stock Exchange Act 1995 (“the 1995 Act”) by failing to

ensure that Waterford was furnished with all the necessary information as to the

characteristics of and risks associated with the investment bonds in question.

2.4 Davy delivered a full defence to this claim on 8 March 2012. It was denied, amongst

other things, that Waterford had invested in the bonds concerned in reliance on any

representations made or advice given by Davy to the effect that the bonds guaranteed

the capital sums invested, complied with the 1998 Order or had a definite maturity date.

It was further denied that Davy had failed to comply with its statutory obligations and

duties under the 1995 Act, as referred to in the statement of claim, or had failed to

furnish Waterford with the necessary information and documentation in respect of the

investment bonds concerned. In its reply, delivered on 24 October 2012, Waterford

claimed, amongst other things, that Davy is estopped from denying that it failed to

discharge the various duties that it owed to Waterford having regard, amongst other

things, to Davy’s conduct and the investigations into its conduct carried out by the Irish

Stock Exchange, which prepared two reports in June 2007 and February 2008 (“the ISE

Reports”), which Waterford said confirmed Davy’s alleged failure to discharge its duties.

2.5 Following the commencement of the proceedings, both parties sought voluntary discovery

of certain categories of documentation from the other. While a number of these

categories were agreed between the parties, several categories remained in contention, in

respect of which cross motions seeking discovery were brought by both parties under O.

31, r. 12 of the Rules of the Superior Courts. Only one category of documentation

remains in dispute before this Court being that which relates to the ISE Reports referred

to earlier. Discovery of this category was requested by solicitors on behalf of Waterford,

as set out in their letter of 25 October 2012, in the following terms:-

“The separate reports furnished by the Irish Stock Exchange to the Defendant in

June 2007 and February 2008 and all communications passing between the

defendant and the Irish Stock Exchange with regard to the investigation carried out

by the Irish Stock Exchange into the Defendant's conduct of its business with

regard to the sale by the defendant of investment bonds to Credit Unions including

the Plaintiff”

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However, the request for communications was not pursued after the High Court and

thus the issues remaining relate only to the two specified reports.

2.6 It is necessary at this juncture to provide some more detail as to the ISE Reports

requested. These refer to reports which were issued by the Irish Stock Exchange as a

result of disciplinary proceedings which it had undertaken in relation to Davy’s conduct in

respect of certain of its credit union clients. Further detail as to this investigation was

provided in a public statement issued by the Irish Stock Exchange on 8 April 2009 (“the

ISE Statement”), which stated the following:-

“The Exchange, as part of its oversight and supervision of stockbrokers, became

aware in late 2006 of issues of concern regarding possible breaches by J&E Davy

(Davy) of Irish Stock Exchange conduct of business rules. These related to its sale

of a number of perpetual Constant Maturity Swap (CMS) bonds to some of its credit

union clients.

Following a detailed regulatory review, the Exchange issued its findings in a report

to Davy, which was also provided to the Financial Regulator, in June 2007. Before

various agreed measures had been implemented further relevant information

became available to the Exchange. The Exchange's final findings and the necessary

actions to be taken by Davy were set out in a second report in February 2008. The

report was also provided to the Financial Regulator.

In January 2008, Davy commenced a process which culminated in a proposal to

credit unions, in May 2008, of a comprehensive arrangement which addressed

performance issues with the bonds. This proposal was accepted by the vast

majority of credit unions at a cost to Davy of over €35m. This negotiated

settlement between Davy and its clients was welcomed by the Exchange as it dealt

with the core issue of loss of value of the bonds.

The Exchange investigations concluded that there had been breaches of the Rules

of the Exchange by the firm in particular in relation to:

• The completeness of disclosure of certain information to credit unions

concerning the bonds and the provision of written evidence to demonstrate that it

had taken due care to ensure that the relevant credit unions understood the

characteristics of the bonds; and

• Taking all reasonable steps to ensure the bonds were full compliance with the

Trustee (Authorised Investment) Order 1998.

The Exchange also acknowledged important mitigating factors such as:

• The changed investment demands of credit unions which were seeking higher

yield investments,

• Fundamentally altered conditions and bond markets, and

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• The extensive interaction between Davy and its credit union clients.

The Exchange is satisfied that Davy has taken appropriate remedial action to

ensure that internal controls and conduct of business procedures have been

rectified to mitigate against any recurrence of the breaches discovered. This and

the arrangements agreed with credit unions bring closure to this matter and it

addressed the actions required of Davy by the Exchange in its reports.”

2.7 It was asserted by Waterford in its letter of 25 October 2012 that discovery of the ISE

Reports was relevant and necessary in light of Waterford’s claim of breach of statutory

duty and Davy’s subsequent denial. Reference was also made to the plea made by

Waterford in its reply as to Davy’s conduct as detailed in the ISE Reports. In its

responding letter of 29 November 2012, discovery of this category was declined by

solicitors on behalf of Davy on the basis that the ISE Reports, it was said, do not deal with

and are not relevant to the issues arising in the proceedings and that, further, Waterford

was “manifestly engaged in a fishing expedition”. Lengthy correspondence was

subsequently exchanged between the parties in relation to this matter, the relevant

aspects of which will be set out here in brief. The principal basis for Davy’s contention

that the reports in question were not relevant stemmed from the fact that the Stock

Exchange investigation and, therefore, the reports in question related to what was said to

be a sample of credit unions that did not include Waterford.

2.8 On 7 March 2013, Waterford’s solicitors responded to Davy’s refusal to make discovery

and referred to the public statement made by the Irish Stock Exchange as previously set

out. The letter went on to say the following:-

“We are aware that the investigations by the ISE concerned, inter alia, Davy's role

in relation to the Jyske perpetual bond, which is one of the bonds at issue in the

present proceedings, and the manner of Davy's remuneration in relation thereto. It

may well relate to other bonds acquired by our client on the advice of Davy.

Given these factors, and the findings of the ISE in its statement as quoted above,

which corresponds to the allegations made by our client in the present proceedings,

the reports are clearly relevant and can in no way be characterised as a ‘fishing

expedition’. Our client acquired its bond between January 2005 and August 2006,

and it is reasonable to infer that this comprises at least part of the period during

which the activities which gave rise to concern on the part of ISE occurred. The

documents sought are necessary to establish the approach of the Defendant in

relation to the matters in respect of which the ISE established that there had been

breaches of the Rules of the Exchange in as far as they related to bonds sold to

credit union clients and the Plaintiff in particular.

It is the Plaintiff's position that voluntary discovery of the reports by the Defendant

will assist the Plaintiff in establishing that the bonds in which the Plaintiff was

advised to invest by the defendant were completely inappropriate and unsuitable

and that the Defendant as an investment advisor knew of this fact and should not

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have advised the Plaintiff to invest in those bonds. The Plaintiff therefore renews it

request for the defendant to make voluntary discover of this category of

documents.”

2.9 In its response dated 29 April 2013, solicitors on behalf of Davy restated their belief that

the ISE Reports were not relevant to the proceedings. As already noted, it was said that

the ISE Statement referred to an investigation carried out by the ISE on a sample set of

credit unions and that Waterford was not one of the relevant credit unions. It was

therefore suggested that the conclusions reached were specific to the relevant credit

unions and were not relevant to these proceedings. Further, it was claimed that the

reports and related correspondence were strictly confidential between the parties and that

discovery had not been justified by Waterford. In respect of Waterford’s solicitors

comments in respect of the Jyske perpetual bond, Davy’s solicitors said the following:-

“We are very surprised to note your comment that you are aware that the

investigations by the ISE concerned, inter alia, Davy’s role in relation to the Jyske

bond and the manner of Davy’s remuneration in relation thereto. The Statement

makes no reference to the Jyske bond or to any issues concerning Davy’s

remuneration in relation thereto. We are at a loss, therefore, to understand how

you claim to be ‘aware’ of these matters, or indeed any such matters, given the

confidential nature of the process referred to above. In the circumstances, please

now identify the source of the information on which your alleged ‘awareness’ is

based.”

2.10 It is apparent from an affidavit sworn in these proceedings by Ms. Lisa Carty, solicitor on

behalf of Davy, that Waterford did not respond to the letter of 29 April 2013. In

correspondence subsequently exchanged between the parties between December 2013

and July 2014, Waterford repeated its request for discovery of the relevant

documentation and Davy reiterated its request for the source of Waterford’s information

regarding the Jyske bond and its concern in relation thereto. On 7 July 2014, it was

suggested that the knowledge of the solicitor acting for Waterford of Davy’s role in

relation to the Jyske bond was derived from discovery made by Davy in separate

proceedings involving E-Services and Communications Credit Union, which was another

client of the solicitor acting for Waterford (“the E-Services Proceedings”).

2.11 In an amended statement of claim, which was dated 17 April 2014, Waterford claimed

that Davy had failed to disclose that it was acting as principal in the sale of bonds in

which it had advised Waterford to invest its monies and was thereby making a “secret

profit” which it failed to disclose to Waterford. In its amended defence, Davy denied that

it failed to disclose the relevant information to Waterford in respect of these matters and

rejected the characterisation of the sum it earned from the sale of the bonds as a “secret

profit”. In a letter issued on behalf of Waterford on 18 July 2014, it was suggested that

the amendment of the statement of claim meant that the “secret profit/conflict of

interest” allegation was explicitly at issue in the proceedings and that it failed to see the

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relevance of the source of the solicitor’s information as to Davy’s role in respect of the

Jyske bond.

2.12 By letter dated 6 August 2014, Davy once again requested information as to the source of

Waterford’s information as to the Jyske bond. On 9 September 2014, a request for

voluntary discovery of, amongst other things, the ISE Reports and related correspondence

was made by Waterford, in reliance on both its previously stated reasons and the matters

pleaded in the amended statement of claim. Following further correspondence between

September 2014 and March 2015, in the course of which agreement was not reached

between the parties, cross motions for discovery under O. 31, r. 12 RSC were issued by

both parties.

2.13 It should be noted that, in the course of extensive correspondence between the parties,

which is exhibited before this Court, and in the affidavits sworn on behalf of Waterford

before the High Court, no explanation was provided as to the source of Waterford’s

information regarding Davy’s role in the Jyske bond. In November 2015, the matter

came before the High Court (Keane J.) and, in the course of the hearing, counsel for

Waterford acknowledged that Waterford’s solicitors had, on the basis of his instructions,

inadvertently made use of information that had come into their possession through

discovery in the E-Services Proceedings, being information which indicated that the ISE

investigation related to Davy’s involvement in the sale of the Jyske bond. There was no

evidence put before the High Court as to this matter.

2.14 In the High Court, the trial judge granted discovery of the ISE Reports but considered

that additional discovery of the “communications passing between the defendant and the

Irish Stock Exchange” would be overbroad and, therefore, declined to order discovery

beyond the ISE reports. This decision was appealed by Davy and, in the Court of Appeal,

Peart J. allowed the appeal and refused discovery of the ISE Reports for reasons which

will be set out in more detail below.

2.15 In the light of that dispute, Waterford sought leave to appeal to this Court while Davy

sought leave to cross-appeal. In those circumstances, it is appropriate to deal with the

determination of this Court granting leave to appeal

3. Leave to Appeal

3.1 By determination dated 26th November 2019 (Waterford Credit Union v. J&E Davy

[2019] IESCDET 278), this Court granted Waterford leave to appeal. The Court set out the

issues of general public importance which it considered arose on the application for leave

as made by Waterford in the following terms:-

“8. The first issue is as to the precise scope of the obligations which arise under an

implied undertaking of the type in issue in this case. While it is accepted that there

had been a breach in the past by the solicitor concerned of such an implied

undertaking in other proceedings, it seems to the Court that it is necessary to

identify the precise obligations which arise from such an implied undertaking, in

order to assess how serious the breach in question might be taken to have been.

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9. Second, there is an issue as to the extent of any discretion which a court may enjoy

to decline to order discovery which would otherwise be appropriate on grounds such

as an accepted previous breach of an implied undertaking. In particular, a question

arises as to the extent of any such discretion in circumstances where any breach

was not that of the party to the current litigation but rather of that party’s solicitor

acting in separate proceedings in which the party concerned was not involved.”

3.2 In respect of Davy’s application to cross-appeal the underlying finding of the Court of

Appeal that the documents in question were relevant and that their discovery was

necessary, the Court held that the issues sought to be raised did not meet the criteria of

being matters of general public importance. However, the Court held that it was in the

interests of justice that those issues could be raised by way of cross-appeal in

circumstances where consideration would necessarily have to be given by this Court as to

whether discovery of the documents in question should be ordered.

3.3 In its submissions on the cross-appeal, Waterford argued that, in reliance on the fact that

the discoverability of the ISE Reports has already been determined in Waterford’s favour

by both the High Court and the Court of Appeal, this Court ought to regard the Court of

Appeal’s decision as dispositive of this issue, having regard to the deference which an

appellate court should show in reviewing decisions of lower courts and having regard to

this Court’s recent decision in Tobin. Waterford submitted that the role of this Court in

the present appeal is not to rehear the application made before the High Court. As the

Court of Appeal, in its review of the High Court’s decision, was satisfied that the High

Court correctly applied the relevant principles and identified the relevant factors, as well

as carefully considering and analysing the competing submissions in the exercise of its

discretionary jurisdiction to direct discovery of the ISE Reports, it was submitted by

Waterford that this Court should regard the issue of the discoverability of the two ISE

Reports as having been conclusively determined in its favour.

3.4 In order to place the submissions of the parties before this Court in context, it is useful at

this stage to consider the judgments of both the High Court and the Court of Appeal

insofar as they relate to the issues which are canvassed by the parties before this Court.

4. The Judgments of the High Court and the Court of Appeal

4.1 In the High Court, the trial judge first considered the question of whether the documents

satisfied the requirements of O. 31, r. 12, being those of relevance and necessity. It was

held that, by reference to the terms of the ISE Statement, the ISE Reports were relevant

to the subject matter of Waterford’s claim of statutory breach under the 1995 Act. The

trial judge rejected Davy's contention that, because the ISE disciplinary proceedings

against Davy dealt with a sample of credit unions of which Waterford did not form a part,

this meant that it dealt with issues separate and distinct from the issues being raised in

these proceedings by Waterford. In particular, the ISE Statement’s reference to a

proposal to credit unions of “a comprehensive arrangement which addressed performance

issues with the bonds” was, the trial judge held, “strongly indicative of systemic issues,

rather than of a disparate collection of distinct and unique problems in the defendant's

dealings with each of a number of specific credit unions”. In these circumstances, the

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trial judge was satisfied that it was reasonable to suppose that the ISE Reports contain

“information which may, either directly or indirectly, enable the plaintiff to advance its

own case or damage the case of the defendant”.

4.2 In respect of Davy’s submission as to the confidentiality of the documentation concerned

and the associated regulatory or disciplinary process, the trial judge held that the

contents of the ISE Reports are very likely to be material to issues which themselves are

likely to arise in the proceedings and that the degree of confidentiality attaching to the

relevant materials is not so significant as to outweigh the interest of the common good in

their disclosure for the purpose of the administration of justice. In particular, the trial

judge placed reliance on the terms of the ISE Statement which were to the effect that the

contents of the reports were not entirely confidential. In this respect, he noted that

copies of the reports had been furnished to the Financial Regulator and further, in

accordance with an explanatory note appended to the statement concerning Rule 9.44 of

the ISE Member Firm Rules, details in relation to the disciplinary proceedings could be

disclosed by the ISE without liability. Further, the documentation concerned was

distinguished from those documents which involve the confidence of a third party, or

which contain commercially sensitive information, which were factors which the trial judge

considered might impact on the balancing exercise which a court is required to undertake

when determining whether to grant discovery of documents in respect of which

confidentiality is claimed.

4.3 Turning to consider Waterford’s solicitor’s breach of the undertaking which was implicitly

provided in the normal course of discovery in the separate E-Services Proceedings against

Davy, being that the requesting party is not to use information obtained through

discovery for any other purpose, the trial judge criticised the solicitor’s failure to admit to

the breach over the course of more than two and a half years. It was submitted on behalf

of Davy that the High Court should exercise its inherent jurisdiction to regulate its own

procedures and to prevent an abuse of process by the refusal of the application for

discovery on the grounds of the breach. However, it was held that Waterford, as the

party to these proceedings, did not provide the undertaking in relation to the discovery

process in the E-Services Proceedings and, hence, did not breach it. The trial judge

therefore held that he was entitled to consider whether the requested documentation was

discoverable. While disregarding, for that purpose, the information improperly deployed

in breach of that undertaking (i.e. the purported confirmation that the ISE Reports

specifically address Davy’s role in the sale of the Jyske bond), he determined that the ISE

Reports were very likely to be material to the issues likely to arise in the proceedings and

granted discovery accordingly.

4.4 In the Court of Appeal, Davy sought to dispute the trial judge’s findings in respect of the

discoverability of the documentation and of the solicitor’s breach of the implied

undertaking. In respect of the former, the Court of Appeal concluded that the ISE

Reports are both relevant and necessary for the purposes of satisfying the provisions of

O. 31, r. 12 RSC. The conclusions of the trial judge in respect of the relevance of the ISE

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Reports were upheld and in response to Davy’s submission that the documents only

referred to a sample of credit unions, Peart J. stated at para. 22 of his judgment:-

“…The fact that the press statement indicates that the reports were prepared on the

basis of investigations carried out by reference to a sample of credit unions only

does not detract from the relevance of the reports to the claims made by

Waterford. It is reasonable to conclude that the sample was a representative

sample – in other words representative of credit unions generally with whom Davy

had dealings in relation to the type of bonds at issue in the case of Waterford. In so

far as Waterford has pleaded criticisms, allegations and deficiencies relating to the

advice given to it, or not given as the case may be, the investigation by the ISE

into similar issues arising in relation to the sample of such credit unions chosen for

investigation must be relevant to the issues in dispute in these proceedings. It is

reasonable to suppose that relevant findings against Davy in relation to the sample

credit unions which are contained in the report would either assist Waterford in

asserting and proving its claims, and meeting the denials of its allegations by Davy,

in conducting cross-examinations of Davy witnesses, and/or may adversely affect

Davy's ability to defend the allegations made by Waterford.”

4.5 On the basis of those considerations, Peart J. also held that the discovery of the ISE

Reports can easily be considered to be necessary. Addressing Davy’s submission that the

trial judge erred in conflating relevance and necessity and in failing to reach any

conclusion on whether the ISE Reports were necessary for the purposes of the discovery

application, Peart J. accepted that the trial judge did not carry out any discrete analysis

as to necessity. However, he considered that this was not an infirmity that of itself

should permit the appeal to be allowed and discovery be refused.

4.6 Peart J. further upheld the trial judge’s conclusion as to the confidentiality of the

documentation concerned. In considering the requirements of the administration of

justice, he agreed with the trial judge’s view that the confidential basis on which Davy

engaged with the disciplinary process is not a sufficient interest to outweigh the interest

of Waterford being able to deploy the reports at trial in order either to advance its own

case or to damage the case put up by Davy in defence of the claims made against it.

4.7 Turning to the question of whether the conduct of the solicitors acting for Waterford, in

breaching the implied undertaking which was given in relation to discovery in the E-

Services Proceedings, should bear on the court’s order for discovery in favour of

Waterford, Peart J. considered that the trial judge took “too benign a view” of the breach

of undertaking which had taken place. He further held that the analysis of the trial judge

did not adequately reflect the seriousness of the breach. Emphasising that such an

undertaking is one which is given to the Court and that, in these circumstances, the

undertaking was made by an officer of the Court, Peart J. also noted that no explanation

or apology was offered to the Court by the solicitor or by any other person responsible.

The trust which is placed in officers of the court, such as a solicitor, is, it was held,

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fundamental to the administration of justice and to the conduct of the legal profession

generally and such a breach may be considered to be a contempt of court.

4.8 Peart J. held that the purpose of the undertaking given to the court in relation to

documents provided by another party in discovery is that the documents disclosed should

not be used for any collateral, ulterior or improper purpose. Although it was submitted to

be an inadvertent breach, Peart J. held that there was “no doubt” that the information

gathered in the course of the E-Services Proceedings was used in these proceedings for

an improper purpose, being to secure discovery of the relevant documents and to counter

Davy’s solicitor’s allegations that the request amounted to “a fishing expedition”.

4.9 Having regard to previous authorities as to how an acknowledged breach of undertaking

ought to be dealt with by a court, including Alterskye v. Scott [1948] 1 All E.R. 469 and

Home Office v. Harman [1983] A.C. 280, Peart J. concluded that, in order to protect its

own process from abuse and to ensure the proper administration of justice and fairness of

procedures between the parties to the litigation, a court can take such steps as may be

open to it to ensure that discovered documents are not used other than in connection

with the proceedings in which they were discovered. Such steps could include imposing a

sanction on the contemnor appropriate to the particular circumstances of the breach, such

as a fine or a committal order.

4.10 In disagreement with the trial judge’s reliance on the fact that Waterford itself did not

breach the undertaking, Peart J. stated the following, at paras. 48 and 49 of his

judgment:-

“48. I cannot agree with that approach to the breach of undertaking. It provides no

protection to the offended party, Davy, to permit the information to be deployed

simply because it was not Waterford itself who gave the undertaking and did not

itself breach it, but rather its agent. If it is wrong that Davy should suffer a litigious

disadvantage as a result of the breach, and if the Court's duty is (using the words

of Murphy J. in Greencore Group plc. v. Murphy) to ‘ensure that documents are not

used for any purposes other than the purpose of the particular legal proceedings in

which they were produced’, then once the undertaking has been breached in the

circumstances of the present case, it matters not to Davy whether it was Waterford

or its agent that breached the undertaking. The court can, and in my view should,

ensure that the information so gained is not put to a use which advances the

interests of the offending party (albeit through the actions of its agent) at the

expense of the interests of, or prejudice to, the offended party in the litigation.

49.Equally it does not seem to me to be the correct approach, and to meet the

justice of the situation, to say that if the Court disregards the wrongfully deployed

information and is still satisfied that the documents are relevant and necessary and

should be discovered, the order for discovery should still be made. The possibility

that the Court in due course might proceed to mark its displeasure at the

undertaking given to the court in other litigation by perhaps making no order in

favour of Waterford in respect of its discovery motion, or even an order for costs

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against it, fails to recognise the seriousness of what occurred, and fails to ensure

that documents or information obtained by way of discovery in one set of

proceedings is not used for an improper, collateral or ulterior purpose, such as to

gain a litigious advantage in another set of proceedings. It would seem to condone

the breach (subject to a possible costs order) of undertaking provided that it has no

adverse consequence for another party.”

4.11 Having regard to his view that the trial judge’s exercise of discretion had failed to protect

the integrity of the administration of justice, Peart J. considered that it was open to the

Court of Appeal to exercise its own discretion in a way that it considered to be more

appropriate. In respect of the Court’s powers under its inherent jurisdiction, he held that

these are “as ample as may be required for its intervention to be effective and

appropriate and to maintain absolute fairness in the administration of justice”. Further, it

was held that the seriousness of the matter could not be appropriately dealt with by way

of costs orders, as suggested by the trial judge.

4.12 In order to prevent Davy suffering a litigious disadvantage and to mark “in a meaningful

way” the serious breach of undertaking which had taken place, Peart J. concluded that the

Court should, as a matter of discretion, refuse to order discovery of the ISE Reports. In

commenting on the approach adopted by the trial judge, whereby he disregarded the

information wrongfully deployed in considering the issue of relevance, Peart J. stated at

para. 49:-

“Equally it does not seem to me to be the correct approach, and to meet the justice

of the situation, to say that if the Court disregards the wrongfully deployed

information and is still satisfied that the documents are relevant and necessary and

should be discovered, the order for discovery should still be made.”

On that basis, the appeal was allowed by the Court of Appeal.

4.13 Both parties filed submissions in respect of the appeal on which they were the moving

party, together with replying submissions on the appeal to which they were the

respondent. In order to identify the precise issues which arise for consideration by this

Court it is, therefore, appropriate to set out a brief synopsis of the positions adopted by

the parties.

5. The Positions of the Parties

5.1 As mentioned, leave was granted by this Court to Waterford to appeal the decision of the

Court of Appeal to refuse to order discovery of the ISE Reports and to Davy to cross-

appeal the underlying finding of the Court of Appeal in respect of the relevance and

necessity of the requested documents. It is appropriate for this Court to consider first

whether the courts below were correct to conclude that discovery of the ISE Reports

prima facie satisfied the requirements of O. 31, r. 12 RSC. Following the determination of

that issue, questions as to the scope and consequences of the breach of the implied

undertaking will then be considered, should they so arise.

Page 13 ⇓

5.2 In respect of the issues arising on the cross-appeal, a preliminary question to be

determined is that of the Court’s jurisdiction to review the decision made by the courts

below regarding discoverability. As previously referred to, Waterford submitted that the

decision of the Court of Appeal should be regarded as having conclusively determined the

question of discoverability in its favour. The Court of Appeal, it was argued, was satisfied

that the High Court had correctly applied the relevant principles, as identified in the

jurisprudence of the courts, in its analysis of the question of whether the ISE Reports

satisfied the requirements of the Rules of the Superior Courts in relation to discovery.

The role of this Court, Waterford contended, is not to rehear the application which was

made before the High Court.

5.3 During oral submissions, counsel on behalf of Davy accepted that, as a general principle,

it is not the role of an appellate court to rehear a discovery application made before the

High Court and the Court of Appeal, where those courts have already conducted a

detailed analysis of relevance and necessity. However, it was argued that these

proceedings ought to be distinguished on the basis that the disputed category of

documents is unusually narrow, such that it would not be unduly onerous for this Court to

revisit the question of discoverability. Further, it was submitted that the relevance and

necessity of the ISE Reports is directly linked to the case made by Waterford so that to

refuse to consider the relevance and necessity of the requested discovery would amount

to an injustice and for this reason it is said that it is appropriate that the relevance and

necessity of the discovery of the reports be determined on this appeal.

5.4 Considering the substantive issues that arise on the cross-appeal, Davy submitted first

that the Court of Appeal erred in concluding that the ISE Reports were relevant. In this

regard, it was contended that there was no evidence to support the High Court’s

conclusion that the sample of credit unions which are considered in the reports was a

“representative sample” and, moreover, the facts and circumstances of Davy’s dealings

with Waterford are separate and distinct from those of the credit unions considered in the

reports. On this basis, Davy submitted that the ISE Reports are not relevant to these

proceedings.

5.5 On a related basis, citing the well established principle that relevance of documents which

are subject to a request for discovery must be determined by reference to the pleadings,

Davy also contended that the pleadings filed by Waterford cannot justify discovery of the

ISE Reports. This argument was made on the basis that the pleadings allege that Davy

failed to highlight the essential features and risks of the bonds in which Waterford was

advised to invest, whereas the ISE Reports refer to the information which was provided to

other credit unions unrelated to Waterford and therefore do not provide any insight into

the issue in dispute in the pleadings. As the reports pertain to an investigation to which

Waterford was not a party, it was submitted that, at most, the documents relate to the

underlying dispute rather than the legal action and that these are circumstances which

have previously led the courts to refuse to order discovery in Framus Ltd v. CRH plc

[2004] IESC 25, [2004] 2 IR 20 and BAM PPP PGGM Infrastructure Cooperatie UA v.

National Treasury Management Agency [2015] IECA 246. Further, Davy argued that its

Page 14 ⇓

conduct in respect of other credit unions will not demonstrate wrongdoing in its dealings

with Waterford, and that discovery of the ISE Reports would, at best, enable Waterford to

advance relatively weak inferences which would be prejudicial to Davy.

5.6 It was also submitted by Davy that the courts below failed to apply the correct threshold

to their assessment of the relevance of the documents. An application for discovery, it

was said, must show that it is reasonable for the court to suppose that the documents in

question contain relevant information and therefore the court cannot order discovery

where there is a mere possibility that documents may be relevant. Davy contended that

the Court of Appeal’s conclusion that the ISE investigation “must be relevant to the issues

in dispute” amounts to a presumption of relevance, with no evidential basis to support the

same. Finally, Davy submitted that the courts below failed to have sufficient regard to

the legal status of the ISE Reports, because, as a matter of law, it was contended that the

views formed in the course of the ISE investigation comprised of mere opinion and would

be entirely irrelevant to a court’s assessment of the dealings between Davy and

Waterford, citing Goodman International v. Mr. Justice Hamilton [1992] 2 I.R. 542 and

Murphy v. Flood [2010] 3 IR 136 in support of this contention.

5.7 Davy also argued that the Court of Appeal erred in conflating the concepts of relevance

and necessity and by concluding that necessity had been demonstrated by the same

reasons as those which were said to establish relevance. It was submitted that necessity

is both a distinct requirement and a distinct concept which must be satisfied in addition to

relevance and which requires an assessment of different criteria than those which are

involved in an assessment of relevance.

5.8 In this regard, Davy submitted that an assessment of necessity requires a balancing

between the litigious advantage which the requesting party will obtain and the prejudice

which disclosure will cause to the requested party. Citing the principles set out by Kelly J.

(as he then was) in Cooper Flynn v. RTE [2000] 3 I.R. 344, Davy contended that

discovery will be necessary where it will give a litigious advantage to the requesting

party, where the information sought is not otherwise available to that party by other

means, and where such an order for discovery would not be oppressive. In reliance on

this authority, and a number of others, it was submitted that the Court of Appeal erred in

finding the ISE Reports necessary. Davy argued that Waterford will not suffer an unfair

disadvantage in not obtaining the reports, that it cannot be said that Waterford’s chances

will be slim without the ISE Reports, and otherwise very strong with them, and that it

cannot be said that the ISE Reports are required for Waterford to make its case.

5.9 In respect of the issue of relevance, Waterford first disputed Davy’s characterisation of

the claim made in Waterford’s pleadings. Rather, it argued, the claim made was that

Davy acted in breach of the duties and obligations which it owed to Waterford under the

Stock Exchange Act 1995 in advising and causing Waterford to purchase CMS bonds. The

ISE Reports relate to Davy’s possible breaches of the ISE Conduct of Business Rules by

advising and causing a number of credit unions to purchase CMS bonds. Waterford

submitted that, with regard to the subject matter of the investigation, it is difficult to see

Page 15 ⇓

how its entitlement to discovery of the reports can be credibly disputed by Davy on the

grounds that it was not one of the credit unions included in the sample canvassed during

the investigation.

5.10 Further, Waterford submitted that the High Court and the Court of Appeal were correct in

determining that discovery of the ISE Reports was relevant to, and necessary for, the fair

disposal of the proceedings. In support of this submission, particular reliance was placed

on a number of principles set out in the recent decision of this Court in Tobin. In that

case, it was held that documents whose relevance has been established should be

presumed to be documents whose production is necessary and that, where the requested

party claims that discovery of relevant documents is not necessary, the burden then lies

on that party to advance reasons as to why the test of necessity had not been met. It

was also submitted by Waterford that this Court in Tobin established that there is an

additional burden on the party disputing the necessity of the requested documents to

show that the relevant information or documentation could be obtained by the requesting

party by some alternative means which is less burdensome but equally as effective as the

discovery process, and that the requesting party does not have to establish that it has

exhausted all other procedures available to establish relevant facts before discovery can

be sought.

5.11 Waterford contended that it is appropriate for the Court to take into account the foregoing

principles, as well as the manner in which the case has been pleaded, not only for

determining relevance, but also in order to assess the extent to which a party that objects

to making discovery on the grounds that it is onerous has contributed to that situation by

the manner in which they have pleaded their case, as was also established in Tobin. In

circumstances where Davy in its defence has denied in full the matters pleaded in the

statement of claim filed by Waterford, it was submitted that, where it is established that

the ISE Reports are relevant to the issues in dispute in the proceedings, it follows that

those documents should be considered to be documents whose production is also

necessary.

5.12 Finally, Davy submitted that the Court of Appeal erred in concluding that the

confidentiality of the ISE Reports was outweighed by Waterford’s interest in their

disclosure. In this regard, Davy reiterated that the reports could establish, at most,

relatively weak inferences against it and argued that the Court failed to have regard to

Davy’s right to confidentiality and the public interest in preserving the confidentiality of

confidential regulatory processes. It was submitted that the ISE Reports arose from a

strictly private and confidential process between Davy and the ISE, which, it was said,

Davy engaged with in reliance on the confidentiality provisions contained in the ISE Rules.

The limited terms of the ISE Statement which was released was suggested by Davy to be

indicative of the confidentiality of the results of the investigation.

5.13 Further to this submission, Davy contended that the Court failed to recognise that its right

to confidentiality under Article 8 of the European Convention on Human Rights was

engaged. In reliance on the jurisprudence of the European Court of Human Rights, it was

Page 16 ⇓

suggested that the ISE Reports can only be disclosed where “necessary in a democratic

society” for the protection of the rights and freedom of others. In addition, Davy

submitted that it enjoyed a constitutional right to privacy under the Constitution, which

required a careful proportionality analysis regarding any interference therewith, citing

Framus Ltd v. CRH plc in support of this contention. Davy also argued that the Court of

Appeal failed to have adequate regard for the public interest in preserving the

confidentiality of confidential regulatory processes in order to encourage open

engagement.

5.14 It was submitted by Davy that a court must engage in a balancing of the competing

interests of both parties and take a proportionate approach in order to ensure that

minimal interference is caused to their rights. Referring to a number of authorities in the

Irish courts, including Independent Newspapers v Murphy [2006] 3 IR 566, Davy argued

that, where confidentiality is invoked in relation to a discovery request, the confidential

documents should only be discovered where that application demonstrates the necessity

of the discovery and where the proceedings would be unfair in the absence of discovery.

Here, it was contended, the ISE Reports were of limited to no materiality and the degree

of confidentiality attaching to the reports, both as a matter of Davy’s right and in the

interest of public policy, was substantial so that, it was said, the balancing exercise ought

to have resulted in a refusal to order discovery of the reports.

5.15 In its response on the issue of confidentiality, Waterford submitted that it is well

established that the principle of confidentiality must yield to disclosure where the

disclosure is necessary to enable the court to fairly dispose of the proceedings and do

justice between the parties. Unlike privilege, it was argued, confidentiality does not

provide a barrier to disclosure where it is necessary in the interests of justice. In

particular, Waterford relied on the principle set out in Telefonica O2 Ireland Ltd v.

Commission for Communications Regulation [2011] IEHC 265 to the effect that, if

information is of some significance to the fair determination of proceedings, then it is

most unlikely that any confidentiality would be sufficient to outweigh the need for the

proper administration of justice. On the basis of the content of the ISE Statement issued

in April 2009, which referred to both the ISE investigation into Davy’s conduct and the

fact that it resulted in Davy entering into a settlement arrangement with a number of

credit unions to compensate for the financial losses which they sustained, it was

submitted that the confidentiality attaching to the ISE Reports had been substantially

eroded by the issuing of the ISE Statement.

5.16 Turning to consider the main appeal brought by Waterford against the Court of Appeal’s

decision to refuse discovery, I consider that three main issues arise for determination.

These are the scope of the implied undertaking to use the documentation obtained in the

discovery process only for the purposes of the litigation in question and the obligations

which attach thereto, the severity of the breach which has occurred on the facts of these

proceedings and the extent of the discretion which a court enjoys in the circumstances of

this case, each of which will be addressed in turn.

Page 17 ⇓

5.17 In its submissions on the main appeal, Waterford first set out its position as to the nature

and purpose of the implied undertaking rule, submissions which were uncontested by

Davy. Waterford submitted that the implied undertaking rule in discovery is a rule of

judge-made procedural law, arising from the inherent jurisdiction of the court to control

its own process, which is imposed in the interests of the administration of justice, to

encourage broad discovery and the disclosure of relevant material.

5.18 On the first question as to the precise scope of the obligations which arise under the

implied undertaking rule, the parties were largely in agreement that the collateral or

ulterior purpose which is proscribed by the implied undertaking rule refers to any purpose

not connected with the conduct of the litigation in the course of which the information or

documentation was discovered. Both parties were also in agreement that the implied

undertaking rule not only applies to the documents made available in discovery but also

to the information contained in these documents. As such, both Waterford and Davy

adopted the position that the precise obligation created by the implied undertaking rule is

that any information and documentation obtained in discovery cannot be used for

purposes unrelated to the proceedings in which the discovery is made.

5.19 Waterford further accepted that an implied undertaking is not only binding on the party to

whom the documents have been disclosed, but also upon that party’s solicitor and anyone

else into whose hands the documents may come. Both parties appeared to be in

agreement that any obligation arising under an implied undertaking is owed to the court

and that breach of that implied undertaking, in the absence of proving “special

circumstances” justifying the release or modification of the undertaking, constitutes a

contempt of court, as was established by this Court in Ambiorix Limited v. Minister for the

Environment (No. 1) [1992] 1 I.R. 277.

5.20 In relation to the effects of the breach of the implied undertaking in the present

proceedings, neither party disputed that there had been a breach of the implied

undertaking made in the E-Services Proceedings on the part of the solicitor acting on

behalf of Waterford. On this basis, Davy submitted that the Court of Appeal was correct

in finding Waterford in contempt of court. Waterford acknowledged that the implied

undertaking rule was, at least in part, designed to protect the privacy and confidentiality

of a party to litigation and that, for this reason, it accepted that the obligations arising

under an implied undertaking are potentially far reaching. Waterford submitted that the

implied undertaking rule is not an absolute rule, however, and that it must yield to higher

public interests, such as the doing of substantive justice between the parties to litigation

and the protection of the public interest.

5.21 Waterford argued that the court’s predominant duty in the administration of justice is to

ensure the fair disposal of the proceedings between the parties which the court is called

upon to determine and that its overriding obligation is to ensure that substantive justice is

done between the parties to litigation. While a party subject to the implied undertaking

rule may apply to the court to release or vary the obligation on that party, it was

Waterford’s submission that, where the interests of justice so require, the court may

Page 18 ⇓

exercise its discretion to release a party from an implied undertaking, even where that

party has not, prior to making use of the documents, applied for an order securing such

release. Following the comments of Kelly J. (as he then was) in Roussel v. Farchepro Ltd.

[1999] 3 IR 567, to adopt an inflexible view in relation to the release or varying of an

implied undertaking would, in Waterford’s view, unduly and unnecessarily tie the court’s

hands and likely give rise to an injustice, as well as frustrating the constitutional

obligation which is imposed on the court to administer justice.

5.22 In relation to the second issue arising on the main appeal, as to the seriousness of the

breach of the undertaking which took place, the positions of the parties differed

significantly. Waterford submitted that the breach was inadvertent and de minimis, and

noted that that it was limited to a single reference to a particular CMS bond. Waterford

also placed emphasis on the fact that that the breach was not committed by Waterford

itself, but rather by its solicitor, who did not then deploy any information or

documentation which was the subject matter of the implied undertaking in the E-Services

Proceedings when requesting and formally applying to the Court for discovery of the two

ISE Reports by Davy in the present proceedings.

5.23 In contrast, it was Davy’s submission that the breach of the implied undertaking by

Waterford’s solicitor was serious. Davy first suggested that any breach of an undertaking

to the court by a solicitor is necessarily a serious breach, as it involves a breach by an

officer of the court. In light of this, Davy argued that the Court of Appeal was correct in

observing that, “[t]he breach of any undertaking, implied or otherwise, given to the Court

and particularly as in this instance by an officer of the court, is a very serious matter,

whether inadvertent or otherwise…”. Davy further submitted that a breach of an implied

undertaking does not require bad faith or deliberate impropriety to be relevant and that

any use or disclosure other than for the purpose of the proceedings will constitute a

breach.

5.24 It was further submitted by Davy that, in assessing the seriousness of the breach of the

implied undertaking in the present proceedings, the court should have regard to both the

general importance of the implied undertaking rule in the administration of justice, and

the conduct of the party responsible for the breach. In relation to the general importance

of the implied undertaking rule, Davy argued that the purpose of the rule is both to

minimise the invasion of privacy inherent in ordering discovery or inspection and to

protect the integrity of the proceedings by ensuring that parties do not withhold material

for fear of the manner in which it will be used. Davy argued that that the implied

undertaking rule therefore comprises a critical protection for those who disclose

documents in discovery as well as an essential mechanism for encouraging full disclosure

in litigation and that, as such, it is necessary for the proper administration of justice.

Davy submitted that the importance of the implied undertaking rule to the process of

litigation should influence the court’s assessment of the seriousness of the breach of such

an undertaking

Page 19 ⇓

5.25 Finally, Davy submitted that the Court of Appeal was correct, in assessing the seriousness

of the breach, to have regard to the conduct of Waterford and their solicitor and, in

particular, the lack of an explanation or an apology offered to the court on affidavit by

Waterford. Davy argued that Waterford’s evasiveness and failure to adduce evidence

relating to the breach underpins the seriousness of the breach of the implied undertaking.

Davy submitted that the Court should also consider Waterford’s omission to seek release

from the implied undertaking as particularly striking when viewed alongside its failure to

adduce evidence on the circumstances of the breach of said undertaking. It was Davy’s

view that this omission comprises an attempt by Waterford to bypass the well-established

position that a decision on release of the implied undertaking must reside with the court.

5.26 During oral submissions, counsel on behalf of Waterford submitted that, while no

explanation for the breach was provided by Waterford on affidavit, an explanation as to

exactly what had caused the breach had been offered to the High Court by counsel at trial

and that it was therefore inaccurate to allege that Waterford had failed to explain the

breach of the implied undertaking to the Court.

5.27 The third question which arises on the main appeal concerns the extent of the court’s

discretion to decline to order discovery which would otherwise be appropriate on the

grounds of an accepted breach of an implied undertaking, in circumstances where the

breach was committed not by the requesting party in the current proceedings, but rather

by that party’s solicitor in separate proceedings in which the requesting party was not

involved.

5.28 Waterford argued that the correct approach to be taken by a court in these circumstances

is based on the overriding duty on the court to do substantive justice between the parties

in the disposal of the proceedings. Where, it was submitted, the court has determined

that the documents sought are relevant to, and necessary for, the fair disposal of the

proceedings, a residual discretion cannot reside with the court to decline to order

discovery as this would effect an injustice. While Waterford accepted that the implied

undertaking rule is binding on the party to whom documents are disclosed as well as the

servant or agents of that party, it was submitted that a breach of an implied undertaking

by a solicitor representing a party in proceedings should be treated by the court as a

contempt of court by the solicitor and any sanction that may be imposed by the court

must be personally directed to the contemnor who is responsible for the breach, as was

the approach adopted by the House of Lords in Home Office v. Harman [1983] A.C. 280.

To decline to order discovery in these circumstances, Waterford contended, was an

approach which was not supported by precedent and would amount to an unjust and

disproportionate punishment of an innocent party, who would then face a real risk of

suffering an irreparable injustice by being permanently deprived of the benefit of such

documents in their proceedings, in circumstances where the solicitor’s breach related to

separate proceedings in which the innocent requesting party was not involved. To allow

such an outcome, it was submitted, would involve the court doing an injustice greater

than the one that it seeks to remedy.

Page 20 ⇓

5.29 Waterford submitted that the correct approach which a court should adopt in determining

an application for discovery where there was an accepted breach of an implied

undertaking by the requesting party’s solicitor is to address whether the documents in

question are relevant to and necessary for the fair disposal of the proceedings,

notwithstanding the breach of the implied undertaking. If it is concluded that the

documents are relevant and necessary for the purposes of the discovery application, then

Waterford argued that this should result in a determination that “special circumstances”

exist which would justify the release or modification of the implied undertaking rule. It is

this approach which, Waterford submitted, was properly followed by the High Court and

which leads to the conclusion that it is necessary to direct discovery of the ISE Reports.

5.30 Finally, Waterford contended that the Court of Appeal failed to correctly apply the

principles which govern the exercise of its appellate jurisdiction in reviewing discretionary

orders of the High Court. In reliance on Re Comet Food Machinery Company Ltd (in

Voluntary Liquidation) [1999] I.R. 485, Martin v. Moy Contractors Ltd [1999] IESC 26 and

CFA v. O.A. [2015] IESC 52, it was submitted that discretionary orders ought not to be

interfered with by an appellate court where it is satisfied that the order made by the trial

judge where it was made in accordance with established principles. In circumstances

where it is submitted that the High Court adopted the correct approach in determining the

discovery application in question, and considered the necessary principles, Waterford

argued that the Court of Appeal erred in interfering with the decision of the High Court in

declining the order of discovery.

5.31 In response, Davy argued that the Court of Appeal correctly identified that the court has a

discretion to take whatever steps may be open to it in order to regulate the consequences

of a breach of an implied undertaking in order to protect its own process from abuse and

to ensure procedural fairness and the proper administration of justice as between the

parties to the litigation. While it is open to the court to make a finding of contempt, Davy

submitted that the courts have an inherent jurisdiction to take a wide variety of actions

when faced with a situation in which the implied undertaking has been breached and that

the Court of Appeal correctly identified the scope of this discretion.

5.32 Furthermore, Davy submitted that the Court of Appeal correctly held that this discretion is

to be exercised in accordance with what is necessary “to meet the justice of the

situation”. It was Davy’s submission that, in these proceedings, the Court of Appeal was

correct to conclude that the High Court’s decision to reflect disapproval of the breach of

the implied undertaking by way of an order for costs would not reflect the seriousness of

the breach and would fail to recognise that significant countervailing factors weigh against

the making of an order for discovery in the circumstances.

5.33 It was submitted that, similar to the balancing exercise which was undertaken in

Telefonica in the context of a claim of confidentiality over requested documents in the

discovery process, the court is entitled, in a case such as this, to consider the likely

materiality of the documents when considering whether to order discovery in light of a

breach of the implied undertaking. On the facts of these proceedings, Davy argued that,

Page 21 ⇓

even if the ISE Reports are considered to be relevant and necessary, their likely

materiality to the proceedings is minimal, such that no significant injustice would be

suffered by Waterford if discovery is declined.

5.34 In respect of the point made by Waterford deriving from the fact that the breach was

committed by its solicitor rather than the party itself, Davy submitted that first there was

no evidence provided by Waterford as to the circumstances of the breach so that it could

not be concluded that Waterford had no involvement. Further, it was submitted that

there is a well established identity between a litigant and its agent in this context, as the

implied undertaking is given by the party in whose favour the order for discovery is made

and is binding on that party, its legal representatives and on any others assisting that

party in the litigation. Moreover, it was said to be well established that any litigant is

fixed with the errors of its legal representatives. Therefore, Davy argued, there is no

legally recognisable basis on which to distinguish between a breach of the implied

undertaking committed by Waterford and one committed by its legal representatives and

to do otherwise would be to undermine the function of the implied undertaking rule in the

litigation process.

5.35 Finally, in response to Waterford’s contention that the Court of Appeal erred in its review

of the discretionary order of the High Court, Davy submitted that, in light of the principles

of review as set out by this Court in Martin v. Moy Contractors Ltd., an appellate court

cannot interfere with a decision of the trial judge where it is “within the limits of

reasonable discretion”. On the facts of these proceedings, Davy argued, the decision of

the trial judge was not within such limits. To order discovery of the documentation, it

was submitted, would be to remove for legal agents a significant disincentive to breach

the implied undertaking and would jeopardise a fundamental element of the discovery

process.

5.36 Against those submissions I will turn first to the cross-appeal.

6. Relevance and Necessity – the Proper Approach

6.1 It is appropriate to start with a consideration of the point made by Waterford as to the

proper approach which should be adopted by an appellate court where there is an appeal

in respect of an application for discovery in which questions of necessity and/or relevance

arise. It should first be said that many of the issues which potentially arise on a

discovery application involve questions of degree. While there may well be categories of

documents where the court is satisfied that the documents in question could not be

relevant or, at the other end of the scale, would be manifestly relevant, nonetheless there

are many points in between those two extremes. All judges have experience of the fact

that, of the documents discovered, many are not actually deployed at the trial because

they turn out to be of little value to the resolution of the issues. However, the problem is

that, without sight of the documents in advance, it can be very hard to tell exactly how

relevant a document is likely to be. In such cases a first instance court must exercise a

degree of judgment as to the likelihood of any document or documents being relevant,

and must factor that into its overall conclusion.

Page 22 ⇓

6.2 Likewise, a court considering whether the disclosure of relevant documents may

nonetheless not be necessary having regard to the principle of proportionality, may also

have to make a judgment call, on the basis of whatever materials may be before the

court, both as to the degree of relevance of the documents in question and the burden

which their disclosure might be likely to place on the requested party. Many other

examples could be given.

6.3 In my view, when a first instance court exercises a judgment of that type, it should not be

overturned on appeal unless the appellate court is satisfied that the determination of the

court below was outside the range of judgment calls which were open to the first instance

court. Clearly, if the appellate court takes the view that documents whose discovery had

been ordered were not relevant at all, then it should have little difficulty in overturning an

order which directed that they be discovered. A similar approach should be adopted

where clearly relevant and necessary documents were refused. However, the fact that

the appellate court takes a somewhat different view from the trial court as to the degree

of relevance should not lead to the overturning of the decision of the trial court unless the

appellate court considers that the trial judge’s assessment of the weight to be attached to

relevance was clearly wrong and, as a result, he or she made an order which was outside

the range of any order which could reasonably have been made.

6.4 Having identified the proper approach, and for reasons which I hope will become clear, it

next seems to me to be appropriate to turn to the issues which arose on the appeal

before returning to the question of relevance and necessity.

7. Breach of an implied undertaking – the consequences

7.1 I do not disagree, nor did I understand counsel for Waterford to disagree, with the

statements made in the judgment in the Court of Appeal concerning both the importance

of compliance with an implied undertaking and the seriousness of any breach.

Furthermore, I understood counsel for Waterford to accept that the failure to provide any

explanation for the breach, despite a number of requests from Davy’s solicitors,

compounded the seriousness of the breach in this case. As already noted, it was only in

the course of the hearing in the High Court that some explanation was given by counsel

speaking from his instructions.

7.2 I have no doubt, therefore, that the Court of Appeal was correct when it said that the

breach here was serious and would warrant significant action being taken by a court to

protect its own process. The issue on this appeal, however, is as to whether the precise

action taken by the Court of Appeal was appropriate in all the circumstances.

7.3 In that context it should be noted that, in the High Court, the trial judge indicated that he

would consider whether discovery ought be directed in respect of the ISE reports without

reference to any of the information which was found in the wrongfully deployed

documents. The Court of Appeal disagreed that such was an appropriate approach for the

reasons set out in para. 49 of the judgment of Peart J., which I have already cited. The

view taken by the Court of Appeal was that excluding information wrongfully deployed

from its consideration was insufficient to mark the seriousness of the breach.

Page 23 ⇓

7.4 In passing, I should note that counsel on both sides were in agreement that any use of

information contained in discovered documents for purposes outside the litigation in

respect of which discovery was ordered amounts to a breach of the implied undertaking.

In other words, it is not only the deployment of the document itself but also the

deployment of any information contained in it, which would not otherwise have been

available to the requesting party and its advisors, that constitutes the breach.

7.5 Furthermore, counsel on both sides agreed, in accordance with well established principles,

that it is possible to invite a court to whom the undertaking has impliedly been given to

waive that undertaking in the particular circumstances of a case. No such application

was, of course, brought in respect of the documents or information at issue on this

appeal. I should add that there may well be cases where an assessment of whether such

a waiver would readily have been obtained may be material in assessing the seriousness

of a breach.

7.6 However, in my view, Peart J. was incorrect in the approach which he adopted in para. 49

of his judgment. There are two bases on which a court may assess what action it should

take to deal with a breach of an implied undertaking. The first may be to deprive a party

of any litigious advantage which it may have obtained as a result of the wrongful

deployment of documents or information obtained on discovery in other proceedings.

However, that aim would be fully met by adopting the approach of the High Court in this

case and considering the application for discovery without reference to any of the

information wrongfully deployed. By taking that approach, the Court ensured that there

was no litigious advantage.

7.7 The second basis is the possibility that it may be considered necessary to impose some

penalty or sanction to mark the seriousness of the breach and to act as a deterrent for

other such breaches. I have no doubt but that a court has the power to impose such

sanctions and should exercise such powers in a proportionate way, having regard to the

seriousness of the breach. The real question, however, is as to whether it was

appropriate to impose a sanction which potentially deprived Waterford of documents,

deemed by both the High Court and the Court of Appeal to be relevant and necessary to

the fair disposition of these proceedings, on the basis of imposing a sanction on

Waterford’s solicitor for a breach of an undertaking given in other proceedings for a

different client.

7.8 It seems to me that different considerations apply when considering the appropriateness

of a sanction than apply in a case where the court is seeking to remove a litigious

advantage. Whether or not Waterford could be said to be at fault in the manner in which

the relevant information came to be deployed in breach of the implied undertaking given

in other proceedings, it would still be appropriate to deprive Waterford of any litigious

advantage which it might have obtained. Such an advantage is one which Waterford

should not have had and, therefore, its fault (or lack thereof) in obtaining that advantage

would not seem to me to be particularly relevant in determining what measures should be

taken to deprive it of the litigious advantage wrongfully obtained.

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7.9 However, different considerations seem to me to apply when one is talking about a

sanction. While it is true, as counsel for Davy argued, that parties to litigation may

sometimes suffer a disadvantage because of actions taken or advice given by their

lawyers, it seems to me to be somewhat different to suggest that Waterford should be

punished for the actions of its solicitor in respect of an undertaking given in other

proceedings for a different client.

7.10 It is true that the solicitor concerned was acting on behalf of Waterford when he

breached the implied undertaking given in previous proceedings. It is also true that no

affidavit evidence was placed before the Court to make clear that Waterford was not,

itself, knowingly involved in the breach. It is also true that an application could have

been made to release the relevant solicitor from the undertaking and thus clarify the

entitlement to deploy the information concerned in advance of taking any action.

7.11 On the other hand, the practical carriage of proceedings so far as purely procedural

matters are concerned is primarily the responsibility of a party’s advisors. The person

who is, therefore, primarily to blame for a breach of an implied undertaking will ordinarily

be an advisor rather than the party itself although there may, of course, be circumstances

where it is clear that the actual use of the information in breach of the implied

undertaking was done directly by the party itself. The primary focus of any sanction

should, therefore, be directed at the person primarily responsible for the breach.

7.12 In those circumstances, I am satisfied that the Court of Appeal was incorrect to go so far

as to impose what amounted to a sanction on Waterford and should, like the High Court,

have confined itself to disregarding the information wrongfully deployed in making an

assessment as to whether an entitlement to discovery had been established.

7.13 In those circumstances, it is appropriate to return to the question of relevance and

necessity and to do so, as the High Court did, without giving any weight to the

information wrongfully deployed.

8. Decision on Relevance and Necessity

8.1 For the reasons already set out, I am satisfied that the correct approach to adopt is to

consider whether the decision of both the High Court and the Court of Appeal to the effect

that the ISE reports were both relevant and necessary for discovery was within the range

of decisions open to those courts. For the reasons also set out earlier, I am satisfied that

the proper approach should be to consider those matters without reference to any of the

information which was wrongfully deployed.

8.2 The central point made on behalf of Davy starts from an analysis of the pleadings, leading

to a suggestion that the only real issue in this case is as to whether Davy gave various

assurances about the suitability of the relevant investments or failed to provide

appropriate advice and information. On Davy’s case it is said that the ultimate resolution

of these proceedings is, therefore, relatively straightforward. The trial court will have to

decide, on the facts, as to whether any such assurances were given or advice provided

and, to the extent that any such matters were established, the Court would then have to

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assess the investments in question to determine whether they complied with any such

assurances or advice or whether other advice and/or information should have been given

having regard to the nature of the investments.

8.3 However, it does appear that Davy were also involved in making the same or similar

bonds available to other credit unions. I use the phrase “making available” so as to adopt

a neutral phrase given that counsel suggests that Davy were really acting as a

salesperson of the bonds rather than an advisor to any of the credit unions. Be that as it

may, it does seem likely that at least some of the issues investigated by the Irish Stock

Exchange and which are, doubtless, recorded in its report, touch on similar issues to

those raised by Waterford in these proceedings, albeit in the context of making relevant

financial instruments available to other credit unions. In those circumstances, it seems to

me that it was open to both the trial judge and the Court of Appeal to consider that the

threshold for relevance had been met.

8.4 There is no doubt that the Irish Stock Exchange investigation and the report which flowed

from it were confidential. There is equally no doubt that a court can reach an appropriate

judgment to the effect that documents should not be discovered by reason of the

significant confidentiality attaching to them, coupled with perhaps a very low level of

relevance or materiality.

8.5 While Waterford was correct to argue that confidentiality (as opposed to privilege) does

not provide a basis in itself for declining discovery, a court can exercise a judgment as to

whether the undoubted interests of justice in ensuring that the court has all relevant

materials before it when deciding a case can be outweighed by any breach of confidence,

and in particular the confidence of third parties, which might be involved in directing

disclosure. However, those interests of justice carry a very high weight so that

confidentiality will certainly have to yield to those interests, unless the court assesses the

documents in question to be only marginally relevant and the confidentiality interests as

being very weighty.

8.6 Again, it seems to me that the decisions of the High Court and the Court of Appeal on that

question were within the range of decisions which were reasonably open to those courts.

8.7 In those circumstances, it does not seem to me to be appropriate for this Court to second

guess the views which both the High Court and the Court of Appeal took on those

matters. The conclusions of those courts on relevance and necessity were within the

range of determinations open to those courts and should not be upset on appeal. In

those circumstances, it follows that the cross-appeal must fail.

8.8 For the reasons already given, it seems to me that the grounds on which the Court of

Appeal based its decision not to order discovery, notwithstanding a finding of relevance

and necessity, were incorrect and in those circumstances the appeal must be allowed and

discovery directed.

9. Conclusions

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9.1 For the reasons analysed earlier in this judgment I consider that the proper approach of

an appellate court when reviewing a decision of a lower court on issues such as relevance

and necessity in the context of discovery is to decide whether the views of the courts

below on those issues fell within the range of views which were reasonably open to them.

9.2 For the reasons also analysed earlier in this judgment, I have concluded that the Court of

Appeal was in error in coming to the view that it would be appropriate to deprive

Waterford of discovery of documents which had been determined to be both relevant and

necessary as a means of imposing a sanction for a breach of an implied undertaking given

in other proceedings in which it was not a party. It seems to me that, by considering the

question of relevance and necessity without reference to any of the information

wrongfully deployed, a court would deprive Waterford of any litigious benefit which it

might otherwise wrongfully obtain. To go further would be to impose a sanction on

Waterford in circumstances where, at a minimum, the person primarily responsible for the

breach of undertaking was its solicitor.

9.3 On that basis it seems to me that it was appropriate to consider the questions of

relevance and necessity in the manner adopted by the High Court being to exclude from

any consideration the information wrongfully deployed.

9.4 I have also concluded that the views expressed by the High Court and the Court of Appeal

on relevance and necessity were within the range of views which could reasonably be

adopted on the materials before the courts. In those circumstances it does not seem to

me to be appropriate for this Court to second guess the views of those courts in that

regard.

9.5 For those reasons it follows that the cross appeal should be dismissed on the basis that

the High Court and the Court of Appeal came to a sustainable decision to the effect that

the documents in question were relevant and that their discovery was necessary. In

addition, the appeal should be allowed on the basis that the Court of Appeal wrongly

declined discovery for the reasons already addressed. It follows in turn that I propose

that this Court should make an order directing discovery of the two ISE reports.

I would propose that the parties be invited to seek to agree the order which should be

made including any question of costs. In the event that the parties so agree the Court

will make an appropriate order. In the event of disagreement, the Court will invite the

parties to exchange correspondence setting out their position on any matters in dispute.

In the light of the receipt of any such correspondence, the Court will consider how to

arrange for the determination of any issues arising.

Result: Appeal allowed