High Court restrains use of privileged documents disclosed by solicitor in breach of confidence

The High Court has held that a party retained the benefit of legal advice privilege in information provided to her solicitor which the solicitor had disclosed to her opponent in breach of confidence after the retainer had come to an end: Kousouros v O'Halloran & anor [2014] EWHC 2294 (Ch).

The decision acts as a reminder that privilege will not always be lost where privileged documents have found their way into an opponent's hands. In some circumstances the court will intervene to prevent further use or disclosure of the documents. All will depend on the facts, but such circumstances may include where the recipient has acted unconscionably or where the material has been disclosed in breach of an obligation of confidence (as in the present case) or inadvertently (as in London Borough of Redbridge v Johnson, here). Parties seeking to prevent use of the documents must act promptly, as otherwise relief may be refused on that basis.

This case does not deal with the (perhaps more common) situation where privileged material is inadvertently disclosed on a party's behalf as part of the disclosure/inspection process in litigation. In those circumstances, questions of waiver of privilege can come into play, and the crucial issue is whether there has been an obvious mistake (see Tchenguiz v SFO [2014] EWHC 1102 (Comm)).

Background

The underlying dispute was between a brother (the claimant) and sister (the second defendant) who were entitled to equal shares in their late father's estate under his Cypriot will. The brother brought proceedings against the solicitor who administered the estate (the first defendant) and the sister. He sought a declaration that he was solely entitled to a property in Islington (the "Property") which he said fell outside the estate as it had been transferred to him by an oral agreement before the father's death.

The solicitor had initially been retained by the sister  to recover her share of the estate but was subsequently appointed to act for the estate itself. Both retainers continued for some time, but the solicitor ultimately ceased to act for the sister on recognising that there was a potential conflict of interest.

The brother relied in his particulars of claim on a letter written by the solicitor to HMRC at the time he acted solely for the estate but which contained information received from the sister when the solicitor was acting solely for her (the "3rd paragraph"). That letter, and the solicitor's other files relating to the administration of the estate, were disclosed in the proceedings.

The sister applied for an order preventing the use of the 3rd paragraph in the action on the basis that it was subject to legal advice privilege. At first instance in the Central London County Court, the judge refused the application on the basis that, as beneficiaries, the brother and sister had a joint interest in the administration of the estate and therefore could not assert privilege against one another.

Decision

The High Court (Simon J) allowed the sister's appeal. The brother and sister had a joint interest as beneficiaries under the will in ensuring that it was properly administered. However, that did not mean the sister lost the benefit of legal advice privilege in relation to her original instructions to the solicitor and the advice she received before the solicitor was retained by the estate and the joint interest came into existence.

The solicitor could not decide that he was no longer bound by his duty of confidence to the sister, as he appeared to have done. The 3rd paragraph contained privileged material which was confidential to the sister and she was entitled to the court's protection in maintaining privilege in relation to it.

If a privileged document comes into the hands of an opposing party, the court may intervene under its equitable jurisdiction to prevent a breach of confidence. The court will ordinarily intervene if the recipient of the material has acted unconscionably. That was not the case here, but it appeared that the solicitor had disclosed the 3rd paragraph to the brother's solicitors in breach of his duty of confidence to the sister. It therefore remained confidential, and so the starting point was that the court would intervene.

Once the party asserting the privilege or confidentiality of a document becomes aware of the facts, it must act promptly. However, taking account of funding difficulties the sister may have had for part of the period, the court was satisfied that the sister's delay in seeking relief was not fatal to her claim.