Discovery refused on the basis of past breach of implied undertaking by solicitors
Speed Read
In Waterford Credit Union Ltd v J & E Davy [2019] IECA 157 the Court of Appeal refused discovery of a category of documents, even though it deemed them both relevant and necessary, because the plaintiff's solicitors had breached their undertaking not to disclose information contained in documents discovered in unrelated proceedings. Peart J refused to order discovery to prevent the defendant suffering a litigious disadvantage as a result of a breach committed by the plaintiff's solicitors.
Background
The proceedings arose out of an investment of the plaintiff's funds by the defendant stockbrokers in funds that did not guarantee the capital sum invested, did not provide a definite maturity date, and which were not in compliance with the Trustee (Authorised Investments) Order 1998. The plaintiff alleged that investment in funds of such nature was in breach of warranty, contract, fiduciary duty and statutory duty, and also represented misrepresentation, and negligent misstatement. It also pleaded that the defendant had failed to disclose that it was acting as a principal in the sale of bonds into which it had advised the plaintiff to invest its funds, and was making a secret, undisclosed profit.
The plaintiff sought three categories of documents from the defendant. The defendant objected on the basis of relevance and necessity, and also on the basis that the plaintiff's solicitors had breached its implied undertaking as to confidentiality in relation to discovery made by the defendant in other proceedings.
The documents sought constituted (i) reports in relation to an investigation carried out by the Irish Stock Exchange into the defendant's conduct with regard to the sale of investment bonds to Credit Unions, (ii) documents relating to the defendant's pleaded disclosure of its role as principal on the sale of the relevant bonds, and (iii) documents relating to meetings between the parties where the defendant claimed to have made disclosure of its role as principal, and the profits earned in that regard.
Decision
The Court of Appeal determined that all three categories of documents were both relevant and necessary, and dismissed the defendant's arguments based on confidentiality and the public interest.
However, it overturned the grant of discovery by the High Court in respect of the ISE reports, on the basis that the plaintiff's solicitors had breached their undertaking not to use previously discovered documents other than for the purpose of the action in which they were discovered.
The plaintiff's solicitors had acted for Eservices and Communications Credit Union in previous litigation. In the course of that litigation they had had the benefit of a discovery order. In correspondence seeking voluntary discovery against the defendant in the case before the court, reference was made to information that could only have been gleaned from that previous discovery. The plaintiff's solicitors belatedly admitted the breach of undertaking, but the court noted that no apology had been offered in respect of the breach.
The High Court had granted the discovery sought on the basis that the specific plaintiff before the court had offered, and therefore breached, no past undertaking, and indicated that it would address the issue by way of costs orders. The Court of Appeal determined that this was "too benign an approach" to a serious breach by an officer of the court.
The Court refused discovery of the ISE reports on the basis that information gained in breach of a court undertaking should not be put to a use that advances the interests of the offending party (although the offence was through an agent) at the expense of the offended party. Addressing the issue through an order for costs only would fail to recognise the seriousness of what occurred.
For more information on this topic please contact Ciaran Joyce or any member of A&L Goodbody's Litigation and Dispute Resolution team.
Date published: 12 June 2019