Legal Privilege in Without Prejudice Correspondence with Regulator

In Purcell v Central Bank of Ireland, The AG and Ireland [2016] IECA 50 the Court of Appeal considered the extent to which 'without prejudice' privilege, which attaches to documents and communications between the Central Bank and the subject of an administrative sanctions procedure for the purpose of 'settling' that process, might be waived. 

The Court held that the Central Bank had not waived 'without prejudice' privilege in such documents, after a 'settlement' of the relevant administrative sanctions procedure, by making a public statement announcing the settlement.  The Court confirmed that a waiver of such privilege might only arise if the Central Bank had sought to put the terms of the settlement at issue or otherwise sought to rely on them adversely against the plaintiff.

Background

The plaintiff is a former executive director and secretary of the Irish Nationwide Building Society (INBS) which collapsed in the wake of the financial crash of September 2008.  In July 2015 the Central Bank served on INBS, the plaintiff and other persons associated with the management of INBS, a Notice of Inquiry alleging that the plaintiff was a "person concerned" with the management of INBS who participated in certain regulatory "prescribed contraventions". 

A week later the Central Bank issued a statement announcing that it had reached a settlement with INBS of the administrative sanctions procedure in the context of which the Notice of Inquiry had been issued. 

The Central Bank further announced that while it was imposing a €5 million fine, it did not propose to collect that fine given that the INBS had no assets.

The plaintiff then commenced proceedings challenging the validity of the settlement on the basis that the administrative sanctions procedure was unconstitutional and further asserting that his constitutional right to a good name was infringed by the publication of the settlement. 

The plaintiff sought discovery of 'without prejudice' correspondence leading to the settlement in question.  The High Court refused the discovery sought on the basis that it was subject to 'without prejudice' privilege.  The High Court also rejected the plaintiff's argument that the Central Bank had waived its privilege by making a public statement regarding the settlement with INBS.

Decision

The Court of Appeal (Hogan J, Peart J, Ryan P) upheld the Central Bank's claim to 'without prejudice' privilege pointing out that a settlement involves compromise or, at least, the exploration of the strengths and weaknesses of both sides case.  The Court noted that if litigants could not explore these matters on a 'without prejudice' basis, the potential for settlement and compromise would be greatly undermined. The Court observed that the same principles applied to both litigation and regulatory enforcement proceedings before administrative bodies such as the administrative sanctions procedure.

The Court also rejected the argument by the plaintiff that the privilege had been waived by publication of the settlement.  In doing so, the Court considered Property Alliance Group Ltd v Royal Bank of Scotland [2015] EWHC 1557 as an example of where the conduct of the defendant in the course of litigation amounted to a waiver of privilege.  In that case the English High Court held that the defendant bank, by positively relying on the outcome of a regulatory enforcement procedure in their Defence in separate litigation, had waived 'without prejudice' privilege in documents provided to the relevant authority for the purpose of 'settling' that regulatory procedure.  Importantly, the Court of Appeal concluded that the present case did not come within the scope of that decision.

The critical point according to the Court of Appeal was that the Central Bank had never formally put the terms of the INBS settlement at issue and had not sought to rely on its terms adversely as against the plaintiff.  However, the Court noted that if the Central Bank were to invoke the terms of the settlement by way of affirmative defence in the proceedings brought by the plaintiff or in some other affirmative fashion in the course of the administrative sanctions procedure, then, in principle, the plaintiff might legitimately contend that the 'without prejudice' privilege had been waived.

Comment

The decision, drawing from UK case law, is in line with the recent UK authorities on this point.  The case highlights the importance of taking care before considering whether to refer, in the context of private litigation, to the details or outcome of prior or parallel regulatory enforcement proceedings.

For more information please contact Dario Dagostino or Paula Mullooly.

Date Published: 16 March 2016