The recent cases of Jinxin Inc v Aser Media Pte Ltd (Jinxin) and Flowcrete UK Ltd and others v Vebro Polymers UK Ltd and others (Flowcrete) have offered some helpful reminders with regard to how parties should approach matters of privilege. These cases are particularly instructive on inadvertent disclosure, use of potentially privileged documents and waiver of privilege.
Jinxin
The background to this case is available in a legal update.
The application
Jinxin applied for a declaration that various defendants were not entitled to claim privilege over any data and documents that were held on, or collected from, the computer systems of MPS (the subsidiary Jinxin had acquired, which had mail accounts which had previously belonged to the defendants), its subsidiaries and associated corporate bodies.
Jinxin submitted that the relevant test was whether the defendants had a reasonable expectation of privacy against MPS and that the response to this was no (because those mail accounts were on servers which they would have known were going to be acquired). Accordingly, Jinxin said the documents could not be withheld on the basis of privilege.
Fifteen points were raised in support of Jinxin’s position (paragraph 48, judgment). Two particularly relevant factors were that one defendant indicated that their mail account was likely to contain privileged materials, and that all the MPS group directors were party to a shareholders’ agreement which included a right of access for Jinxin. Jinxin submitted that privilege could not exist where MPS’ employee handbooks and policies implied that staff could use the company systems for private communications, but where MPS reserved the right to monitor/access material on its servers “where necessary”.
The decision
The court held that whilst it is correct that confidentiality is an essential prerequisite for a claim to privilege, privacy and confidentiality should not be equated. Instead, the relevant question is whether the information was imparted in circumstances importing an obligation of confidence (Coco v Clark at paragraph 419).
The relevant question was “what a reasonable person in the position of the party seeking to use the information (or in a three party situation the person from whom that party obtained the information) would have understood from all the circumstances in which the information was received”. In essence, confidentiality is not simply a quality which information either has or does not have, but may be viewed as a relationship between information, persons and uses.
In applying the relevant question to MPS’ handbooks and policies, the court explained that this did not mean the company had free rein to use any private information belonging to staff members for any purpose whatsoever (paragraph 69, judgment). The reasonable person would assume that the company’s right to monitor and access data on its servers would not extend to locating and exploiting otherwise privileged material for the benefit of a person with an adverse interest to the owner of that privilege.
Finally, the court held that it was not safe to make the declaration as there was inadequate evidence about the nature of the relevant documents and, given that there were 1.5 million documents in dispute, granting a declaration would require the court to proceed on the basis of a broad generalisation.
Flowcrete
The background
The third and fourth defendants in this matter were former employees of the first claimant. A dispute arose when the third and fourth defendants set up a business in competition with the first claimant. It was alleged that this was done through the misappropriation and misuse of confidential information belonging to the claimants, and that this was in breach of covenants within the third and fourth defendants’ employment contracts.
As part of the litigation process, disclosure had been exchanged between the parties, including two PDFs which were compilations of other documents.
The inter partes correspondence is relevant to the application, decision and key takeaways:
- The claimants’ solicitors raised various deficiencies within the defendants’ disclosure, including “a failure to disclose native documents” and attachments, a failure to disclose documents which the claimants deduced must exist and the provision of documents by way of extended disclosure (which should have properly been disclosed previously) (paragraph 8, judgment).
- The defendants’ solicitors responded around a month later asserting privilege over the two PDF compilations. The defendants’ solicitors also requested that the claimants delete the two PDF compilations and any reference to their content be redacted. No clarification was provided as to which documents within the compilations were purportedly privileged, nor was any explanation provided as to the basis of privilege or how the documents came to be disclosed.
- The claimants’ solicitors replied the following week to indicate that there was nothing to suggest the documents had been provided by mistake or were obviously privileged. The claimants’ solicitors also requested further detailed explanation of the privilege analysis and asserted that in any event privilege had been waived.
- Around five weeks after the initial assertion of privilege, the defendants’ solicitors set out which individual documents within the compilation documents were allegedly privileged.
The inter partes correspondence indicated that the defendants’ solicitors took a number of weeks to highlight the inadvertent disclosure and the basis on which privilege was claimed.
The application
The claimants then brought an application regarding the defendants’ disclosure and made it clear that they intended to refer to the two compilation documents during the course of the application. The claimants’ position was that the documents could potentially reveal wrongdoing. In response, the defendants brought an application for injunctive relief: (i) to prevent the claimants’ use of certain communications, which the defendants said were privileged and inadvertently disclosed, (ii) to require the destruction by the claimants of those communications, and (iii) for certain ancillary orders.
The decision
The court refused the defendants’ application and granted the claimants permission to use the documents. It concluded that the defendants had not established that disclosure had been inadvertent or an obvious mistake, and it would not be unjust for the claimants to rely on the documents.
The court distinguished between two different situations regarding documents which may potentially reveal wrongdoing. The first situation was where the allegedly privileged document evidences iniquity – in which case privilege never attaches to the document as there is no confidence in iniquity. The second situation was where, as a result of the potential wrongdoing or inappropriate conduct revealed in the material, or as a matter of justice, it would be wrong to restrain use of inadvertently disclosed material by injunction. In that second situation, the authorities were clear that the nature of the wrongdoing, which may be relevant to the exercise of the court’s discretion as to whether to grant injunctive relief to restrain the use of inadvertently disclosed material, does not depend on dishonesty and is wider in scope.
The court also reaffirmed the applicable principles regarding inadvertent disclosure in circumstances where a receiving party has read the documents without being told that the documents are or are allegedly privileged and have been inadvertently disclosed (Al Fayed v Commissioner of the Police of the Metropolis cited). The court indicated that the relevant question is whether a reasonable solicitor would have realised that an obvious mistake had been made in disclosing the documents. The court further considered the approach of Mann LJ in Pizzey v Ford Motor Company Ltd that an obvious mistake must be evident “to the recipient of the discovery. If the mistake was evident to that person then the exception applies”. It was also noted that even if there is an obvious mistake, the court will consider whether it is just and equitable to prevent the use of material, taking into account various matters such as delay, lack of clean hands and public interest.
Key takeaways
These two cases provide useful confirmation of the correct approaches to certain confidentiality and privilege issues:
- Jinxin confirmed that privacy and confidentiality should not be equated and that it is necessary to establish whether the information was imparted in circumstances importing an obligation of confidence (Coco v AN Clark (Engineers) Ltd). The court also emphasised the relevant fact-sensitive question to answer, specifically, what a reasonable person in the position of the party seeking to use the information would have understood from all the circumstances in which the information was received.
- Flowcrete provides a convenient summary of the key principles when it comes to inadvertent disclosure and how it operates. It is a useful reminder to disclosing solicitors to take great care not to disclose privileged documents inadvertently and, in the event that such disclosure occurs, to act promptly to maximise the likelihood of preserving privilege. It also reinforces the obligations on recipient solicitors not to act in an obtuse manner and seek to benefit from an obvious mistake.
Both cases also offer practical guidance for practitioners in approaching document reviews and handling potentially privileged information:
- Jinxin emphasises that where one party holds a cache of documents from the other party and where there are assertions of privilege over certain documents, a robust approach to handling these potentially privileged documents is to use an independent reviewing lawyer.
- Flowcrete cautions of the dangers when dealing with compilation documents, given that privileged material can be scattered throughout otherwise innocuous documents. Equally, the fact that certain allegedly privileged documents were contained both within the compilation and as standalone documents separately underscores that legal teams should take care to ensure a consistent approach is taken to avoid disclosing the same document on multiple occasions (potentially using multiple different approaches). In terms of disclosure, this problem can be minimised by sensible data collection with the client, in particular effective deduplication and limiting the use of collations.
Finally, Flowcrete confirms that assertions of privilege should be fully substantiated with application of relevant principles, rather than based on bare assertions. Bare assertions prevent both the court and the opposing party from assessing whether the assertion of privilege is a reasonable one and, in turn, increases costs and the chance that the issue will end up before the court.
