Protecting confidential information in litigation

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Introduction

Parties to litigation often run the risk that commercially confidential or private information will be revealed, either to the other side or to the public at large. There is a strong line of authorities, emphasised again in recent times, in favour of open justice. The starting point for every litigant must therefore be to understand that there is always a risk that information which they would prefer to keep confidential might become public.

This cautionary note applies whether the information in question is accurate but commercially confidential, or whether it is an untrue or scurrilous allegation designed to damage a party's reputation. As the High Court emphasised in a recent case involving allegations harmful to the reputation of two Saudi princes (Global Torch Ltd v Apex Global Management Ltd [2013] EWHC 223 (Ch)), reputational harm is a basic fact of life in most litigation.

That being said, the courts do have at their disposal a series of powers which can prove invaluable for litigants in protecting confidential information. Consequently, in most cases involving confidential information, it is advisable to consider at the outset whether and how that information can be protected.

This article considers the main tools available to litigants to protect confidential information. At the end of this article is a table summarising the various confidentiality concerns that may arise at various stages in the proceedings and the potential solutions to such concerns.

Initial considerations when seeking to protect confidential information

Before exploring the means by which parties can seek to protect confidential information, it is worth noting the following which parties should bear in mind whenever they are considering asking the court to protect confidential information:

1. As already mentioned, the courts give great weight to the principle of open justice. That means both that the other party should have access to all relevant information, and also that the proceedings should be held in public.
2. Consequently, in considering what protections to put in place, the courts look to impose the minimum possible interference with the open justice principle. Parties should therefore be proportionate and targeted in their applications.
3. The risk of information becoming public increases as trial approaches. It is far easier to obtain protections early on in proceedings. The most difficult task is to obtain orders keeping the trial confidential.
4. Any application to protect confidential information should be fully supported by evidence explaining why the order is required.

The main tools available to litigants to protect confidential information

Sealing the court file

The first practical concern of parties to litigation is often whether third parties (including the press) can obtain documents from the court file.

Statements of case

In relation to statements of case, the general rule under CPR 5.4C(1) is that a person who is not a party to proceedings may obtain from the court records a copy of a statement of case, but not any documents filed with or attached to it. The default position is therefore that statements of case are public documents. However, the rule only applies after the defendant has filed its acknowledgment of service or defence, or if the claim has been listed for a hearing, or if judgment has been entered (CPR 5.4C(3)).

Anyone wanting to keep the contents of a statement of case out of the public domain should make an application under CPR 5.4C(4). This rule provides that the court may, on the application of a party or of any person identified in a statement of case:

• order that a non-party may not obtain a copy of a statement of case;
• restrict the persons or classes of persons who may obtain a copy of a statement of case;
• order that persons or classes of persons may only obtain a copy of a statement of case if it is edited in accordance with the directions of the court; or
• make such other order as it thinks fit.

An application for an order under CPR 5.4C(4) may be made without notice (CPR 5.4D(2)). If such an order is made, the consequence is that any person wishing to obtain a statement of case would need to apply on notice to the parties for permission to do so (CPR 5.4C(6)).

The expression "sealing the court file" is typically used where the order made by the court completely prevents non-parties from accessing the court file. But note that CPR 5.4C(4) contains a series of options, of which sealing the file completely is the most draconian.

It appears to be common practice, instead of seeking an order under CPR 5.4C(4), simply to attach a "confidential schedule" to a statement of case. However, it is unclear whether that approach would stand up if challenged. If there were ever any argument about the effect of calling a schedule "confidential", the party seeking to protect the information in the schedule would presumably need to contend that the schedule is not part of the "statement of case" as the expression is used in CPR 5.4C(1). That might be a difficult argument. The safer option would be to obtain an order under CPR 5.4C(4) sealing the confidential schedule.

Where the court has made an order sealing the court file, a practical tip is to provide the Master with an envelope marked "Not to be opened except pursuant to a court order", into which the statement of case may be placed. This will minimise the risk of the court office inadvertently providing the statement of case to a non-party.

Documents other than statements of case

In relation to documents other than statements of case, the rule under CPR 5.4C(2) is that a non-party may, if the court gives permission, obtain from the court records a copy of any other document filed by a party, or a communication between the court and a party or another person.

Lewison J gave important guidance on applications to see such documents in ABC Ltd v Y (Practice Note) ([2012] EWHC 3176 (Ch), [2012] 1 WLR 532). In summary, he suggests that where documents are referred to in open court and form part of the judge's decision making process, the principle of open justice means that the court ought generally to lean in favour of providing access to such documents. On the other hand, if such documents are not read by the court as part of the decision-making process, or if they are read only in the context of a private hearing (or in a hearing at which the judge considers access to the documents and makes an order restricting access), the court should only give access if there are strong grounds for thinking that it is necessary in the interests of justice to do so.

Documents referred to in certain court documents

The other party will be entitled to a copy of any document referred to in a statement of case, witness statement, witness summary or affidavit under CPR 31.14. Whilst this rule is apparently unqualified, it appears that it is possible for the court to limit the extent to which disclosure is required, in particular if it is not needed for the fair disposal of the action (Danisco A/S v Novozymes A/S [2012] EWHC 289 (Pat)). However, if possible, the safest course of action will always be to avoid referring to documents containing confidential information.

Restrictions on the use of disclosed documents

Disclosed documents are subject to an implied undertaking that they will be used only for the purpose of the proceedings in which they are disclosed. This rule is now codified in CPR 31.22(1) which provides that a party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where:

• the document has been read to or by the court, or referred to, at a hearing which has been held in public;
• the court gives permission; or
• the party who disclosed the document and the person to whom the document belongs agree.

There are a series of cases in which the court has given permission for disclosed documents to be used for other purposes under CPR 31.22(1)(b), and the tide appears to be in favour of granting permission if the objective is to bring other proceedings (civil or criminal) and there is no strong countervailing reason not to allow the documents to be used in the manner suggested.

However, the most important point in most cases will be to note that under CPR 31.22(1)(a) a party may use a disclosed document for other purposes if it is read by the court or referred to at a hearing which is held in public. That rule may provide cover for the other party to the proceedings to provide the document in question to third parties (e.g. the press).

CPR 31.22(2) allows the court to make an order restricting or prohibiting the use of a document which has been disclosed, even if it has been read by the court or referred to at a public hearing and parties may therefore wish to consider whether to apply for such an order. As noted above, such an order would also have the benefit of making it less likely that third parties would subsequently succeed in obtaining copies of the document in question from the court file.

Confidentiality clubs

There is, of course, always a risk that the implied undertaking that documents will not be used other than for the purposes of the litigation may be breached. The breach may be intentional. It may also be inadvertent. Take for example a case in which a party is required to disclose pricing information to a competitor. It may be impossible for the competitor to put that information completely out of its mind when it comes to set its own prices. In such a case there would be an obvious risk of inadvertent use.

Confidentiality clubs (or rings) can be helpful in such situations. They typically impose restrictions on: who should have access to disclosed documents; how those documents may be copied; where the documents may be viewed; and/or the dissemination of information contained in the documents. Parties to confidentiality clubs are also typically required to provide undertakings regarding their compliance with the confidentiality club.

The key case on the jurisdictional basis on which to make confidentiality club orders is Church of Scientology of California v Department of Health and Social Security ([1979] 1 WLR 723). In that case, the defendant was concerned that if the Scientologists learned the names of individuals named in certain documents then they might harass, threaten or blackmail the individuals concerned. The court held that the basis of its power to make such orders was to prevent the use of a document for a collateral purpose. Brandon LJ summarised the principles as follows:

"1. A party to litigation has a prima facie right of unrestricted inspection of the documents of which discovery has been made by the other party so far as may be necessary to dispose fairly of the case or for saving costs. 2. A party is not entitled to use his right of inspection for any collateral purpose. 3. If it is shown that there is a real risk of a party using his right for a collateral purpose, the court has power to impose restrictions on such right in order to prevent or discourage him from doing so. I think that this power is derived from the inherent jurisdiction of the court to prevent abuse of its process…"

In Roussel Uclaf v ICI [1990] RPC 45, the Court of Appeal approved the following summary of the principles from the first instance judgment of Aldous J:

"Each case has to be decided on its own facts and the broad principle must be that the court has the task of deciding how justice can be achieved taking into account the rights and needs of the parties. The object to be achieved is that the applicant should have as full a degree of disclosure as will be consistent with adequate protection of the secret. In so doing, the court will be careful not to expose a party to any unnecessary risk of its trade secrets leaking to or being used by competitors. What is necessary or unnecessary will depend upon the nature of the secret, the position of the parties and the extent of the disclosure ordered. However, it would be exceptional to prevent a party from access to information which would play a substantial part in the case as such would mean that the party would be unable to hear a substantial part of the case, would be unable to understand the reasons for the advice given to him and, in some cases, the reasons for the judgment. Thus what disclosure is necessary entails not only practical matters arising in the conduct of a case but also the general position that a party should know the case he has to meet, should hear matters given in evidence and understand the reasons for the judgment."

"Members" of the confidentiality club

It will be necessary to consider who will have access to disclosed documents. Clearly solicitors and counsel will need access to the documents and there may be others working on the case who will also need access such as experts or foreign lawyers.

As regards whether the client can be excluded from the confidentiality club, a helpful recent case which gives an indication of the sorts of factors which will be relevant is IPCom GmbH & Co KG v HTC Europe Co Ltd ([2013] EWHC 52 (Pat)). The proceedings were to determine the terms on which Nokia should be licensed under IPCom's patent. As part of its case, Nokia relied on the terms of the licences of its own technology. The issue was whether those licences should be made available to a member of IPCom's internal management team. Floyd J held that they should not be i.e. IPCom's internal managers should be excluded from the confidentiality club. The following factors were relevant to his decision:

• IPCom would itself be able to understand the documents;
• the case was at an interim stage and there was no guarantee that the matter would go to full trial;
• it was not clear what part, if any, the documents would play in the case;
• the order might affect the interests of third parties who were concerned to avoid their confidential agreements falling into IPCom's hands;
• IPCom was a very small company and any person who had sight of the documents would subsequently be involved in commercial negotiations on behalf of IPCom and would not be able to put the confidential information out of their minds in those negotiations; and
• it was not necessary in order to do justice for the individuals concerned to have access to the documents at that stage in the proceedings.

However, as trial approaches, it becomes increasingly difficult to exclude a party itself from a confidentiality club and it will be difficult to convince the court that this is justified. Indeed, in Re Coroin Ltd ([2012] EWHC 1158 (Ch)), Mr Justice David Richards held that, in his view, if the court does have jurisdiction to deny a party access to the evidence at trial, the jurisdiction is so exceptional as to be of largely theoretical interest only.

It is worth highlighting that this case was concerned with access to the evidence at trial. Some confidential information revealed in disclosure will not actually be used as evidence at trial and it seems likely that such information could remain subject to a confidentiality club which continues to exclude the client for the duration of the trial and beyond.

Some practical points

The confidentiality club needs to be practical. It is important to think about how it will work in practice and who needs to have access to the documents. Things to consider include:

• Will you allow members of the confidentiality club to work on confidential documents from home or on handheld devices?
• You should ensure that you have an exception to the confidentiality club which enables the preparation of a trial/hearing bundle for use at the trial or hearing. If the hearing is not in private, you should ask the court for an order that documents read by the judge or referred to in court will not thereby come into the public domain under CPR 31.22.
• To reduce the risk of an inadvertent breach of the confidentiality club, you should consider marking all confidentiality club documents in some way so it is clear when you are dealing with a document to which the restrictions apply.
• After the proceedings have ended, do you want confidentiality club documents to be returned or destroyed? If you do, do you want a witness statement from the other side confirming that they have complied with this obligation? Electronic documents can be difficult to destroy so the obligation to destroy these documents may need to be limited. You should also include an exception which enables solicitors, counsel and experts to retain documents held on their files.

Hearings in private

For a party concerned to protect confidential information, holding a hearing in private has several advantages. Most obviously, the public cannot attend. Two side benefits, touched on above, are:

• a private hearing means that disclosed documents referred to in the course of the hearing remain subject to the implied undertaking; and
• a private hearing makes it much less likely that an application by a third party for copies of documents on the court file referred to at the hearing would be successful.

The general rules on hearings are contained in CPR 39.2. CPR 39.2(1) provides that the general rule is that a hearing is to be in public. However, under CPR 39.2(3), a hearing, or any part of it, may be in private if:

• publicity would defeat the object of the hearing;
• it involves matters relating to national security;
• it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality;
• a private hearing is necessary to protect the interests of any child or protected party;
• it is a hearing of an application made without notice and it would be unjust to any respondent for there to be a public hearing;
• it involves uncontentious matters arising in the administration of trusts or in the administration of a deceased person's estate; or
• the court considers this to be necessary, in the interests of justice.

In addition, the court may order that the identity of any party or witness must not be disclosed if it considers non-disclosure necessary in order to protect the interests of that party or witness (CPR 39.2(4)).

In Re Coroin Ltd, the court emphasised that the principle of open justice is a fundamental feature of our legal system and that any departure from the principle of open justice is permitted only if it is necessary in the interests of justice and the administration of justice. The burden of establishing that it is necessary to depart from the principle of open justice rests firmly on the party seeking it and any departure must be supported by clear and cogent evidence which will be subjected to careful scrutiny by the court. Sitting in private is the last resort. Where the court is satisfied that some inroad into the principle of open justice is required, it will strive to keep it to the minimum and will sit in private only if any other course is effectively unworkable.

Recent cases suggest that in most commercial cases, it will be very difficult to satisfy the court that holding the hearing in private is necessary in the interests of justice. In Re Coroin Ltd itself, the application for a private hearing was rejected. The applicant relied on the following points:

• First, he said that the hearing would be concerned with confidential information relating to his property portfolio, which he contended was a "personal financial matter" within the meaning of CPR 39.2(3)(c). The judge was doubtful that such business activities could be described as "personal" within the meaning of the rule, but in any event held that the concerns came "nowhere near overcoming the basic requirements for open justice".
• Secondly, he raised points about the likely negative reaction of third parties to the disclosure of confidential information. In particular, he contended that disclosure of the identity of people with whom he had negotiated, and the terms of their negotiations, would jeopardize his ability to deal with them in the future. The judge held that this was mere speculation, and inherently improbable because business people want to do business.

An application for a hearing in private was also rejected in Global Torch Ltd v Apex Global Management Ltd. In that case, various serious allegations were made about the conduct of, inter alia, two Saudi princes. The applicants, seeking to have the hearing in private, claimed that the allegations would affect the health of the elder prince (who was 86), result in a serious threat to their personal safety, and have an adverse effect on relations between Saudi Arabia and the US and UK. They also argued that the allegations would seriously affect the reputation of the ruling family of Saudi Arabia.

On appeal, the Court of Appeal summarised the relevant legal principles, starting with the paramountcy of open justice, which now has to be reconciled with rights under Articles 6 (right to a fair trial), 8 (right to respect for private and family life) and 10 (freedom of expression) of the European Convention on Human Rights. On an application for a private hearing, the court must consider whether there is sufficient public interest in maintaining the open justice principle to justify the resulting curtailment of the competing rights (here, the appellants' reputational rights under Article 8). The Court of Appeal noted that allegations of serious misconduct are raised in many cases, with the potential for reputational damage. However, if the allegations are false, the maligned party will be vindicated through the judicial process. In the absence of evidence that the court's process was being abused by the making of knowingly false allegations, this case was no different. Therefore, there was no justification for departing from the principle of open justice.

One important consideration in any application for a private hearing is whether there are less drastic steps which could be taken to protect the private information. In Ambrosiadou v Coward ([2011] EWCA Civ 409), during divorce proceedings between the parties in Greece, the defendant had issued an application notice for custody and related matters concerning their son. Instead of ordering that the hearing take place in private, the court took the view that it should order that there should be no reporting of the contents of the application notice, whether or not mentioned in court, without the permission of the court or the written agreement of both parties. On that basis, the court could see no objection to the hearing proceeding in open court, on the basis that counsel could be expected to be able to avoid revealing any private information in their oral submissions. If for some reason it was necessary to do so, counsel could ask the court to sit in private temporarily and if counsel accidentally revealed any private information orally, the court could make an appropriate order preventing its reporting. The court emphasised that before applying for a hearing to be in private, parties and their advisers should consider whether the concern that confidential information may be revealed during the course of the hearing can be accommodated by a less drastic course, such as that adopted in the Ambrosiadou v Coward case.

Judgment

It is worth noting that whatever steps may be taken in the course of proceedings, confidential information may end up in a public judgment. The court can be informed of this concern, and there may be an opportunity to identify those parts of a draft judgment said to be confidential. However, the content of the judgment is ultimately a matter for the Judge.

Injunction

The tools which can be used to protect confidential information set out above will not necessarily prevent the other side from revealing confidential information to third parties. If the information is of a type which could be protected by injunction, and if there are grounds to obtain an injunction, it may be desirable to go down that route.

If the other side has confidential information which they had in their possession other than through the court proceedings (e.g. information which they know from their historic involvement with your client) and that information cannot be protected by injunction, then it may not be possible to protect the information. However, in this case, some of the steps set out above may be helpful. For instance, if you obtain an order sealing the court file, you could then write to the other side warning them that disclosing any of the information which the court has protected would be a contempt of court.

Summary: confidentiality concerns and potential solutions

Tristan Jones, Blackstone Chambers and Sarah Milsted, Olswang LLP