In on-going complex and high value Commercial Court proceedings (Jinxin Inc v Aser Media Pte Ltd and Ors Claim No CL-2021-000089), the claimant seeks rescission of an SPA under which it acquired a 65% stake in MP & Silva Holding SA (MPS) for a price in excess of US$660 million or damages in the same amount. The claimant contends that certain of the defendants made false representations on which the claimant relied and which induced the claimant to enter into the SPA.
Before commencing proceedings, the claimant collected from the computer systems of MPS and its subsidiaries and associates a vast amount of data and documents including the email mailboxes and other documents stored on the MPS group’s systems used by certain defendants (formerly senior officers of MPS and some of them company directors). The claimant’s solicitors then set up an internal review team, to identify the defendants’ privileged documents and exclude them from consideration by the matter team.
The claimant did not initially disclose to the defendants that it had obtained their data. When the defendants discovered this, they objected that the data included potentially-privileged material, and that the arrangements put in place by the claimant’s solicitors failed to protect such privilege. The claimant disputed this, arguing that the defendants had no reasonable expectation of privacy as against the claimant, and so could not assert privilege against it.
The claimant then applied for a declaration that the defendants were not entitled to claim privilege as against the claimant over any data and documents that were held on or collected from the computer systems of MPS. The stated purpose of the application was to entitle the claimant to review the material for the purposes of disclosure.
In a judgment handed down on 1 November 2022 and reported under [2022] EWHC 2856 (Comm), Simon Salzedo KC sitting as a Deputy Judge of the High Court dismissed the claimant’s application without calling on any of the defendants.
The Judge rejected the claimant’s argument that the relevant material had lost its confidentiality against MPS by reason of the circumstances in which the documents were stored and held on the MPS group’s servers and thus could not be privileged. “Circumstances in which a company permits its employees to use its servers for private purposes but retains a right to monitor them where necessary, do not lead to the conclusion that the company has completely free rein to do as it pleases with any private information that it may find. A reasonable executive would not believe that the company could sell his private information merely because it was left on the corporate server, nor would a reasonable company believe that. In other words, these circumstances import some obligations not to misuse the information, even if they do not imply that the company could not access it at all. The company's ability to access might narrow the scope of what counts as misuse, but it does not negate any idea of confidentiality at all.” The Judge further held that MPS was under a duty not to pass potentially privileged material that might be on its servers to a shareholder who is in dispute with the relevant employee or officer.
The Judge also rejected the claimant’s alternative argument that, on the proper construction of a shareholders’ agreement, the senior officers (who were either themselves or through their corporate vehicles party to that agreement) had consented to the transfer by MPS of potentially privileged material to the claimant specifically, even if not to the whole world.
Finally, the Judge made clear that even if he was wrong in his conclusion that potential privilege had not been lost for any reason given by the claimant, he would still have declined to make the declaration in the exercise of his discretion on the basis that it was not safe to do so on inadequate evidence about the number of and circumstances in which the relevant documents had been stored on the company servers. Moreover, the Judge noted that there were other ways of dealing with disclosure of the data including, for instance, the review of such material by an independent legal team.
The judgment contains a succinct and useful summary of current legal principles on confidentiality and privacy, especially in the context of privilege. The Judge held that it is more helpful to consider confidentiality directly on the basis established by Mr Justice Megarry in Coco v AN Clark (Engineers) Limited [1968] FSR 415 at 419 (“that information must have been imparted in circumstances importing an obligation of confidence“) rather than to attempt an analysis which starts from the reasonable expectation of privacy and then moves to confidentiality. The question of whether the information was imparted in circumstances importing an obligation of confidence, like the question whether a party had a reasonable expectation of privacy, requires an intensive focus on the facts to assess 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. An important similarity between the objective assessment that is required by both the privacy and confidentiality tests is that neither is limited to a binary outcome.
Simon Colton KC and Sophie Weber appeared for the successful sixth and ninth defendants, instructed by Allen and Overy LLP. You can read the full judgment here.