Discovery of Without Prejudice Documents - Purcell v Central Bank of Ireland

In the case of Purcell v Central Bank of Ireland, the AG, and Ireland [2016] IECA 50, the Court of Appeal considered the context in which ‘without prejudice’ documents can be disclosed as part of a discovery request.

In July 2015, the Central Bank served a Notice of Inquiry on Mr Purcell (the “Plaintiff”), the Irish National Building Society (“INBS”), and other persons involved in the management of the INBS pursuant to Section IIIC of the Central Bank Act 1942 (as amended). A week later, a settlement was reached between the Central Bank and INBS and the Central Bank issued a statement which read “INBS had admitted multiple failings at several levels of its commercial lending process (…) all the way to the Board of Directors”.

The Plaintiff brought High Court proceeding challenging the validity of the settlement. The Plaintiff alleged that the settlement was “completely artificial in nature” and that the “announcement of the settlement was prejudicial to the plaintiff in implying that he participated in the admitted contravention of INBS”. In order to prove this allegation, the Plaintiff sought discovery of ‘without prejudice’ documents exchanged during the settlement discussions. The High Court refused the disclosure and this decision was appealed to the Court of Appeal.

Hogan J in the Court of Appeal noted that the rationale for the existence of litigation privilege is to enable both sides to freely discuss the strengths and weaknesses of their cases in order to reach an agreement. In his judgment, he stated that “quite compelling – even exceptional – reasons are required to displace [litigation privilege]”.

The judge went on to say that it is “not sufficient to show that a party had made disclosures on a without prejudice basis: it was instead necessary to show that the privilege itself had been abused”.

The judge considered whether the defendant, the Central Bank, had waived its right to privilege by reference to the decision of the English High Court in Property Alliance Group Ltd v Royal Bank of Scotland [2015] EWHC 1557 where it was held that dishonest conduct perpetuated by the defendant had waived the litigation privilege and the court agreed to the discovery of the ‘without prejudice’ documents.

It is clear from the judgment of Hogan J that in order for discovery of ‘without prejudice’ documentation to be granted, there must be some mala fides on behalf of the defendant. The court decided that in the present case, there was no evidence of impropriety in respect of the Central Bank’s actions and refused to grant discovery.

For other regulatory bodies, situations will inevitably arise where without prejudice discussions will take place in the context of settlement. This judgment highlights the importance of taking care when referring to without prejudice discussions. Any evidence of the defendant acting in bad faith may result in an implied waiver of litigation privilege and the granting of discovery.

Click here for full judgment

Authors: Elaine Morrissey and Brian Hammond