British American Tobacco (Investments) Ltd v United States of America

This is an expedited appeal by British American Tobacco (Investments) Limited (BATCo), brought with the permission of Brooke LJ, against a ruling made by Moore-Bick J in the Commercial Court on 22 April 2004. The judge made his ruling at a directions hearing held prior to the examination of a witness, Mr Andrew Foyle, a partner in a London firm of solicitors. He acted for BATCo and other companies in the BAT group between about November 1985 and May 1994.

On 10 December 2003 the judge had made an order for the examination of Mr Foyle pursuant to a Letter of Request issued by the United States District Court for the District of Columbia. One of the rulings made by the judge at the directions hearing on 22 April 2004 related to the question whether, under English Law, legal privilege had been voluntarily waived in respect of communications evidenced in the bundles of documents prepared for Mr Foyle’s examination.

The judge made the following declaration:

“11.

It be declared that:

(i)

Privilege has been voluntarily waived by BATCo in any communications evidenced in documents in the examination bundles which either:

(a)

Were voluntarily produced by BATCo in the US proceedings or in other US litigation without reservation of privilege under English or US law;

(b)

Entered the public domain via the Minnesota Depository pursuant to the Minnesota Consent Judgment to which BATCo voluntarily consented.

(ii)

The precise scope of any such voluntary waiver is to be determined on a question by question or document by document basis.”

BATCo, along with other large tobacco companies, including Philip Morris Inc, is a defendant to a colossal claim in proceedings pending in the District Court for the District of Columbia. The claim is by the United States of America (the USA) under the Racketeer Influenced and Corrupt Organisations Statute (RICO) for the sum of at least US$289bn. It involves the production of about 40 million documents on discovery. The nature of the litigation, in which it is alleged that the tobacco companies engaged in an unlawful enterprise to deceive and defraud the American public and consumers of cigarettes about the health risks of smoking and about their knowledge and attitude to them, is described in more detail in the judgment delivered by Brooke LJ on 23 March 2004 on an unsuccessful appeal by BATCo against Moore-Bick J’s order for the examination of Mr Foyle pursuant to the Evidence (Proceedings in Other Jurisdictions) Act 1975 ([2004] EWCA (Civ) 330).

Compared with the gargantuan scale of this litigation, the issue on this appeal is a pinhead, involving only a few documents and a short question of construction. According to BATCo, however, the declaration under appeal has “potentially serious ramifications” and important adverse consequences for it and other members of the same group of companies involved in product liability litigation in a number of jurisdictions. BATCo’s documents might be deployed in other litigation, whether or not BATCo is a party. It might be said, in reliance on the declaration, that BATCo had waived privilege in the subject matter of communications evidenced by the documents, thereby opening up the field of investigation worldwide.

It is common ground that any privilege existing in the documents described in sub-paragraph (b) of the declaration, which are now available to the public, has gone. The point at issue is not whether privilege exists, but whether the privilege, which may once have existed in the documents, has, as the judge declared, gone as a result of voluntary waiver by BATCo, or, as BATCo contends, as a result of the compulsion of a court order made in accordance with the terms of the Minnesota Consent Judgment (the MCJ) referred to in the declaration. The MCJ was made following a compromise of other US proceedings brought against the tobacco companies by the State of Minnesota and others. It included provisions for obtaining court approval to the public release of documents, which had been placed by the tobacco companies, during the litigation, in a depository subject to the terms of a protective order.

It is also common ground that the resolution of the issue turns on the construction of the MCJ and whether its effect in English Law is to waive privilege in the communications evidenced by the documents. The context and terms of the MCJ is explained in more detail below. I must first deal, however, with a preliminary point raised on behalf of the USA.

Availability of appeal

As an opening salvo, the USA contended that no appeal against the declaration is available to BATCo. The objection taken to this court entertaining BATCo’s appeal is that it raises “a moot point with no consequences for Mr Foyle’s testimony or for BATCo’s position in the US proceedings.” As this is a preliminary objection, it should be determined at the outset. If the objection is upheld, it will be unnecessary to deal with the real controversy between the parties as to the correctness of the declaration.

Mr MacLean QC, appearing for the USA, submitted that BATCo’s appeal is pointless. It should be dismissed for that reason alone. He cited Lord Hutton’s recent speech in R (Rusbridger) v. AG [2004] 1AC 357 at para 35 on p371:

“It is not the function of the courts to decide hypothetical questions which do not impact on the parties before them. The point was well put by the Lord Justice-Clerk (Thomson) in Macnaughton v. Macnaughton’s Trustees 1953 SC 387,392:

“Our courts have consistently acted on the view that it is their function in the ordinary run of litigation to decide only live, practical questions, and that they have no concern with hypothetical, premature or academic questions, nor do they exist to advise litigants as to the policy which they should adopt in the ordering of their affairs. The courts are neither a debating club nor an advisory bureau. Just what is a live practical question is not always easy to decide and must, in the long run, turn on the circumstances of the particular case.”

The “moot point” argument ran as follows: Mr Foyle’s examination took place over three days from 26 to 28 April 2004; it is now over, his testimony is filed in the US District Court; and there are no further issues in the US proceedings to which the declaration might be relevant. It turned out to be unnecessary for the court to consider the extent of the waiver of privilege, as the USA had not taken advantage of it during the course of Mr Foyle’s examination and did not lead any evidence which required the court to consider the extent of the waiver.

It was also argued that the precedential value of the declaration was so limited that it was fanciful to suggest that it posed any threat to BATCo’s defence of future claims in other jurisdictions. Persons seeking to raise the waiver of privilege point in subsequent proceedings could turn to relevant rulings on it in other jurisdictions. Reference was made to two other judgments on the construction of the MCJ and its impact on privileged communications.

The judgment given by Judge Kessler in the US District Court for the District of Columbia on 17 May 2002 dealt with the effect of the MCJ under US Law. In Order 149 she granted the USA’s motion for a ruling that the defendants had waived their claims of “.Attorney-Client Privilege and Work Product Protection” over certain documents described as “the Bliley Documents” by reason, among other things (i.e. production of the documents to Congress and public policy considerations), of their consent to the public release of the documents into the Minnesota depository pursuant to the MCJ.

Judge Kessler concluded (p18) that

“…because the express terms of the settlement agreement fail to preserve the Minnesota defendants’ right to oppose public release of the Bliley documents and afford the trial court complete authority to decide the matter, the Defendants waived any privilege claims for those documents.”

Earlier in her judgment (p16) Judge Kessler made it clear that her conclusion was strongly influenced by the absence of express provisions in the MCJ reserving to the Minnesota defendants the right to oppose the plaintiffs’ application for public disclosure or to appeal against the decision of the trial court granting approval to public disclosure. The judge rejected the defendants’ contention that they had never given up their right under the previous protective order to object to public disclosure and that the right to object was so obvious that no explicit preservation provision was required.

Her view was shared by other courts which had considered the issue; it was confirmed by her in Order 409 (an unopposed order) of 1 October 2003 as the definitive ruling in relation to BATCo documents; and it was applied by her in Order 263 of 19 November 2002, adopting the report of the Special Master. She said

“… the text of the [MCJ] unambiguously provides the Minnesota plaintiffs with a mechanism to seek approval from the Minnesota trial judge to release the documents to the public and affords the trial court complete authority to decide the matter.”

A similar conclusion on the effect of the MCJ under Australian Law was reached by the New South Wales Court of Appeal in BATCo and Cannar v. Sharon Eubanksfor the United States of America [2004] NSWCA 158 (18 May 2004) It was held (at paras 185 and 186) that the disputed documents in the Minnesota Depository were in the public domain with BATCo’s implied consent. The decision of the Australian court was in the particular context of the provisions of s 122 (2) and (4) of the Evidence Act 1995 governing the adducing of evidence with the consent of the client or party concerned. The court ruled that privilege had been lost by reason of BATCo’s implied consent to disclosure within the meaning of s 122(4) of the 1995 Evidence Act, if its objections to court approval under the MCJ did not prevail:

“ That eventuality of disclosure was plainly encompassed within the scope of its express consent to the consent judgment. As such it constitutes an implied consent under s122(4).” (para 186)

Unlike Judge Kessler, the NSW Court of Appeal referred to the right of the Minnesota Defendants to oppose an application to have the protective orders dissolved and to the fact that BATCo had unsuccessfully opposed at first instance and on appeal (para 174).

No objections to the jurisdiction or discretion of the English Court to grant a declaration were raised by the USA at first instance. Far from objecting to the making of the declaration by Moore-Bick J, the USA fully participated in the arguments on the point and secured a declaration, having the effect for which it had contended and contrary to the effect for which BATCo had contended and now wishes to challenge on appeal.

The very fact that the USA strenuously opposed the reversal of the declaration by this court is in itself some indication that waiver of privilege in the communications evidenced by the disputed documents has not become a hypothetical or academic point. If the moot point objection were valid, the judge ought never to have made the declaration at first instance. The USA does not go that far, however, as it is anxious that the declaration should not be set aside by this court. Having secured the declaration for which it contended, the USA now raises the objection for the first time in order to prevent BATCo from challenging it on appeal. The USA’s litigation objective is understandable, but the legal objection is unsustainable. There is a live practical issue between the parties, which took almost a day to argue in this court, as to whether the declaration is correct. Although the judgments of the US District Court and of the NSW Court of Appeal are no doubt persuasive, they do not purport to decide the position under English law and do not necessarily conclude the waiver point in the English courts or in the courts of other jurisdictions. This court can and should resolve the real issue.

Construction and effect of the MCJ in English Law

Litigation between the State of Minnesota and others and the defendant tobacco companies concerned the costs of treating illness caused by smoking. The case settled and a final consent order was made by the court. On 19 May 1998 the MCJ was made by the District Court in the County of Ramsay. Though not a party to the settlement agreement, BATCo was a party to the MCJ, which contained the relevant provisions governing public access to documents and court files deposited in the Minnesota Depository during the proceedings. Such documents were to be made available to the public at the Depository in accordance with the court procedure contained in the consent order. The previous protective orders were dissolved with respect to all documents. The provisions governing the manner in which documents should be made available to the public at the Depository included the following:

“VIII ……

C.

For documents upon which a privilege was claimed and found not to exist, including any briefs, memoranda and other pleadings filed by the parties which include reference to such documents, Plaintiffs may seek court approval to make such documents available to the public, provided that any such request be made to the Court within 45 days of the date of entry of this Consent Judgment.”

The documents in question had not been voluntarily disclosed in the course of litigation in Minnesota or other jurisdictions in the USA without the defendants attempting to assert privilege. Some documents had been disclosed in circumstances which involved a waiver of privilege, though the precise scope of the waiver could only be determined when the documents were examined individually. Far from being voluntarily disclosed and made public during the litigation, the documents in question had been protected from public disclosure by being placed in a depository and made the subject of a protective order of Judge Fitzpatrick dated 16 June 1995. The order was expressed to continue to be binding after the conclusion of the action until further court order (para 24).

The Minnesota defendants had claimed privilege for many documents, which were scientific in nature and specifically related to health issues. Assertions of privilege were successfully challenged by the Minnesota plaintiffs on the grounds of prima facie fraud. The context in which the protective order was made is that under US law there is no implied obligation, as there is in English Law, in relation to the use that may properly be made of documents disclosed on discovery.

The protective order made by Judge Fitzpatrick was discharged when the Minnesota proceedings were settled. The use of the documents was then governed by the provisions in the MCJ, including those already quoted in para 20 above. It also included a miscellaneous provision in clause XI that

“Jurisdiction of this case is retained for the purpose of enforcement and enabling the continuing proceedings contemplated herein. Any party to this Consent Judgment may apply to this Court at any time for such further orders and directions as may be necessary or appropriate for the construction and enforcement of this Consent Judgment.”

Within the time specified in the MCJ (on 12 May 1998) an application was made by the plaintiffs named in the order for court approval to public disclosure. On 31 May 1998 an order was made by Judge Fitzpatrick for the release of the documents for public access at the Depository. The order was later upheld on appeal. BATCo opposed the making of the order and unsuccessfully appealed against the grant of court approval to the Minnesota Court of Appeals and to the Supreme Court of Minnesota. The order recited that

“…defendants’ opposition to the release of documents is not well taken .”

It appears that BATCo was allowed an opportunity to object to the release of the documents to the public, even though, as pointed out by Judge Kessler in her judgment, there was no express provision in the MCJ for a procedure entitling the defendants to make representations to the court before a decision was made whether or not to approve the public release of the deposited documents At footnote 9 of her judgment Judge Kessler did refer to the fact that the Minnesota defendants did in fact object, make opposing representations and unsuccessfully appeal against the order approving disclosure to the public, but stated that this did not alter her analysis.

In his ruling Moore-Bick J correctly identified the issue as “whether BATCo should be regarded as having voluntarily allowed the documents and their contents to enter the public domain” and summarised the rival submissions. In particular, he noted that it was common ground that the issue depended on

“2.

…whether in disclosing any given document BATCo can be said to have shown its willingness to forgo any right to keep confidential matters to which it relates.”

The judge held that:

“6.

In my view BATCo is to be regarded as having disclosed these documents voluntarily. They were deposited under a consent order terminating the Minnesota litigation on terms which placed the decision whether to make them public entirely in the hands of the court. When agreeing to the consent order BATCo was willing to accept the very real possibility that the documents and their subject would enter the public domain by that route. Again, however, the precise extent of the waiver will have to be determined on an individual basis.”

In reaching that conclusion the judge accepted the submission of Mr MacLean that, as the documents entered the public domain as the result of the operation of the consent order, BATCo must be treated as having been willing to accept that outcome as part of the price of obtaining a settlement of the litigation. He rejected the submission of Miss Dohmann QC for BATCo that it had not voluntarily allowed the documents in the depository to enter the public domain. On the contrary, the decision to make them available to the public had been that of the court and the court had reached that decision despite BATCo’s representations objecting to the grant of court approval.

With great respect to the judge and to the courts in the US and Australia, I have reached a different view on the effect of the MCJ in English Law in the context of waiver of privilege in communications.

The question on the waiver of privilege issue turns on this: what did BATCo consent to in the MCJ? It consented to the order containing the machinery of court-controlled approval for the release of documents to the public. Of course, as the judge held, it was inherent in the provisions of the MCJ that it consented to run the risk that the court might grant approval, if and when it was sought. The crucial question is whether, in agreeing to run the risk that the court might grant approval, BATCo actually agreed to the public release of the documents and thereby waived privilege in them.

On a fair and sensible reading of the relevant provisions of the MCJ I do not think that they did, any more than a claimant, who issues proceedings in which he runs the risk that he will lose the case, consents to a judgment of a judge dismissing or upholding the claim. In fact BATCo took the necessary and appropriate steps to make it clear that it did not consent to the grant of approval necessary for public access to the documents.

The provisions in the MCJ do not automatically make the document in question available to the public nor do they confer on the plaintiffs in the action any absolute right either to make them public or to have the approval of the court to release them to the public. Access to the documents is dependent on the grant of approval by the court, which had a discretion in the matter of whether or not to grant its approval. The final decision on disclosure rested with the court. The plaintiffs applied to the court for approval and obtained an order against BATCo’s wishes.

As for objections by the defendants to the making of the order, it must have been the understanding of the parties and of the court that the defendants were entitled to make objection. That is a reasonable understanding and, in my view, it is implicit in the MCJ. One would expect that, in the absence of a contrary provision or very special circumstances, the general principle of natural justice that a party is entitled to be heard before a court makes a decision would implicitly apply to a judicial procedure of applying for and obtaining a court order.

Even if there was no entitlement under the MCJ to object to the grant of approval, as the USA contended, it is a matter of record that BATCo did in fact object. In those circumstances I conclude that it is impossible to say that BATCo has voluntarily and of its own free will, expressly or impliedly waived privilege in the documents, which only became available to the public after the court gave its approval overriding the objections of BATCo.

I do not infer from the absence of an express right to oppose the application to the court for approval that BATCo thereby impliedly consented to such release. An element of compulsion was present in the process by which the documents became available to the public under the MCJ. That element of compulsion deprived the disclosure of the voluntary element, which needed to be present for there to be a voluntary waiver of privilege. The procedure gave BATCo a degree of protection which they would otherwise have lost on the lifting of the previous protective orders governing the documents.

Lord Bingham said in Paragon Finance v. Freshfields [1999] 1 WLR 1183 at 1188C-D

“ A client expressly waives his legal privilege when he elects to disclose communications which the privilege would entitle him not to disclose. Where the disclosure is partial, issues may arise on the scope of the waiver….. While there is no rule that a party who waives privilege in relation to one communication is taken to waive privilege in relation to all, a party may not waive privilege in such a partial and selective manner that unfairness or misunderstanding may result. ”

In this case, so far as the deposited documents protected by the MCJ are concerned, no election to disclose was made by BATCo, either partial or comprehensive. The only election made by BATCo was to sign up to the MCJ, which provided the protection of the need for court approval for disclosure. That was not an express or implied election to disclose the documents to the public.

As for the ruling in the US courts and the Australian courts that privilege has been waived, that depends on the domestic law of those countries as interpreted and applied by their courts. In this case this court is only concerned with the position under English law. As Aldous LJ said in Bourns Inc v. Raychem Corp [1999] 3 All ER 154 at 167h privilege is not lost under English law because it cannot be claimed in another country:

“To suggest otherwise would mean that a court, when deciding whether to uphold a claim for privilege, would need to be informed as to whether privilege could be claimed in all the countries of the world…….The fact that under a foreign law the document is not privileged or that the privilege that existed is deemed to have been waived is irrelevant. The crucial consideration is whether the document and its information remain confidential in the sense that it is not properly available for use. If it is, then privilege in this country can be claimed and that claim, if properly made, will be enforced.”

In my judgment, similar considerations apply when determining whether documents, which are no longer privileged, have ceased to be so as the result of voluntary waiver of privilege or otherwise.

Mr MacLean submitted that BATCo is estopped by the decision of Judge Kessler in the case of Order 149 from disputing the effect of the MCJ on waiver of privilege. It was estopped from contending that it did not voluntarily consent to the release of the Minesota documents to the public by reason of a final and binding decision of a competent foreign court on the merits, to which BATCo and the USA were parties. As explained in para 13 above Judge Kessler held in the case of Order 149 that the MCJ amounted to a voluntary waiver of privilege, as BATCo had thereby impliedly consented to a procedure, whereby the documents in question put into the Minnesota Depository became available to the public.

Mr MacLean cited The “Good Challenger” [2004] 1 Lloyd’s Law Reports 67 at 77-81 and contended that all the requirements of issue estoppel were satisfied in this case: the judgment of Judge Kessler was that of a foreign court of competent jurisdiction; the judgment was final and conclusive and on the merits; there was identity of parties; and there was identity of subject matter. The decision on the consent point was necessary for its decision. It was irrelevant that the English court might think that the decision of Judge Kessler was wrong as a matter of English Law. The application of issue estoppel in this case did not work injustice.

Miss Dohmann objected to this new point being taken on appeal. The USA had not attempted to persuade the judge that he was prevented from deciding the point according to English Law by reason of the decision of Judge Kessler. The objection is well founded. The USA persuaded Moore-Bick J to make his own decision on the construction of the MCJ according to English Law. It would be unjust to allow the USA on an appeal to use the issue estoppel argument in order to prevent BATCo from contending that the judge had erroneously construed the MCJ.

I also agree with Miss Dohmann that issue estoppel does not apply in this case for the reasons stated in the passage cited from Bourns v. Raychem in paragraph 39 above. Judge Kessler decided the issue of voluntary waiver according to US Law. Moore-Bick J decided the point according to English Law. The applicable laws on disclosure of documents and legal privilege are not the same.

I would allow the appeal and set aside the declaration.

I agree,

I also agree.