Litigation Privilege in Witness Statements 

Defender Limited v HSBC Institutional Trust Services (Ireland) Limited IEHC 587

Background

This discovery application was made by the plaintiff, Defender, in its ongoing proceedings against HSBC for negligence and breach of contract regarding HSBC’s alleged role as Custodian of funds lost in the Bernie Madoff Ponzi scheme.

Defender was seeking delivery of witness statements from two sets of proceedings involving HSBC entities but to which Defender was not a party.  The two sets of proceedings were Thema International Fund plc v. HSBC Institutional Trust Services (Ireland) Ltd (the “Thema Case”)) which had settled after 17 days in the High Court and Primeo Fund (in Official Liquidation) v. Bank of Bermuda (Cayman Ltd) and HSBC Securities Services (Luxembourg) SA (the “Primeo Case”) in which a judgment was delivered in Cayman in 2017. 

In respect of statements adopted by witnesses in open court in the Primeo Case the Court ordered their delivery to Defender on the basis that they had lost their privilege. However the Court had to consider whether the statements in the Thema Case retained their privilege where they had been served but not opened in court. 

Relevance & Necessity

As this was a discovery application the issues of relevance and necessity were considered first by the Court and Twomey J. was satisfied that the witness statements clearly met the threshold for both tests given the fact that, in other proceedings in the Cayman Islands’ High Court based on the Madoff Ponzi scheme, witness statements had been used to test the credibility of witnesses. Further Charleton J. in an earlier Defender application regarding the transcripts of the Thema Case held that:

“generally speaking if there are documents available in relation to what a witness has said before and the witness’ evidence is likely to be challenged it is incumbent on people to make those available..”

Litigation Privilege 

Generally documents that are protected by litigation privilege lose that privilege when they are put into the public arena, such as used in open court.  However, a central question was whether the service of a witness statement on an opposing party leads to the loss of privilege when the proceedings conclude.

Twomey J. held that this could not be the case and that a witness statement does not lose its privileged status in those circumstances. He was of the view that service does not constitute putting the statement into the public arena. He relied on the judgment of Clarke J. in Moorview v First Active IEHC 214 to emphasise that not only is it not put into the public arena, but also that a witness statement has no evidential value unless and until it is adopted by a witness in court.

The Court contrasted the different court rules between England (which provided for privilege) and Ireland (where the rules are silent) and the policy reasons behind the rules. Twomey J. found that one of the policy reasons behind the rules in England was that it maintained an incentive for settlement.  This was on the basis that it could act as a disincentive to parties settling after hearings had commenced if litigants could not rely on one potential benefit of settling, being the avoidance of a public airing of the details of their dispute.

Closely Connected Proceedings

Even if litigation privilege is not lost when the witness statement is served on the other side, litigation privilege can be lost when the proceedings are concluded, unless those concluded proceedings are closely connected with the proceedings in which the documents are sought. For two sets of proceedings to be closely connected there must be “some connection between the parties or the subject-matter, or both”.

The High Court had to consider whether the Defender proceedings were closely connected to the Thema Case and the Primeo Case.  In this regard the Court held that the Defender case met both tests as:

1. the parties in the cases are connected (a defendant being identical in the Thema Case and part of the same HSBC Group in the Primeo Case) and
2. the subject matter of all three cases was closely connected, involving negligence claims by three different funds against a HSBC company in connection with Madoff’s alleged role as sub-custodian.

Therefore witness statements that had not been opened in court retained their litigation privilege because, although the Thema and Primeo Cases had finished, they were closely connected with the Defender proceedings.  

There was one exception regarding a witness statement that had been used in Court in the Thema Case for the purposes of cross-examination but had not been adopted by the witness as evidence. The High Court held, on the basis of Kelly v Byrne 2 IR 389 (discussed previously by us here) that this witness statement, used in open court without any caveats or restrictions, had lost its privileged status. 

Key Points

• Documents that have the protection of litigation privilege are amenable to discovery but not to production to the other side. However, if these documents are then deployed in open court, whether by adoption by a witness or otherwise without any restrictions, they can lose this status as they will be considered to be in the public arena.
• If witness statements have gained privileged status and have not been used in open court they may only retain their litigation privilege if the sets of proceedings are closely connected.

As can be seen from this decision, issues surrounding privilege are varied, complex and can frequently raise points of law that the courts have not considered. This judgment gives more certainty to the approach of the Irish Courts dealing with witness statements.

Contributed by: Catherine Thuillier

Follow Us @WilliamFryLaw