Defender Ltd v HSBC Institutional Trust Services (Ireland) Ltd

Factual and Procedural Background

The Plaintiff, Defender, initiated proceedings against the Defendant, Company A, alleging negligence and breach of contract related to its role as custodian of funds lost due to fraud by an alleged sub-custodian involved in a large Ponzi scheme. The case involves discovery applications concerning witness statements from prior proceedings involving Company A. Specifically, the Plaintiff seeks discovery of witness statements from two prior settled cases ("Thema Case" and "Primeo Case") where Company A or its group entities were defendants. The Thema Case settled after 17 days of hearings, and the Primeo Case concluded with a judgment from the Cayman Islands High Court. The Plaintiff argues for access to these statements to identify inconsistencies with current witness evidence. The Defendant objects based on privilege, delay, and necessity grounds. This ex tempore judgment addresses the novel issue of whether a witness statement loses privilege upon service or only upon adoption in open court, with the trial scheduled imminently.

Legal Issues Presented

1. Does a witness statement lose its privilege when served on the opposing party or only when adopted by the witness in open court?
2. Whether the witness statements from prior proceedings that were settled and not adopted in court remain privileged and thus immune from discovery?
3. Whether the prior proceedings (Thema and Primeo Cases) are closely connected to the current proceedings such that privilege is preserved post-settlement?
4. Whether delay in seeking discovery of prior witness statements justifies refusal of discovery?
5. Whether the use of parts of a witness statement in cross-examination without formal adoption constitutes a waiver of privilege?

Arguments of the Parties

Plaintiff's Arguments

• Seeks prior witness statements to identify inconsistencies with current witness evidence.
• Argues that even if statements are privileged, privilege should not survive post-settlement unless proceedings are closely connected.
• Explains delay in seeking discovery was due to timing of receiving Defendant’s witness statements and changes in legal landscape after relevant judgments.
• Claims discovery is necessary for fair disposal of the case, supported by precedent from the Cayman Islands Court of Appeal allowing such discovery.

Defendant's Arguments

• Maintains that witness statements served but not adopted remain privileged and are not discoverable.
• Objects to discovery on grounds of inexcusable delay and lack of necessity.
• Contends that discovery requests are a litigation tactic designed to prejudice preparation by requiring witnesses to respond to documents served late.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court first identified the novel legal question: whether privilege in witness statements is lost upon service or upon adoption in open court. The Court distinguished between simply serving a statement on the opposing party and putting it into the public arena through adoption or use in court. Citing Irish and English authorities, the Court held that privilege remains intact after service, as service does not equate to public disclosure. The evidential value only arises upon adoption by the witness in open court.

Policy considerations were paramount: preserving privilege until adoption encourages frankness in witness statements and incentivizes settlements, especially in lengthy proceedings. The Court noted that Ireland’s court rules are silent on this issue, unlike English rules, but found persuasive the English policy and case law supporting privilege preservation.

The Court then addressed whether privilege is lost upon completion of proceedings. It held that privilege survives post-settlement if the prior proceedings are closely connected with the current case, applying established criteria requiring connection of parties or subject matter. Given the identical or closely connected parties and highly related subject matter involving alleged negligence related to sub-custodianship and fraud, privilege was preserved.

Regarding the partial use of a witness statement in cross-examination without formal adoption, the Court found that this amounted to effectively putting the statement into the public arena, thus losing privilege for that statement. This conclusion was supported by analogous case law on affidavits opened in court and on the principle that unrestricted references in open court waive privilege.

The Court also considered objections based on delay and necessity. It found the discovery necessary for fair trial disposal, especially given precedents where prior witness statements were used to assess credibility. The delay was mitigated by the timing of the Plaintiff’s knowledge of witness identities and relevant legal developments. The Defendant’s prejudice argument was unpersuasive, as the Court’s role is not to protect witnesses from unexpected challenges.

Holding and Implications

The Court granted discovery of the witness statements from the Primeo Case, as privilege was lost by adoption of those statements during that trial. It rejected the Defendant’s objections based on delay, relevance, and necessity.

Regarding the Thema Case, the Court held that the witness statements remain privileged because they were served but not adopted, and the Thema Case is closely connected to the current proceedings, preserving privilege post-settlement. Therefore, the Thema witness statements are generally not discoverable.

An exception was made for the witness statement of the witness referred to as "Ms. Coe" and the witness statement of "Mr. Wiener," which, although not adopted, were effectively opened in court by reference and summary during cross-examination, resulting in loss of privilege and requiring disclosure.

This decision reinforces the principle that privilege in witness statements endures until adoption or effective use in open court, supporting litigation fairness and settlement incentives. It clarifies an important procedural point in Irish law and guides parties on discovery expectations in related proceedings.