Redaction Action

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Andrew Martin’s practice bridges the international corporate and dispute resolution fields and focuses on commercial litigation and arbitration, insolvency and corporate reconstruction.

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It is always reassuring when a decision of the court validates and confirms the adage that the law is largely just “common sense with knobs on” (in the words of Lord Sumption).

The loser in a recent injunction case wanted to be able to rely upon privileged information contained in the bill of costs submitted by the winner, and to use that information against the winner in the arbitration proceedings that were pending between the parties. This is pretty outrageous, and one would readily expect that this would not be permissible.  It isn’t.

Hellman J decided that the details of the lawyer’s advice or work product for his client contained in a bill of costs remained privileged when that information and any documents in support are provided for the purposes of a taxation of costs.  It does not lose its privileged nature because it is provided to the other side in the context of a disputed taxation proceeding.

Hellman J also decided that anything contained in the bill of costs remains confidential to the party supplying the information, and subject to the implied undertaking that the other side will not use that information for any other purpose than the taxation for which the information was provided.  This includes anything disclosed in the bill of costs (or documents in support), whether it is privileged or not.  Makes sense.

For those unfamiliar, the “taxation” process is the method of assessing the amount of costs to which the winning side is entitled to recover, and requires the winner to set out in some detail the basis of the claim for costs.  Of necessity the bill of costs has to describe what was done, by whom, when, at what rate and for how long, or how often, and the description may involve providing supporting documents, especially if the taxation is contested.  Plainly most of this information will be privileged.  If it is, then it is protected, and the protection is “absolute”.

After all, this information is only produced to justify the recovery of the costs from the loser. You might think it would be pretty rich if the loser were allowed to use that information to make a collateral attack against the winner in some other proceedings. The court would agree with you.

Hellman J went on to say that “redaction” (blanking out) of privileged material in a bill of costs is not the correct approach, although this has approach has been adopted in Australia and New Zealand.  This may be of interest to practitioners.

The case was the first time the question of privilege in a bill of costs has been argued before the Bermuda court; this was not really a novel point, because these basic principles have been well established for many years.  It is more remarkable that it had to be resolved at a fully contested hearing.