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Cite as: [2005] ScotCS CSOH_62, [2005] CSOH 62

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Narden Services Ltd v. Inverness Retail And Business Park Ltd & Ors [2005] ScotCS CSOH_62 (17 May 2005)

OUTER HOUSE, COURT OF SESSION

[2005] CSOH 62

P961/03

 

 

 

 

 

 

 

 

 

 

OPINION OF

R F MACDONALD QC

(Sitting as a Temporary Judge)

in Petition of

NARDEN SERVICES LIMITED

Petitioners

against

(FIRST) INVERNESS RETAIL AND BUSINESS PARK LIMITED; (SECOND) JAYMARKE DEVELOPMENTS LIMITED; (THIRD) ALAN BAXTER WILSON; (FOURTH) PAUL DOHERTY; and

(FIFTH) JAMES SHAW

Respondents

________________

 

 

Petitioners: McBrearty; Dundas & Wilson CS

First, Second and Fifth Respondents: N F Davidson QC; Blacklock Thorley

Third and Fourth Respondents: Scott QC, E W Robertson; Brodies

17 May 2005

Introduction

[1]      This petition has been raised by Narden Services Limited for rectification of the register of members of Inverness Retail and Business Park Limited, who are the first respondents. The petitioners are members of the first respondents. The second respondents are Jaymarke Developments Limited. The third respondent is Alan Baxter Wilson, a shareholder in the second respondents. The fourth respondent is Paul Doherty, also a shareholder in the second respondents. The fifth respondent is James Shaw, a shareholder in and director of the second respondents. He is also a shareholder in, and director and secretary of, the first respondents. Answers have been lodged by the third and fourth respondents only.

[2]     
The case pleaded by the petitioners is briefly as follows. In November 1998 a Joint Venture Agreement ("JVA") was entered into between them and a company then called Jaymarke Developments Limited, which is a separate company from the second respondents and has a separate registered number. The petitioners refer to this company as "Old Jaymarke". At that time the third and fifth respondents were directors of Old Jaymarke and the third respondent was also company secretary. The first respondents (then registered as Redleys Limited) were incorporated for the purpose of the acquisition, development and sale of an area of land near Inverness. The JVA provided that Old Jaymarke and the petitioners were each to hold a 50% shareholding in the first respondents and the net profit was to be divided equally between Old Jaymarke and the petitioners. Both the Articles of Association of the first respondents and the JVA made provision for the procedures to be followed in relation to the transfer of shares in the first respondents. On 16 April 1991 Old Jaymarke transferred their 50% shareholding ("the shareholding") in the first respondents to Jaymarke Properties Limited ("Properties") in accordance with the relevant terms of the Articles of Association and the JVA. That transfer, which was discussed in or about February 1991 in a meeting at the offices of Paull & Williamsons, Solicitors, attended by the third and fifth respondents and Mr Les Dalgarno of Paull & Williamsons, was carried out because the third and fifth respondents were concerned to protect the shareholding from Old Jaymarke's creditors at a time when the commercial property market was depressed. Since 16 April 1991 there have been two purported transfers of the shareholding. On 29 April 1993 a stock transfer form was completed by the third and fifth respondents on behalf of Properties purporting to transfer the shareholding from Properties to Old Jaymarke. On 30 June 1994 a stock transfer form was completed by the third and fifth respondents on behalf of Old Jaymarke purporting to transfer the shareholding from Old Jaymarke to the second respondents, who were then registered in the name of Jaymarke Retail Developments Limited, and have since undergone a change of registered name. These two purported transfers were both invalid as they were not carried out conform to the procedures in Article 7 of the first respondents' Articles of Association, the petitioners did not give their approval for them as required by clause 4 of the JVA and there was no formal resolution of the board of the first respondents authorising the purported transfers as required by clause 5 of the JVA. The petitioners became aware of the two purported transfers only in about October 2002 as a result of ongoing proceedings raised by the third and fourth respondents under the commercial procedure in the Court of Session. The purported transfers are therefore of no effect. The second respondents are not members of the first respondents. In the register of members of the first respondents the second respondents are entered as 50% shareholders of the first respondents. The basis for that entry is the second of the purported transfers, and, in light of the invalidity of that purported transfer, the second respondents have been entered in the register without sufficient cause. Properties have not been entered in the register as members of the first respondents. In light of the valid transfer of the shareholding to Properties from Old Jaymarke on 16 April 1991, Properties ought to have been so entered: their name has therefore been omitted from the register without sufficient cause. The register ought to be rectified accordingly.

The relevant statutory provisions

[3]     
The point which arises for decision at this stage in the proceedings relates to the procedure for the recovery of documents. It is therefore appropriate that, before turning to the procedure which has been followed, I should set out the relevant statutory provisions.

(i) The rules of court

[4]     
The relevant rules of court are 35.3, 35.3A and 35.8. So far as material, these provide as follows:

"Optional procedure before executing commission and diligence

35.3.-(1) Subject to rule 35.5A (optional procedure where there is a party litigant or confidentiality is claimed), this rule applies where a party has obtained a commission and diligence for the recovery of a document on an application made under rule 35.2(1)(a).

(2) Such a party may, at any time before executing the commission and diligence against a haver, serve on the haver an order in Form 35.5-A (in this rule referred to as 'the order').

(3) The order and a copy of the specification referred to in rule 35.2(2), as approved by the court, shall be served on the haver or his known agent and shall be complied with by the haver in the manner and within the period specified in the order...

(6) Where any party, who has obtained any such document under paragraph (5), wishes to lodge the document in process, he shall -

(a) lodge the document within 14 days after receipt of it;

Optional procedure where confidentiality is claimed

35.3A.-(1) This rule shall apply where -

(b) confidentiality is claimed for any document in the possession of a haver.

rule 35.3 (optional procedure before executing commission and diligence).

Confidentiality

35.8.-(1) Where confidentiality is claimed for any document or other property sought to be recovered under any of the following rules, such document or other property shall, where practicable, be enclosed in a sealed packet:

(2) A motion to have such a sealed packet opened up or such recovery allowed may be made by -

(a) the party who obtained the commission and diligence;

(3) In addition to complying with rule 23.3 (intimation of motions), the party enrolling such a motion shall intimate the terms of the motion to the person claiming confidentiality by registered post or the first class recorded delivery service.

(4) The person claiming confidentiality may oppose a motion made under paragraph (2)."

Rule of court 35.4 makes provision for the execution of commission and diligence for recovery of documents before a commissioner.

(ii) Human Rights Act 1998

[5]      Section 1(1) and (2) of the Human Rights Act 1998 ("the 1998 Act") provides that the Convention rights are to have effect for the purposes of the Act subject to any designated derogation or reservation. Included in the Convention rights is article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms ("ECHR"), which is in the following terms:

"(1) Everyone has the right to respect for his private and family life, his home and his correspondence.

(2) There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic wellbeing of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others."

Sections 3 and 6(1), (2) and (3)(a) of the 1998 Act provide as follows:

"Interpretation of legislation

3.-(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.

(2) This section -

(a) applies to primary legislation and subordinate legislation whenever enacted;

(b) does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and

(c) does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility or revocation) primary legislation prevents removal of the incompatibility.

Acts of public authorities

6.-(1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right.

(2) Subsection (1) does not apply to an act if -

(a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or

(b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.

(3) In this section 'public authority' includes -

(a) a court or tribunal..."

The Court of Session is, by virtue of section 6(3)(a), a public authority, and it is therefore unlawful for it to act in a way which is incompatible with a Convention right.

Procedural history

[6]      On 17 March 2004 the third and fourth respondents enrolled a motion for, among other things, commission and diligence for recovery of the documents called for in the specification of documents No 18 of process. That motion was not intimated to the first, second or fifth respondents, who had not lodged answers. The motion called before Lord Menzies on 19 March 2004 when the petitioners and the third and fourth respondents were represented by counsel. Lord Menzies granted diligence against havers for recovery of the documents called for in the specification of documents No 18 of process, with the exception of call 13 thereof, and commission to Stephen Woolman QC to take the oaths and examination of havers and to receive any exhibits and productions made by them, to be reported quam primum. The third and fourth respondents then served an order on the havers in the Form 35.3-A along with a copy of the specification of documents and certain documents were recovered. On 7 April 2004 the third and fourth respondents enrolled two separate motions. The first motion, which was intimated to the petitioners' solicitors and to Paull & Williamsons, was to open up the confidential envelope No 23 of process lodged by Paull & Williamsons in response to the specification of documents No 18 of process. The second motion, which was intimated to the petitioners' solicitors and to Ritson Smith, was to open up the confidential envelope No 24 of process lodged by Ritson Smith in response to the specification of documents No 18 of process. Neither of these motions was opposed and on 13 April 2004 an interlocutor in the name of Lord Penrose and signed by a Depute Clerk of Session allowed the confidential envelopes Nos 23 and 24 of process, recovered in terms of the interlocutor dated 19 March 2004, to be opened up and allowed the respondents, if so advised, to lodge the contents thereof in process. On 23 April 2004 the third and fourth respondents enrolled a motion to open up the confidential envelopes Nos 26 and 27 of process lodged by Ernst & Young in response to the specification of documents No 18 of process. On 26 April 2004 notice of opposition to that motion was lodged by the first, second and fifth respondents, their reason for opposition being to allow them to claim confidentiality and privilege in respect of the said documents. The first, second and fifth respondents also lodged a Note averring that the third and fourth respondents had, as a result of the interlocutor of 13 April 2004, gained access to documents which the first, second and fifth respondents believed were subject to privilege and confidentiality obligations owed to them by the havers. The Note goes on to aver that the first, second and fifth respondents had not agreed to the third and fourth respondents having access to the documents, that they were entitled to the protection of the court in respect of the documents in respect of which they had claims of privilege and confidentiality and that the third and fourth respondents had obtained access to documents to which they were not entitled. The prayer of the Note asks the court meantime to ordain the third and fourth respondents and their agents not to seek further recovery of documents from any person pursuant to the interlocutor of 19 March 2004 without intimation to the first, second and fifth respondents; to ordain the third and fourth respondents and their agents to make no use of recoveries from the havers, whether by copying or otherwise, pending further order of the court; to ordain the third and fourth respondents and their agents to return recoveries to the control of the court pending further order of the court; and thereafter, upon resuming consideration with or without answers, to permit the first, second and fifth respondents to address the court (including the court's commission) in respect of privilege and confidentiality in respect of the said recoveries after having been provided with access to the recoveries to make copies thereof.

Submissions at first hearing of motion

[7]     
The motion by the third and fourth respondents to open up the confidential envelopes Nos 26 and 27 of process, along with a motion by the first, second and fifth respondents for an order for intimation and service of their Note and for orders in terms of the prayer of their Note, called before me on 27 and 29 April 2004. I shall refer to the hearing on those dates as the first hearing.

[8]     
Mr Davidson QC for the first, second and fifth respondents referred to the terms of their Note and advised me that the third and fourth respondents had been proceeding with commission and diligence for the recovery of documents without intimation to the first, second and fifth respondents. The latter had been advised by the solicitors for Ernst & Young of the motion now before the court by the third and fourth respondents to open up the confidential envelopes. There was a lengthy inventory which did not reveal what the documents were. The interlocutor of 19 March 2004 had not been served on the first, second and fifth respondents. Paull & Williamsons had not advised them of the documents they had sent to the court in response to the specification of documents served on them and on 20 April 2004 an envelope containing confidential documents (No 23 of process) had been opened up. The first, second and fifth respondents were anxious to maintain confidentiality and privilege. He asked that copies of the contents of the confidential envelopes Nos 26 and 27 of process be provided to the first, second and fifth respondents and that the documents obtained from Paull & Williamsons be not lodged until the commissioner had been addressed. The first, second and fifth respondents had to be allowed to assert privilege in relation to the documents. He was not seeking anything other than the right to address the commissioner. The Note which the first, second and fifth respondents had lodged produced the opportunity for them to be heard before the court. In their capacity as havers the specification of documents had been served on them but they were ignorant of the various motions before the court. It was not being suggested that they had waived confidentiality or privilege and the third and fourth respondents must have known that there was no waiver. The third and fourth respondents knew from other proceedings that the fifth respondent was seeking to assert confidentiality. He had been provided by the agents for the petitioners with copies of the documents which the third and fourth respondents intended to lodge but he had not had adequate time to consider the dense material put before him. Submissions on the confidentiality of the Ernst & Young documents should be made to the commissioner. In the circumstances he suggested that the motions be continued.

[9]     
Mr Scott QC for the third and fourth respondents moved me to refuse the prayer of the Note as unnecessary under reference to rule of court 23.3(1)(a), which provides for intimation of a motion to any party who had entered appearance. As the first, second and fifth respondents had not entered appearance they were not entitled to intimation. The specification of documents had been served on the second and fifth respondents, who were therefore aware of which documents were sought to be recovered. In relation to the documents No 23 of process contained in the confidential envelope sent by Paull & Williamsons, the procedure for intimation contained in rule of court 35.8 had been followed. There had been intimation of the motion to Paull & Williamsons, who had not responded. The second and fifth respondents as havers were by then well aware that issues of this type might arise. The motion by the first, second and fifth respondents was unnecessary as there was a procedure in existence to protect them. Mr Davidson could make submissions to the court on whether or not material was confidential: see rule of court 35.8(4). He was not entitled to have the procedure stopped but the first, second and fifth respondents could be represented at any commission. No 24 of process contained nothing of relevance. No 23 of process, the documents in the confidential envelope from Paull & Williamsons, were the subject of a motion to lodge late productions. The possession by the third and fourth respondents of the correspondence contained in No 24 of process was quite legitimate and in accordance with the rules of court, and it was therefore now too late for anything to be done about it. It was accepted that Mr Davidson could now be heard in opposition to the motion for the late lodging of the documents 7/9-35 of process, which included the documents in No 23 of process. The first, second and fifth respondents could not create a procedure which was not in the rules of court in order to seek to frustrate the third and fourth respondents. It was for the court to determine the question of confidentiality in relation to the material produced by Ernst & Young in accordance with rule of court 35.8(4). The motion to open up the confidential envelope from them should be continued for submissions on confidentiality and the other motions should also be continued. The motion by the first, second and fifth respondents in relation to their Note should be refused as unnecessary because they were protected by the rules of court.

[10]     
Having heard the above submissions I continued all motions to a date to be afterwards fixed in order that the first, second and fifth respondents could consider their position in respect of any claim of privilege and confidentiality and ordained them to lodge a Note of their Grounds of Claim by 10 June 2004 and appointed the cause to be put out By Order on Friday 18 June 2004 in order that further procedure could be regulated.

Submissions at the second hearing
[11] The continued motions called before me again at the By Order hearing on 18 June 2004, when I heard further submissions. A Note of Grounds of Claim had been lodged by the first, second and fifth respondents on 9 June 2004.

[12]     
Mr Davidson resumed his submission by asking that I report the case to the Inner House. The recoveries in question had been made under the optional procedure in Chapter 35 of the rules of court. No 23 of process was the confidential envelope from Paull & Williamsons and Nos 26 and 27 of process were confidential envelopes from Ernst & Young. At no stage had the motions to open up these confidential envelopes been intimated to the first, second and fifth respondents. Under the rules intimation of a motion for commission and diligence to a non-party haver was not required, and intimation of a motion to open up a confidential envelope to a person covered by a claim of confidentiality or privilege who was not a haver was not required. The documents in No 23 of process had come in to the hands of the third and fourth respondents without there having been any waiver of privilege and their possession and use of them was therefore prima facie unlawful. He therefore asked that the third and fourth respondents be ordered not to use them and sought return of them.

[13]     
In developing his submission Mr Davidson asserted that the procedure followed had failed to protect the rights of the first, second and fifth respondents under article 8 of the ECHR. In Chappell v United Kingdom (1989) 12 EHRR 1 the European Court of Human Rights had held that the English Anton Piller orders did not breach article 8. At para 60 it was stated that the restrictions and safeguards in force to keep the order within reasonable bounds were important. In the present case there were no safeguards so far as the documents from Paull & Williamsons or Ernst & Young were concerned, but by good fortune the first, second and fifth respondents had been told about the latter documents. In Niemietz v Germany (1993) 16 EHRR 97 a lawyer's offices were searched by the police under a search warrant issued by the court in order to obtain information which would reveal the identity and possible whereabouts of a third party who was the subject of criminal investigation by the State. It was held unanimously that there had been a violation of article 8. At para 31 the court held that to interpret the words "private life" and "home" as including certain professional or business activities or premises would be consonant with the essential object and purpose of article 8. It was held at para 37 that the interference in that case was not necessary in a democratic society as the search complained of was not proportionate to the legitimate aims sought to be achieved: the search had not been accompanied by any special procedural safeguards and more importantly it impinged on the professional secrecy of the lawyer to an extent that was disproportionate in the circumstances. Mr Davidson submitted that, as in this case there was no question of serious crime being involved, the position of the third and fourth respondents was much weaker. In R (Morgan Grenfell Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563 the Revenue sought to recover from a taxpayer its instructions to and the advice of counsel in relation to a leaseback scheme. The House of Lords held that legal professional privilege (LPP) was a fundamental human right that could be overridden only by express words or necessary implication and that it had not been overridden by the statutory provision applicable in that case. At p 606, para 7 Lord Hoffman stated as follows:

"Two of the principles relevant to construction are not in dispute. First, LPP is a fundamental human right long established in the common law. It is a necessary corollary of the right of any person to obtain skilled advice about the law. Such advice cannot be effectively obtained unless the client is able to put all the facts before the adviser without fear that they may afterwards be disclosed and used to his prejudice. The cases establishing this principle are collected in the speech of Lord Taylor of Gosforth CJ in R v Derby Magistrates' Court, ex parte B [1996] AC 487. It has been held by the European Court of Human Rights to be part of the right of privacy guaranteed by article 8 of the Convention (Campbell v United Kingdom (1992) 15 EHRR 137; Foxley v United Kingdom (2000) 31 EHRR 637) and held by the European Court of Justice to be a part of Community law: AM & S Europe Ltd v Commission of the European Communities (Case 155/79) [1983] QB 878."

At p 611, para 30 Lord Hoffman went on to state:

"The policy of LPP requires that the client should be secure in the knowledge that protected documents and information will not be disclosed at all."

In the present case the absence of intimation to the first, second and fifth respondents of the motion to open up the confidential envelopes amounted to a failure on the part of the court to protect their article 8 rights. I would add that since I heard these submissions the House of Lords in Three Rivers District Council and Others v Governor and Company of the Bank of England [2004] UKHL 48 held that legal professional privilege is a single integral privilege whose subheads are legal advice privilege and litigation privilege (per Lord Carswell at para 105). Lord Scott of Foscote, reviewing some of the features of legal advice privilege, stated as follows at paras 24 to 27:

"24 First, legal advice privilege arises out of the relationship of confidence between lawyer and client. Unless the communication or document for which privilege is sought is a confidential one, there can be no question of legal advice privilege arising. The confidential character of the communication or document is not by itself enough to enable privilege to be claimed but is an essential requirement.

25 Second, if a communication or document qualifies for legal professional privilege, the privilege is absolute. It cannot be overridden by some supposedly greater public interest. It can be waived by the person, the client, entitled to it and it can be overridden by statute... but it is otherwise absolute. There is no balancing exercise that has to be carried out... Certainly in this country legal professional privilege, if it is attracted by a particular communication between lawyer and client or attaches to a particular document, cannot be set aside on the ground that some other higher public interest requires that to be done.

26 Third, legal advice privilege gives the person entitled to it the right to decline to disclose or allow to be disclosed the confidential communication or document in question. There has been some debate as to whether this right is a procedural right or a substantive right. In my respectful opinion the debate is sterile. Legal advice privilege is both. It may be used in legal proceedings to justify the refusal to answer certain questions or to produce for inspection certain documents. Its characterisation as procedural or substantive neither adds to nor detracts from its features.

27 Fourth, legal advice privilege has an undoubted relationship with litigation privilege. Legal advice is frequently sort of given in connection with current or contemplated litigation. But it may equally well be sought or given in circumstances and for purposes that have nothing to do with litigation. If it is sought or given in connection with litigation, then the advice would fall into both of the two categories. But it is long settled that a connection with litigation is not a necessary condition for privilege to be attracted....".

See also Lord Rodger of Earlsferry at paras 50 and 54.

[14]      Mr Davidson went on to submit that the current procedure in the rules of court for the recovery of documents was unsound and incompatible with article 8. This case should therefore be reported to the Inner House so that it could consider the current procedure. Neither a commissioner nor a judge had authorised the opening up of the confidential envelope from Paull & Williamsons. The confidential envelopes Nos 26 and 27 of process from Ernst & Young had not yet been opened up and the motion to open them up should be refused. Everything obtained from Paull & Williamsons should be returned as it had been obtained under a procedure which was not compatible with article 8. The opening of the confidential envelopes amounted to a violation of the article 8 rights of the first, second and fifth respondents. Their previous solicitors had not constituted any form of safeguard and he was not in a position to answer the question why they had not opposed the motion to open the confidential envelopes. The current procedure did not require a solicitor in these circumstances to do anything other than to put the documents in an envelope and mark it "confidential". The fact that the first, second and fifth respondents had received in their capacity as havers copies of the specification of documents did not mean that they knew that Paull & Williamsons were going to send confidential documents to the court. The question of confidentiality should be determined by the commissioner.

[15]     
In response Mr Scott submitted that paras 2 and 3 of the Note of Grounds of Claim on behalf of the first, second and fifth respondents were not well-founded. Para 2 stated that the interlocutor of 19 March 2004 having been made and proceeded without intimation to the first, second and fifth respondents of the motions was contrary to their rights under article 8. Para 3 stated that the interlocutor and consequent procedure permitted documentation to be recovered from Paull & Williamsons without any safeguards in respect of privilege or confidentiality and from Ernst & Young without any of these safeguards. Mr Scott submitted that, although under the rules of court there was no requirement to intimate a motion for commission and diligence for the recovery of documents to a party who had not entered appearance, it did not follow that the rules of court did not protect confidentiality. He referred to rules of court 23.3, 35.3(1) and 35.8, as well as Note (1) to Form 35.3-A. Until the court otherwise directed, a sealed packet remained confidential. In this case the specification of documents had been served on all noters on 23 March 2004, although that was not required by the rules of court. The recorded delivery envelope sent to the fifth respondent had been returned without delivery but the specification of documents and related order were then sent to his solicitor Mr Littlejohn with a request that they we forwarded to the fifth respondent. Accordingly, as a matter of fact the first, second and fifth respondents had been made aware of the terms of the specification by 5 April 2004, the date on which the specification and order were sent to Mr Littlejohn. The interlocutor of 13 April 2004 allowed the confidential envelopes to be opened up. The procedure had worked as the envelopes sent by Paull & Williamsons and Ernst & Young were marked "confidential". The motion to open up the confidential envelope sent by Paull & Williamsons had been intimated to them, but not to the first, second and fifth respondents. A solicitor's obligation of confidentiality was lifelong and he should therefore intimate any motion to open a confidential envelope to his former client. The party seeking to recover documents may not know that confidentiality exists, as of its essence it is secret. The procedure in the rules of court was effective if it operated properly.

[16]     
Turning to consider article 8, Mr Scott submitted that the reference in article 8.2 to interference for the protection of the rights and freedoms of others included the right of others to a fair trial under article 6.1. Article 8 did not lay down any explicit procedural requirements: see W v United Kingdom (1987) 10 EHRR 29 at pps 49-50, paras 62 and 63. In this case what had gone wrong was that Paull & Williamsons should have told their clients that the documents had been sent and that there was a motion to open the confidential envelope. For some extraordinary reason Paull & Williamsons had not opposed the motion to open up the confidential envelope. It was their obligation to notify the clients, and for the clients, if they wished, to claim their right to confidentiality: see McMichael v United Kingdom (1995) 20 EHRR 205 at p 239, para 85; Johansen v Norway (1997) 23 EHRR 33 at p 68 para 66; and Z v Finland (1997) 25 EHRR 371, the Commission at pps 391-3, paras 139, 144 and 153 and the Court at pps 403 and 407, paras 82 and 101. I should be very wary of a submission based on lack of intimation to the first, second and fifth respondents of the motion for commission and diligence or of the motion to open up the confidential envelope. The court in Z did not say that the absence of an explicit requirement for intimation in the procedure meant that it did not protect article 8 rights. The procedure in Scotland for dealing with confidential envelopes was quite sufficient. The matter was one to be resolved after hearing the parties to the action because it was their respective averments which the court had allowed to go to proof. When a motion for commission and diligence to recover documents in terms of a specification of documents was granted it was not known upon whom the specification of documents would be served: the documents could be in the hands of a haver who was under no obligation of confidentiality. It would be quite impossible to have representation of all third party havers and all persons to whom they might owe an obligation of confidentiality. It was of the essence of a confidential relationship that it was not made public. It did not follow that the rights of a person not represented at the stage when the specification of documents was approved were not protected. It was quite appropriate that the claim for confidentiality should in the first instance rest on the haver because he was in the best position to know of the circumstances in which he first came to be in possession of the documents. In the present case there was no problem so far as the Ernst & Young documents (Nos 26 and 27 of process) were concerned as the procedure had operated successfully and the safeguards had worked. The problem arose in relation to the Paull & Williamsons documents because the solicitors had departed from a claim of confidentiality. There was no explanation why the solicitors had flagged up a claim of confidentiality when they had returned the documents and done nothing further about it. The fact that there was in existence a procedure which had not been used belied the suggestion from Mr Davidson that there was a defect in the procedure. In McGinley & Egan v United Kingdom (1998) 27 EHRR 1 at p 45, paras 102 and 103 the court considered that a rule of the Pensions Appeal Tribunal provided a procedure which would have enabled the applicants to have requested the documents which they sought and that there was nothing to suggest that the procedure would not have been effective, so that the State had fulfilled its positive obligation under article 8. So far as was known the procedure in relation to confidentiality worked satisfactorily in cases other than the present one. I should therefore be slow to criticise a procedure which appears to have satisfactorily protected confidentiality until now. It was going too fast too far to suggest that the present procedure lacked safeguards. Mr Davidson's point appeared to be that intimation should be made to all persons who might have a claim of confidentiality. It was impracticable to put on the party seeking recovery of documents the onus of identifying ab ante all persons who might have a claim of confidentiality. There was a limit as to how far rights under article 8 could be protected. In this case the failure of the haver to mark opposition to the motion to open the confidential envelope was sufficient to indicate to the court that a claim of confidentiality was no longer being insisted on. Moreover, as a matter of fact the first, second and fifth respondents all had knowledge of the terms of the specification of documents No 18 of process and could have, had they wished to do so, entered the process. The Note presented by them to the court was simply a backdoor attempt to recall the interlocutor of 19 March 2004 granting commission and diligence for the recovery of documents and the whole procedure following upon it. There had been no defect in the procedure whereby the documents in No 7/9-35 of process from Paull & Williamsons had been recovered and in any event they were not covered by legal professional privilege. I should reject all Mr Davidson's submissions and allow these documents to be lodged.

[17]      So far as the Ernst & Young documents, Nos 26 and 27 of process, were concerned the claim of confidentiality being made by the first, second and fifth respondents should be dealt with in accordance with the procedure in rule of court 35.8(4). These documents had been obtained under the optional procedure, which bypasses the commissioner, and it would not therefore be appropriate to remit to the commissioner to determine the claim of confidentiality. Even if the commission and diligence had been executed under rule of court 35.4 and the documents produced to the commissioner, the commissioner would have been obliged to seal up the documents and await the ruling of the court on the issue of confidentiality. In relation to the merits of the claim, the third and fourth respondents were entitled to a fair trial under article 6, and that involved having knowledge of the evidence of the other party and being in a position to comment on it: Ruiz Mateos v Spain (1993) 16 EHRR 505 at p 542, para 63 and McMichael v United Kingdom (1995) 20 EHRR 205 at p 237, para 80. The principle of equality of arms applied: Dombo Beheer BV v The Netherlands (1993) 18 EHRR 213 at p 229, para 33. If the procedure advocated by Mr Davidson were adopted, the third and fourth respondents would be at a substantial disadvantage. A denial of access to the documents without good cause would be a breach of their article 6 rights: McGinley and Egan v UK, supra. The balance lay very much in favour of disclosure: Re B [2001] 2 FLR 1017 per Munby J at p 1039, para 67. Article 6 applied to the procedure leading up to trial: Rowe v United Kingdom (2000) 8 BHRC 325 at p 342, para 60 and R v H [2004] 1 All ER 1269 at p 1282, para 27. All elements of the proceedings, including those which related to procedure, should be adversarial and there should be equality of arms between the parties. Any proceedings in relation to the Ernst & Young documents should comply with article 6. There could therefore be no question of one party addressing either the commissioner or the judge in the absence of the other party. The party seeking recovery must know the basis of the claim of confidentiality which was being made and be able to respond to it. Any hearing on the issue of confidentiality in the absence of representation by the third and fourth respondents would contravene article 6. Reference was made to the procedure adopted in Santa Fe International Corporation v Napier Shipping SA 1985 SLT 430.

Decision
(i) The Ernst & Young documents (Nos 26 and 27 of process)

[18]      The position so far as these documents are concerned is that there is before the court a motion to open the confidential envelopes Nos 23 and 24 of process. Although that motion was not intimated to the first, second and fifth respondents because they have not entered the process, they have now entered opposition to the motion. They are entitled to do this by virtue of rule of court 35.8(4). I cannot see any valid reason for an alternative procedure being followed, such as having submissions on confidentiality before the commissioner. I shall therefore continue the motion on behalf of the third and fourth respondents to open up the confidential envelopes Nos 26 and 27 of process lodged by Ernst & Young to a date to be afterwards fixed for submissions on the merits of the claim of confidentiality being made by the first, second and fifth respondents.

(ii) The Paull & Williamsons' documents, Nos 23 and 24 of process

[19]     
It is in relation to the documents from Paull & Williamsons that the problem arises. The interlocutor of 13 April 2004 allowed the confidential envelopes Nos 23 and 24 of process to be opened up and the third and fourth respondents now seek to lodge as late productions No 7/9-35 of process, which consists of part of the documents from Nos 23 and 24 of process. Put shortly, the position adopted by Mr Scott on behalf of the third and fourth respondents was that they had followed the procedure in the rules of court and it was now too late for the court to entertain a claim of confidentiality in relation to these documents on behalf of the first, second and fifth respondents. I have reached the view that, in light of certain provisions of the Human Rights Act 1998, that submission cannot be sustained. The claim which the first, second and fifth respondents seek to make in relation to these documents is one of confidentiality based on legal professional privilege, an absolute legal privilege and a fundamental human right which has been held to be part of the right of privacy guaranteed by article 8 of the Convention, and they assert that the disclosure of these documents would amount to a breach of their article 8 rights. It is unlawful for the court to act in a way which is incompatible with a Convention right: section 6(1) and (3)(a) of the 1998 Act. The rules of court, as a form of subordinate legislation, must be read and given effect in a way which is compatible with Convention rights: section 3(1) of the 1998 Act. In relation to any act or proposed act of a public authority which the court finds is or would be unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate: section 8(1) of the 1998 Act. It therefore seems to me that, notwithstanding that the claim of confidentiality in relation to these documents by the first, second and fifth respondents is being made late in the day, and the third and fourth respondents have followed the rules of court so far as their recovery is concerned, the court, faced as it now is with a claim of confidentiality by the first, second and fifth respondents, must take steps to ensure that their article 8 rights are protected. It further seems to me that, if I were to accept the submission by Mr Scott, it is at the very least possible that the court would be acting in a way which was incompatible with a Convention right and therefore acting unlawfully. In my opinion the procedure which should now be adopted to deal with the claim of confidentiality on behalf of the first, second and fifth respondents is that I should continue their motion of 26 April 2004 and the motion by the third and fourth respondents for the late lodging of No 7/9-35 of process for submissions on the issue of confidentiality in relation to Nos 23 and 24 of process. I shall meantime make no order in relation to the Note presented by the first, second and fifth respondents. There is also a motion on behalf of the third and fourth respondents to allow the inventory of productions No 7/36-91 of process to be received late. The productions in question were produced by GM Mackenzie Limited in response to the specification of documents No 18 of process. I do not understand from the terms of the motion sheets and the submissions which I have already heard that there is any opposition to this particular motion, but, lest I be mistaken about that, I shall continue that motion also.


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