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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Glenn & Anor v Watson & Ors [2016] EWHC 3259 (Ch) (16 December 2016) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2016/3259.html Cite as: [2017] 4 WLR 48, [2016] EWHC 3259 (Ch), [2017] WLR(D) 14 |
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CHANCERY DIVISION
BEFORE THE HON. MR JUSTICE NUGEE
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF SPARTAN CAPITAL LIMITED
AND IN THE MATTER OF THE INSOLVANCY ACT 1986
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
DERIVATIVE CLAIM
B e f o r e :
____________________
SIR OWEN GEORGE GLENN KNZM ONZM KEA INVESTMENTS LIMITED |
Claimants |
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- and - |
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ERIC JOHN WATSON NOVATRUST LIMITED MILES JOHN ANTHONY LEAHY NUCOPIA PARTNERS LIMITED SPARTAN CAPITAL LIMITED |
Defendants |
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Claim No: 3224/2015 |
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IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT IN THE MATTER OF SPARTAN CAPITAL LIMITED AND IN THE MATTER OF THE INSOLVANCY ACT 1986 |
Claim No: 3224/2015 |
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BETWEEN: |
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KEA INVESTMENTS LIMITED |
Petitioner |
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-and- |
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(1) NOVATRUST LIMITED(2) SPARTAN CAPITAL LIMITED
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Respondents |
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Claim No. HC-2014-000608 |
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IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION DERIVATIVE CLAIM |
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BETWEEN: |
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(1) NOVATRUST LIMITED |
Petitioner |
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-and- |
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(1) KEA INVESTMENTS LIMITED (2) SPARTAN CAPITAL LIMITED |
Defendants |
____________________
Hannah Brown (instructed by Oury Clark) for the 1st Defendant
Sa'ad Hossain QC, James Goldsmith, Adam Rushworth (instructed by Wilson Gilmore) for the 2nd Defendant
Anna Boase (instructed by Excello Law) for the 3rd and 4th Defendants
Hearing dates: 23rd, 24th and 25th November 2016
____________________
Crown Copyright ©
Mr Justice Nugee:
Introduction
(1) An application by the Defendants designed to enable them to speak to a prospective witness, Mr David Miller, about certain topics.(2) A question as to the form of questions to be put to the US tax law experts.
(3) An application by Novatrust for certain specific disclosure.
The Miller topics
"3.1 The Corona Trust was declared by Pizarro Company Limited ("Pizarro"), a Nevis company, by a deed of trust dated 12 February 2009. Pizarro, which became the sole trustee of the Corona Trust, was ultimately beneficially owned and controlled by a Mr Peter Dickson ("Mr Dickson"). The Protector of the Corona Trust was Mr David Miller ("Mr Miller"), who had been an employee and close friend and adviser of Sir Owen for about 30 years. Mr Miller was also the "policy director" of Pizarro. Sir Owen was not a named beneficiary of the Corona Trust (though the Corona Trust contained provisions whereby he could be added as a beneficiary).
3.2 On 12 February 2009 Pizarro also declared a trust called the Regency Trust. Mr Miller was also the protector of the Regency Trust. The Regency Trust contained extensive powers reserved to Sir Owen, including the power to revoke the Regency Trust and to re-vest its assets in Sir Owen.
…
3.5 On 31 October 2011, and without the knowledge of Sir Owen, Mr Miller and Mr Dickson caused the Regency Trust to transfer all its assets to the Corona Trust, thus placing all the wealth which Sir Owen had created in an irrevocable trust of which he was not a beneficiary, and to which he could only be added as beneficiary if they so decided."
"36. In early January 2012, OTSLG was sold. The sale of OTSLG provided the Corona Trust with a substantial amount of cash for investment.
37. Mr Miller and Mr Dickson came to see Sir Owen in Sydney shortly after the sale. They stated that there would now be rules about Sir Owen's involvement in the affairs and investments of the Corona Trust which owned the proceeds of sale and that effectively Mr Miller and Mr Dickson would be in charge while Sir Owen would have little or no say in what investments were made by the trust. This came as a total surprise to Sir Owen.
38. This attempt by Mr Miller and Mr Dickson to change the basis on which the Corona Trust had operated to that date and to marginalise Sir Owen caused a breakdown of relations between Sir Owen and Mr Miller and Mr Dickson in the early part of 2012."
Another matter pleaded by the Claimants is as follows:
"76. Sir Owen's relationship with Mr Miller began to break down following the 31 March 2012 meeting referred to above. After Mr Leahy had left, Sir Owen informed Mr Miller that he wanted Mr Dickson removed and a new trustee appointed. Mr Miller terminated any discussion, to Sir Owen's surprise and disappointment. Thereafter, on 14 April 2012, Pizarro, acting by Mr Miller, sent a letter dated 13 April 2012 to Sir Owen. This letter asserted that Sir Owen was not entitled to make investment decisions on behalf of the Corona Trust, that Sir Owen had given up all rights, control, title and powers in respect of the trust property and that Project Spartan was being addressed and considered by Pizarro."
"2. With respect to the dispute in 2012 between Sir Owen and Messrs Miller and Dickson about the operation of the Corona Trust:
a) The communications between Sir Owen and Messrs Miller and Dickson at the meetings in early January 2012 and 31 March 2012 (APOC/37,76);
…
c) Whether in January 2012 Messrs Miller and Dickson attempted to change the basis on which the Corona Trust operated and to marginalise Sir Owen (APOC/38);
d) Whether this caused the breakdown of relations between Sir Owen and Messrs Miller and Dickson in the early part of 2012 (APOC/38);"
"An interim declaration under CPR r 25.2(1)(b) that it is not a breach of confidence (or an inducement of a breach of confidence) for Novatrust to obtain evidence and information from Mr Miller for use in these proceedings on the [specified topics]."
Ms Jones QC, who appears for the Claimants, has a point on whether the Court can grant an interim declaration of this sort at all in this way, but her main point is a much more fundamental one, which is that the Claimants have not waived their right of confidentiality in these topics. Mr Hossain accepts that unless they have done so he cannot obtain the declaration he seeks. So that squarely raises the question of whether the Claimants have waived confidentiality in certain matters by reference to them in their pleadings.
"Once disclosure has taken place the receiving party becomes privy to any confidential information relating to a matter in issue in the proceedings. As between the disclosing and the receiving party confidentiality is, so as far as the prosecution of the action is concerned, lost. The disclosing party ceases to be able to assert a claim to breach of confidence against the receiving party if the latter does no more than use the information for the purposes of the action to which it is relevant e.g. by questioning potential witnesses in relation to matters in issue in the proceedings. Such witnesses may answer such questions without being in breach of any duty of confidentiality they would otherwise have."
"I do not, however, accept that the effect of disclosure is in any way to alter any duty of confidence owed by (say) an employee or former employee (save that compliance with the obligations of disclosure would, obviously, not be a breach of duty). Subject to any special order of the Court the receiving party is entitled to use the documents disclosed for the purpose of the action. He may show the documents to a potential witness or provider of relevant information. But that does not mean that the witness is absolved from any duty of confidence he may owe to an opposing party (or anyone else). Fulfilment of that duty may preclude him from answering some of the questions that may be asked of him. The fact that the disclosing party has been compelled to disclose the documents to the receiving party does not alter that duty."
"30. Such a principle would enable one party to question his opponent's employees and confidential agents about anything which could plausibly be said to relate to something in dispute in the action. Whether the questions did so relate could be the subject of much debate and, even if they did, the answers might extend into matters that did not. Mr Onions, prompted by a suggestion of mine, proffered the proposal that the first order sought might have a proviso that information related to matters in dispute when it related to a matter on which the claimants relied or which adversely affected the case of either side or supported the defendants' case. But that could be the subject of equal if not greater debate. Whether or not the question or answer was illicit would not be likely to become known, unless the questioning took place in the presence of the disclosing party's solicitor, because it would be the subject of privilege. In the present case it is apparent that MWE do not intend to ask questions with S & S present.
31. Further it would seem illogical for any release from the duty of confidentiality to be dependent on disclosure having taken place. If the two individuals may be examined, free from any duty of confidentiality, on matters upon which the disclosed documents are silent, provided those matters are in issue, it is difficult to understand why such freedom can only be obtained once disclosure takes place."
"such later advice as was given by Mr Briggs or by DJ Freeman which is an alteration, amplification or extension of the advice already disclosed."
"A client expressly waives his legal professional 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. Practical difficulties occur in determining such issues, as in Nea Karteria Maritime Co Ltd v Atlantic and Great Lakes Steamship Corporation (No 2) [1981] Com LR 138, General Accident Fire and Life Insurance Corporation Ltd v Tanter [1984] 1 WLR 100 and Reg v Secretary of State for Transport, Ex parte Factortame (1997) 9 Admin LR 591). But the law is clear. 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.
When a client sues a solicitor who has formerly acted for him, complaining that the solicitor has acted negligently, he invites the court to adjudicate on questions directly arising from the confidential relationship which formerly existed between them. Since court proceedings are public, the client brings that formerly confidential relationship into the public domain. He thereby waives any right to claim the protection of legal and professional privilege in relation to any communication between them so far as necessary for the just determination of his claim; or, putting the same proposition in different terms, he releases the solicitor to that extent from the obligation of confidence by which he was formerly bound. This is an implication of law, the rationale of which is plain. A party cannot deliberately subject a relationship to public scrutiny and at the same time seek to preserve its confidentiality. He cannot pick and choose, disclosing such incidents of the relationship as strengthen his claim for damages and concealing from forensic scrutiny such incidents as weaken it. He cannot attack his former solicitor and deny the solicitor the use of materials relevant to his defence. But since the implied waiver applies to communications between client and solicitor, it will cover no communication to which the solicitor was not privy and so will disclose to the solicitor nothing of which he is not already aware."
As the decision in that case establishes, implied waiver does not extend to advice taken from other solicitors later instructed in the same matter.
"Neither Lucas nor Expandable considered the effect of there being no automatic waiver by reference in the pleading. It must follow that the party referring to a privileged document would be entitled to refuse to give inspection under CPR r 31.14 on grounds of privilege, but the issue would then arise separately whether there was reliance on the document so that the reliance gave rise to a waiver of privilege. There is unlikely to be a problem if the party withdraws his reference to the document in his pleading. But if he does not so do, his Statement of Case is evidence in the case. It is hard to see how he could continue to rely on his Statement of Case and then refuse to give disclosure of the document he had relied upon in that Statement of Case. So it seems unlikely that these decisions are important other than in relation to the question of whether disclosure of privileged documents referred to in pleadings can be obtained in advance of the usual date for disclosure."
"We need not linger on Hayes v Dowding [1996] PNLR 578, a case in which the plaintiffs were held to have impliedly waived their right to legal professional privilege by bringing proceedings even though the proceedings were not against any legal adviser. In reaching that conclusion the judge relied heavily on Australian and United States authorities. Neither party before us sought to contend that this case was correctly decided, and we are satisfied that it was not. The authorities on which the judge principally relied do not represent the law in this country, and the decision must be overruled."
That brief reference led to a debate between the parties as to what Hayes v Dowding decided and in what respect it was overruled, and I received further submissions from counsel on these matters by e-mail after the hearing. I think in the circumstances I ought probably to express my views on these questions, even though they do not in the end appear to me to be of central relevance to the questions I have to decide.
"all documentation passing between the plaintiffs' former solicitors Edge & Ellison and the plaintiffs' current solicitors, Rollit Farrell & Bladon including but not limited to that relating to the care and conduct of [the earlier proceedings]."
"In inviting the court to adjudicate on, inter alia, the inducement issue, the plaintiffs in the present case must be taken to have waived privilege in such documentary material as is relevant to the determination of that issue."
"The plaintiffs have not sued Slaughter & May. They have not invited the court to adjudicate on any question arising from their confidential relationship with Slaughter & May, so have not brought that confidential relationship into the public domain. They have done nothing to release Slaughter & May from the obligation of confidence by which they are bound. They have chosen to subject their relationship with Freshfields to public scrutiny, but not their relationship with Slaughter & May. They are not seeking to pick and choose among the confidential communications passing between themselves and Slaughter & May: none of them is (so far) in the forensic arena."
"This shows that the decision was overruled both to the extent that it was based on Lillicrap v Nalder and to the extent it was based on decisions in Australia and the United States. The commentary in Matthews and Malek and Thanki which suggest that some part of Hayes v Dowding based on Waldrope v Dunne was not overruled by Paragon Finance is not, respectfully, a correct analysis of the effect of Paragon Finance on the decision in Hayes v Dowding."
There is a brief reference by Morgan J in Digicel (St Lucia) Ltd v Cable & Wireless plc [2009] EWHC 1437 (Ch) at [50] to his agreeing with Ramsey J, but this does not take the point any further.
Questions to the US tax law experts
"78. I take the view that the court would be assisted by being educated by expert evidence that is narrowly focused on the question whether the fact that the grantor or economic settlor of a trust who is consulted about proposed investments and given information about proposed investments but who has no right to direct or veto the investments as such is a fact that could lead to the consequence that the trust is includible in his estate for the purposes of US estate duty.
79. I would regard as likely to be far more helpful for that question to be asked in the abstract, as it were, as a proposition of US tax law rather than experts being asked to address it in the context of the particular allegations in this case and being asked to opine on what might or might not have been the position in this case. That will avoid any impression being given that the experts are asked to pass judgment on what Sir Owen or Messrs Miller and Dickson or Mr Watson did or did not do in fact, matters which are likely to be highly contentious at trial.
80. Evidence of that limited [the transcript reads united but it should read limited] and focused type seems to me to be likely to be fairly short and not likely to add significantly to the length of the trial. I will hear counsel on whether it is more appropriate to be given, as in this case it I think it might be, by a single joint expert to whom both parties can address questions, or two experts, in the way that is done in contentious issues.
81. I hope I have made it clear that the main purpose of the expert evidence is not to resolve a central issue in the case but to educate the court into the law and practice of US estate tax."
"1 To what extent (if at all) could a Settlor be consulted or given information about proposed trust investments by a trustee and/or influence the investment decisions of such trustee, without undermining (or potentially undermining) the tax planning purposes of the trust?
2 To what extent (if at all) could a Settlor be consulted or given information about proposed trust investments by the proposed counterparty to such investments, without undermining (or potentially undermining) the tax planning purposes of the trust?"
"Would it make a difference to the answer to question 1 if the settlor/grantor had significant business experience?"
and to question 2:
"Would it make a difference to the answer … if the information disclosed by the proposed counterparty disclosed matters which should be of concern to the trustees and the beneficiaries?"
"Would it make a difference to the answer to question 1 if the purpose for which the Settlor wanted to be consulted / provided with information was to exercise control over the trust investments through the trustees (even though he had no right to do so)?"
and a suggested follow up to question 2:
"Would it make a difference if the purpose for which the Settlor wanted to be consulted / provided with information was to exercise control over the trust investments through the counterparty or the beneficiaries of the trust (even though he had no right to do so)?"
"As the creator of the wealth settled in the Corona Trust with a long track record of successful investment and building of businesses, Sir Owen had a legitimate expectation that Messrs Miller and Dickson, who had no such experience, would consult with him and avail themselves of his experience and expertise."
"If Mr Watson had informed Sir Owen at any material time that Messrs Miller and Dickson were intending to commit Kea to a transaction which would result in the payment of a very significant sum to Mr Watson's interests for no consideration Sir Owen would have immediately taken steps to restrain them from so doing."
Similar pleas are found at paragraphs 153, 158 and 178 of the Particulars of Claim. In response to a request as to what right Sir Owen had to take such steps, the Claimants have pleaded (in the response to the request for further information already referred to) a cross reference to paragraph 123.1 of the Reply, which pleads:
"Sir Owen had informed the beneficiaries of the Corona Trust of his concerns and in fact proceedings were brought in Nevis in February 2013 which had the effect of preventing Mr Dickson and Mr Miller from taking further steps in relation to the Corona Trust and Kea and which led to Pizarro bring replaced as trustee by HML."
"Sir Owen did not have any right to control the actions of the trustee of the Corona Trust."
"Would it make a difference to the answer [to the relevant question] if the purpose for which the settlor wanted to be consulted / provided with information was because he wished to be involved in or fully engaged in all decision making related to the proposed investments to be made through the trustees?"
In that form, I do not think that the Claimants can object that it does not arise out of the pleaded case, nor does it attribute to the Claimants something which is not expressly pleaded by them, namely a desire by Sir Owen to control the trust investments. With that amendment I propose to allow Novatrust's follow up questions but not to allow them in the form in which Novatrust has asked for them.
Specific disclosure application