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Cite as: [2017] EWHC 2805 (Ch)

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Neutral Citation Number: [2017] EWHC 2805 (Ch)
Case No: CR-2015-009042

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

Royal Courts of Justice,
Rolls Building, Fetter Lane,
London, EC4A 1NL
10/11/2017

B e f o r e :

MR JUSTICE MORGAN
____________________

Between:
IN THE MATTER OF EDWARDIAN GROUP LIMITED ESTERA TRUST (JERSEY) LIMITED
HERINDER SINGH

Petitioners

- and -


JASMINDER SINGH
VERITE TRUST COMPANY LIMITED
JEMMA TRUST COMPANY LIMITED
EDWARDIAN GROUP LIMITED
JASMINDER SINGH AND HERINDER SINGH (as trustees of the English Trusts)







Respondents

____________________

Justin Fenwick QC and Alex Barden (instructed by Arnold & Porter Kaye Scholer LLP) for the Petitioners
Daniel Lightman QC (instructed by Orrick, Herrington & Sutcliffe (UK) LLP) for the First Respondent
Sam O'Leary (instructed by Herbert Smith Freehills LLP) for the Second and Third Respondents
Hearing dates: 26 and 27 October 2017

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    MR JUSTICE MORGAN:

    Part I: Introduction

  1. This is an application by the First Respondent for declaratory relief and for an order for inspection of two classes of documents which are referred to in the First Respondent's application notice dated 23 June 2017 as the "Litigation Funding Documents" and the "Magwells Documents".
  2. The declaration claimed is that, by failing to give inspection of the Litigation Funding Documents and the Magwells Documents, the Petitioners have failed to comply with an earlier order for disclosure and inspection of documents. The First Respondent then claims an order that the Petitioners do permit the First Respondent to inspect the Litigation Funding Documents and the Magwells Documents. The First Respondent did not apply for specific disclosure of documents which had not been disclosed.
  3. The proceedings in which this application is made are unfair prejudice proceedings brought pursuant to section 994 of the Companies Act 2006. The Petitioners are minority shareholders in Edwardian Group Ltd ("the company") and the Respondents are the company and the principal other shareholders in the company. The company is the holding company of a group which owns and manages hotels. By reference to the most recent annual account, the value of the assets of the company is in the region of 1 billion. The Petitioners own approximately 20% of the shares in the company. The primary relief claimed by the Petitioners is that the first three Respondents should be ordered to buy the Petitioners' shares at a fair price, with no discount for the shares being a minority holding and so that the valuation should disregard certain matters of which the Petitioners complain. The Second Petitioner, Herinder Singh, ("Herinder") and the First Respondent, Jasminder Singh, ("Jasminder") are brothers.
  4. One of the acts of unfair prejudice alleged by the Petitioners is the removal of Herinder as a director on 22 July 2009. The Petition was presented on 20 November 2015. In his Points of Defence, the First Respondent contends that because of the delay between July 2009 and November 2015, some 6 years and 4 months, the Petitioners should not be granted any relief. Further, it is alleged that the delay should lead the court to order that any valuation of the Petitioners' shares should be at a date in the past (rather than the date of the Petition) and various dates between January 2006 and July 2009 are contended for. In their Points of Defence, the Second and Third Respondents plead a detailed case of laches and contend that the Petitioners should not be granted any relief or alternatively that the shares should be valued as at 31 December 2005 or some other date or dates prior to the presentation of the Petition.
  5. The Petitioners have served a combined Reply to the Respondents' Points of Defence. In their Reply, the Petitioners dispute the Respondents' contentions as to the existence of, or the consequences of, the alleged delay. In particular, they plead that the period from July 2009 to November 2015 did not amount to "improper delay" in all the circumstances. They then particularise six circumstances. The pleaded circumstances include, but are not confined to, the contention that in July 2009, the Petitioners did not have sufficient funds to conduct "heavy" section 994 proceedings to trial, that the Petitioners were starved of funds by reason of Herinder's removal as an employee (in 2010) and the improper payment of no or minimal dividends. It is then pleaded:
  6. "From 2009 to December 2014 when he was introduced to the current funders, Herinder (initially) and subsequently the Petitioners together, in each case through their solicitors, actively but unsuccessfully sought funding to commence the litigation."
  7. On 7 July 2016, Registrar Barber held a case management conference in these proceedings at which she gave detailed directions. She split the issues arising so that there would be two trials. The first trial which is due to take place in January 2018 with a time estimate of 7 weeks, will deal with the allegations of unfair prejudice, the appropriate remedy for any unfair prejudice and the valuation date for any order for the Petitioners' shares to be bought out, and other matters. Paragraph 8 of the Registrar's order provided for standard disclosure in relation to the issues to be tried at the first trial and for inspection. There was no application to the Registrar pursuant to CPR 31.5 to limit disclosure.
  8. On 12 January 2017, the Petitioners gave disclosure of documents and each prepared a separate list of documents. The First Petitioner's list stated that inspection was not to be permitted of certain documents on the ground that inspection would be disproportionate; the documents referred to for this purpose did not include the Litigation Funding Documents. The list of documents also included a claim to legal professional privilege. In this part of the list, it was said that some of the documents had been redacted for irrelevance and the list went on to describe:
  9. "Redacted parts of documents listed in the List of Documents at Schedule 1 which refer to, reproduce, summarise, embody or otherwise reveal directly or indirectly the nature, content of effect of privileged communications."

    I understand that the quoted words apply to the redacted parts of the Litigation Funding Documents.

  10. As to the Magwells Documents, the First Petitioner's list stated that Magwells had previously been its legal advisers. It said that Magwells had asserted a lien over the First Petitioner's files in respect of allegedly unpaid fees. The First Petitioner commented that a significant amount of the material in the Magwells Documents was available from other sources and was being disclosed.
  11. The list of documents served by the Second Petitioner was in essentially the same terms as the First Petitioner's list.
  12. Part II: The Litigation Funding Documents

  13. I was not shown the Litigation Funding Documents which have been disclosed. I was told that copies of them occupied 6 lever arch files. I was told that there were over 250 documents although some, possibly many, of these involved duplication. I was told that the disclosed documents did not include documents relating to negotiations and agreement with the Petitioners' current funder. I was shown a number of pages (with redactions) from the disclosed documents which appear to be emails between the representatives of the Petitioners and potential funders. The identity of some or possibly all of the funders approached is revealed but the identity of the current funder is not revealed. The redactions from the documents I have seen are very extensive. Mr Lightman QC suggested that, in terms of extent, some 75% of the Litigation Funding Documents have been redacted. It also appears that there are Litigation Funding Documents which have not been disclosed even in redacted form.
  14. The parties have exchanged witness statements in relation to the evidence to be given at the first trial. In Herinder's witness statement, he refers to the Respondents' allegation of delay. In that context, he makes brief reference to the time taken in seeking litigation funding. He says that this began in 2009 and was not successful until the Petitioners were introduced to the current funder in December 2014. He says that the attempts to obtain funding were made by the solicitors, brokers and his trustee. He describes the attempts as "extensive".
  15. Mr Prosser, who is a director of the First Petitioner, deals with the attempts to obtain funding in greater detail in his witness statement. He deals with the allegation of delay at paragraphs 83 to 110. That section deals with other matters relevant to the alleged delay in addition to the question of funding. Mr Prosser makes a number of points, as follows:
  16. (1) the process of seeking funding was affected by the legal advice on the merits of the case, legal advice on the funding process and without prejudice matters; he says that he cannot refer to these matters and he does not waive privilege;

    (2) the process was entrusted to legal advisers because they had experience of litigation funding and ATE insurance and at least one broker was used;

    (3) the process was extremely difficult and time consuming;

    (4) he says that it would be apparent from the documents disclosed that the process involved repeated attempts and a large number of different providers;

    (5) the disclosed documents show that the Petitioners were "actively and persistently seeking funding";

    (6) he refers to the overall chronology but he would not recite the contents of the documents;

    (7) he then refers to a number of features of the search for funding;

    (8) he repeatedly refers to matters being clear from the disclosed documents;

    (9) an example of references to the contents of documents is in paragraph 98(d); whilst I cannot definitively say what the position is, I speculated in the course of argument that paragraph 98(d) refers to matters of alleged fact which could not be verified from the disclosed documents by reason of the redactions which have been made; it was not submitted that this speculation was wrong.

  17. The First Respondent's application is supported by a witness statement from his solicitor, Mr Willis. In that witness statement, he contends that it is necessary for the Respondents to see the Litigation Funding Documents to determine why the Petitioners apparently failed to obtain funding between 2009 and 2014. He adds that the Respondents wish to consider why the Petitioners were unable to agree terms of funding for such a long period and what funding terms were finally agreed with what funders and whether, and if so in what respects, the finally agreed terms differed from the funding terms offered in earlier discussions with funders. He says the Respondents wish to see the Litigation Funding Documents in order to be able to test the allegation that the Petitioners "actively but unsuccessfully" sought funding.
  18. Mr Willis then describes the Litigation Funding Documents and the redactions to them as falling into three categories. The categories are:
  19. (1) back and forth parts of correspondence with funders or brokers;

    (2) discussions between the Petitioners/their solicitors and funders relating to the terms of the funding, the reasons for those terms and the acceptance or rejection of those terms;

    (3) references to the Petitioners' legal advice as to the merits and/or strategy.

    Mr Willis says that there are no redactions in relation to category 1. He accepts that redactions in relation to category 3 are prima facie justified and states that the First Respondent is not currently seeking disclosure in relation to the redactions in this category, although he reserves his position in that respect. As to category 2, he says that he understands that the redactions have been made on the basis that the legal advice given to the Petitioners can be "inferred". He seems to accept that a document from which the contents of legal advice can be inferred can be the subject of a claim to privilege. He then makes a detailed submission as to why the contents of the legal advice could not be inferred in this way in this case. He also distinguishes between a communication which reveals the content of legal advice and one which simply leads to speculation as to what that advice might be.

  20. In response to this application, the Petitioners rely on the witness statement of their solicitor, Mr Mervis. In paragraph 37.1 of that statement, Mr Mervis says:
  21. "The documents which have been withheld or redacted are privileged, in that they tend to reveal the advice which the Petitioners have received in relation to the merits of the case, in relation to strategy and tactics, and in relation to the funding itself. Furthermore, these are matters where the Court can properly, in the exercise of its discretion, refuse disclosure in any event (regardless of whether they are relevant to an issue in the case)."
  22. The passage just quoted from Mr Mervis' witness statement seems to show four things:
  23. (1) some litigation funding documents have been "withheld" and others have been disclosed in a redacted form;

    (2) the Petitioners claim to be entitled to withhold or redact documents on the grounds of privilege;

    (3) the claim to privilege is based on the assertion that the documents withheld or the parts redacted would "tend to reveal the advice which the Petitioners have received";

    (4) in the alternative (presumably) to their claim to privilege, the Petitioners assert that the court has a discretion to refuse to order disclosure (and presumably inspection) of the documents which had been withheld or of the redacted parts.

  24. In paragraph 37.2 of his witness statement, Mr Mervis objects to the Respondents seeing documents which would give them "a collateral advantage" in two respects. The first advantage would arise if the documents would give the Respondents insight into the Petitioners' legal advice on the merits of the dispute. The second advantage would arise if the documents would give the Respondents insight into the sensitive terms of the funding and, in particular, the terms as to settlement.
  25. Mr Mervis then refers to the history of the dispute between the parties prior to the presentation of the petition. In this section of his evidence, he makes various points as to Herinder's financial position and the impact on that position of the conduct of the Respondents. Mr Mervis also makes a number of suggestions as to the difficulties which are liable to arise in the course of negotiations with funders in respect of litigation of the present type.
  26. Mr Mervis then suggests that there is no issue raised on the pleadings as to the reasonableness of the way in which the Petitioners sought funding. He then refers to some of the difficulties which the Petitioners faced in their negotiations with a number of named potential funders.
  27. Mr Mervis then describes the approach which the Petitioners have adopted to the litigation funding documents. He makes the following points:
  28. (1) the redactions were made to maintain privilege and at the same time to remove sensitive information;

    (2) all substantive terms as to funding which were being negotiated were redacted; this was to avoid what was described as "cherry picking";

    (3) duplicative material was redacted;

    (4) not all copies of draft documents, but usually only the last drafts of the documents, were disclosed;

    (5) Mr Mervis explains the approach adopted as to which documents allowed the drawing of inferences as to legal advice; he then discusses in detail the terms as to funding which might allow such inferences to be drawn; he refers in particular to terms as to:

    a) settlement;
    b) valuation;
    c) term and amount of funding;
    d) definitions of success and provisions as to termination;
    e) funder's return;
    f) amount and protection of security;
    g) certain representations and warranties;
    h) certain conditions precedent and document requests.
  29. Mr Mervis then makes two points as to proportionality. His first point is that in view of the category 3 redactions (as defined by Mr Willis) which have been made, it will not be possible to determine whether particular funding packages which might have been available to the Petitioners were reasonable or appropriate (even if some or all of the category 2 redactions were opened up). He seeks to reinforce that point by referring to the further difficulty created by redactions of references to the legal advice given to the funders and to without prejudice material. His second proportionality point refers to the time and expense which would be involved in reviewing the category 2 documents applying some different test as to permissible redactions.
  30. Towards the end of his statement, Mr Mervis refers to the position in relation to the negotiations and agreement with the Petitioners' current funder. He suggests that Mr Willis did not deal with that subject in his witness statement. I take the view that the application before me does not include an application for specific disclosure of such documents (which had not been disclosed) but instead seeks inspection of documents which had been disclosed and made available for inspection in a redacted form. Mr Mervis points out that the alleged period of delay came to an end when the Petitioners were introduced to their current funder. He does not accept the suggestion that it would be open to the Respondents to compare the current funding terms with earlier terms which were available in order to assess whether the Petitioners ought to have accepted such terms at an earlier point. He also says that the current funding terms are both privileged and highly sensitive.
  31. Mr Willis replied to Mr Mervis' witness statement. He put forward an argument as to waiver of privilege which was not pursued at the hearing before me. He disagreed with both of Mr Mervis' points about proportionality, as described above.
  32. Although the application which is before me was not an application for specific disclosure of documents relating to the Petitioners' current funding, in correspondence the solicitors for the First Respondent offered to agree that, in relation to such documents, the Petitioners should be free to redact parts of such documents which revealed the Petitioners' legal advice or which revealed:
  33. (1) the amount of a success fee or premium being charged to reflect the contracting party's assessment of the merits of the case;

    (2) any circumstances in which the solicitor or the funder could terminate the funding arrangement; and

    (3) any terms by which the solicitors or the funder would require to be consulted on whether offers should be accepted.

    This proposal was confined to documents relating to current funding and did not apply to documents in the period before 2014 when the Petitioners were introduced to their current funders.

  34. The order made on 7 July 2016 required the Petitioners to give standard disclosure followed by inspection. The first point which was argued on this application was whether the redacted parts of the Litigation Funding Documents came within standard disclosure. In particular, it was argued for the Petitioners that because the Respondents had not pleaded a particularised allegation of unreasonable delay on the part of the Petitioners, the redacted parts of these documents were not relevant to any pleaded issue. I do not accept that submission. The Petitioners have pleaded that the passage of time following the existence of a dispute between the parties and prior to the presentation of the Petition should not be held against the Petitioners because the time taken to pursue negotiations for litigation funding was not improper delay and because the Petitioners actively but unsuccessfully sought such funding. I do not intend to rule on the relevance of the passage of time before proceedings were issued nor as to whether the Petitioners need to show a reasonable explanation for the passage of time. It is obvious from the Petitioners' own pleading that they intend to justify the passage of time taken up with negotiations for funding as a proper use of time involving active negotiations. The Petitioners have already recognised the need to disclose the documents which relate to the negotiations in connection with funding as part of the standard disclosure in this case as documents which potentially support their case.
  35. The next point which I will address is whether the Petitioners will be able to establish that they actively sought funding and that there was no improper delay if they are able to redact the litigation funding documents to the extent which they have done. This will ultimately be a matter for the trial judge but it is right to record that Mr Fenwick QC accepted before me that if the extent of the redactions was such that the trial judge did not feel able to make a finding in the Petitioners' favour as to their explanation of the time taken to negotiate funding, then the Petitioners would have to bear the consequences of their having made such extensive redactions. He accepted that such an outcome would not conflict with the rule that the court does not draw an adverse inference against a party by reason of that party claiming privilege when it was entitled to do so.
  36. The next question is whether the Petitioners are entitled to assert legal professional privilege to the extent which they claim. Before addressing the detailed points which arise, it is necessary to resolve an issue of principle as to the extent of the documents in the present case for which legal professional privilege may be claimed.
  37. The privilege which is claimed in relation to the disputed documents is legal advice privilege rather than litigation privilege. It is well established that, as a matter of public policy, communications between clients and their lawyers for the purpose of obtaining legal advice are privileged from disclosure. It is also clear that this head of privilege is not confined to the communications themselves but also extends to other material which "evidences" the substance of such communications: see Three Rivers DC v Bank of England (No 5) [2003] QB 1556 at [19] and [21] per Longmore LJ and see also the declaration made by the Court of Appeal in that case which is quoted in Three Rivers DC v Bank of England (No 6) [2005] 1 AC 610 at [14]. It was not necessary in Three Rivers DC v Bank of England (No 5) to consider what was meant by "evidencing" the substance of privileged communications and, indeed, the issue in that case was a different one.
  38. In the earlier case of Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd, "The Good Luck" [1992] 2 Lloyd's Rep 540, Saville J (at page 540, right hand column) described the privilege as extending to documents "reproducing or otherwise revealing" the communications but, again, that case did not turn on the meaning of that phrase, as to which there was no discussion in the judgment.
  39. It might have been thought from Mr Willis' witness statement that the First Respondent accepted that privilege could be claimed for documents from which the substance of a party's legal advice could be inferred so that the issue related to whether there was a proper basis for the suggested inference or whether all that could happen would be speculation as to the legal advice.
  40. However, at the hearing, Mr Lightman submitted that the possibility that one could infer the substance of a party's legal advice from a document did not suffice to make that document privileged. He relied on the decision of David Richards J in Financial Services Compensation Scheme Ltd v Abbey National Treasury Services plc [2007] EWHC 2868 (Ch) where the judge was asked to rule on a claim to legal advice privilege. The judge was satisfied that a document which revealed the substance of the advice was privileged. He then discussed in some detail whether the fact that the substance of the advice could be inferred from the disputed document would suffice. As to that he said:
  41. "17. Save as mentioned below, none of the authorities to which I was referred deal with the case of a document which, rather than stating the substance of advice, is a document from which it is said the advice can be inferred. Two considerations lead me to the view that, unless perhaps the inference is obvious and inevitable in which case the document is in substance a statement of the advice or communication, privilege does not attach to such documents. First, it is the communication between the client and lawyer which is privileged either in its original form or in a summarised or paraphrased form. A document which does not contain the communication in any form contains nothing to which privilege attaches. [Counsel's] submission that a document from which the substance of the communication may be inferred "evidences" the privileged communication treats "evidences" as carrying its fact-finding meaning of "providing an evidential basis". I do not think that this is the sense in which the word is used in Three Rivers DC v Bank of England (No. 5) and other authorities. It is used, I believe, in the narrower sense, consistent with The Good Luck and other cases, of reproducing, summarising or paraphrasing the communication.
    18. The second consideration is that inference is usually a matter of subjective judgment. Save in very clear cases, views may differ as to whether the inference can be made. A claim to privilege should not, in my judgment, depend on a subjective assessment of this sort. It would, as Sir Sydney Kentridge QC appearing for the Law Society in Three Rivers DC v Bank of England (No.6) submitted in relation to the issue on that appeal, introduce "an unwelcome element of subjective uncertainty": [2005] AC 610 at 630. There are in any case many documents which are clearly not privileged but from which the substance of legal advice may be inferred. A common example is a minute of a board meeting recording the directors' decision on a particular matter.
    19. There is a reference to a claim for privilege based on inference in a short passage in the judgment of Finn J in the Federal Court of Australia in Pratt Holdings Pty Ltd v Commissioners of Taxation (2004) 207 ALR quoted in part in Thanki: The Law of Privilege at para 2.57:
    "[20] The second principle which is more directly tied to the protection of communications is that the privilege extends to any document prepared by a lawyer or client from which there might be inferred the nature of the advice sought or given. Examples include communications between the various legal advisers of the client, draft pleadings, draft correspondence with the client or the other party, and bills of costs: Propend Finance, at CLR 569; ALR 5978."
    I do not consider that this provides a basis generally for a claim for privilege in any document from which legal advice may be inferred. Its restricted application is apparent from the examples given."
  42. Mr Fenwick submitted that the decision in the Financial Services Compensation Scheme case is not consistent with a number of other authorities which are binding on me. He relies in particular on Lyell v Kennedy (No 3) (1884) 27 Ch D 1 ("Lyell") and Ventouris v Mountain [1991] 1 WLR 607. In Lyell, the Court of Appeal refused to order disclosure of original documents which had been collected for the purpose of preparing a defence in litigation and for the purpose of instructing counsel in that litigation. At page 26, Cotton LJ said that the documents would give the other party "a clue to the advice given by the solicitor" and accordingly they were privileged. In the same case at page 31, Bowen LJ referred to the application for disclosure of documents was asking for "the key to the labour which the solicitor had bestowed in obtaining them". Mr Lightman accepted that the relevant privilege in that case was legal advice privilege rather than litigation privilege. In Ventouris v Mountain, at page 615F, Bingham LJ stated the ratio of Lyell as follows:
  43. "The ratio of the decision is, I think, that where the selection of documents which a solicitor has copied or assembled betrays the trend of the advice which he is giving the client the documents are privileged. [Counsel] for the plaintiff put this forward as an exception to what he claimed was the general rule, that non-privileged documents do not acquire privilege simply by being copied. If the ratio I have given is correct, the authority is consistent with the fundamental principle underlying the privilege."
  44. In Sumitomo Corporation v Credit Lyonnais Rouse Ltd [2002] C P Rep 3, it was held that the principle in Lyell did not extend to copies or translations, representing the fruits of a selection made for litigious purposes from own client documents. Lyell was applied in Imerman v Tchenguiz [2010] Lloyd's Rep PN 221 at [16] and in re RBS Rights Issue Litigation [2017] 1 WLR 1999 at [99] [128].
  45. I was also shown a number of other decisions which appeared to apply the approach in Lyell to a claim to legal advice privilege. In Barr v Biffa Waste Services Ltd [2009] EWHC 1033 (TCC), Coulson J had to consider a claim to privilege in relation to an ATE insurance policy. He held that the policy was not the subject of litigation privilege but at [48] he accepted as correct a concession by counsel that legal advice privilege could be claimed for material in relation to the ATE policy "which would allow the reader to work out what legal advice had been given". In Arroyo v BP Exploration Company (Colombia) Ltd [2010] EWHC 1643 (QB), the Senior Master took the same approach and cited Cotton LJ's judgment in Lyell as to whether the documents "give a clue" to the parties' thinking. In Excalibur Ventures LLC v Texas Keystone Inc [2012] EWHC 2176 (QB), Popplewell J had to consider a claim to privilege in relation to a party's attempts to obtain litigation funding. He held that the documents in question were not the subject of litigation privilege but at [23] he said:
  46. "If and insofar as the disclosure of the funding agreements would or might give the other side an indication of the advice which was being sought or the advice which was being given, it would be covered by legal advice privilege."
  47. Finally, in relation to the English authorities, I note that Financial Services Compensation Scheme Ltd v Abbey National Treasury Services plc was referred to in Property Alliance Group Ltd v Royal Bank of Scotland plc [2016] 1 WLR 992 but there was no issue in that case as to whether a document "evidenced" a communication containing legal advice.
  48. The question as to what is a sufficient reference to legal advice for present purposes has been considered in a number of Australian decisions. In Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, Gummow J said at 569 that legal advice privilege extended to any document prepared by a lawyer or a client "from which there might be inferred the nature of the advice sought or given". The judge in that case then gave examples such as draft pleadings, draft correspondence and bills of costs. This statement of principle was repeated by Finn J in Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122 at [21]; this passage was cited in Financial Services Compensation Scheme Ltd v Abbey National Treasury Services plc. In Pratt Holdings, the Federal Court of Australia remitted the case to the judge at first instance, Kenny J, for her to apply the identified test to the disputed documents in that case. The subsequent decision of Kenny J is reported at [2005] FCA 1247. At [58] to [79], the judge applied the test to the disputed documents. However, her reasoning is not stated in detail as in most cases she simply stated her conclusion as to whether one might be able to infer the nature of the legal advice from the disputed document. However, what is clear is that the documents being considered were not confined to draft pleadings, draft correspondence and bills of costs. Further relevant Australian decisions are summarised in Passmore on Privilege, 3rd ed. at paras. 2-015 and 2-016. The cases cited are Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325 at 333-334 and AWB v Terence Cole [2006] FCA 571 at [133] and [142]. In the first of these cases, Anderson J stated that privilege extended to documents which would, if disclosed: "reveal, or tend to reveal the content of the privileged communications". In the second of these cases, Young J stated that the inference of fact to be drawn "must have a definite and reasonable foundation in the contents of the document" and that it was not enough if there was something in the document which would cause the reader "to wonder or speculate whether legal advice had been obtained and what was the substance of that advice".
  49. Mr Lightman submitted that I should apply the approach in Financial Services Compensation Scheme Ltd v Abbey National Treasury Services plc. I consider that there are considerable arguments in favour of that approach, as explained by David Richards J. However, the learned judge in that case was not referred to Lyell and I do not have the benefit of his comments on that authority. After the Financial Services Compensation Scheme case, there has been a number of cases where it has been assumed that the relevant test to be applied is that stated in Lyell or in Ventouris v Mountain. I consider that I should apply that test in this case also. I also consider that I can derive assistance from the discussion in the Australian cases to which I have referred. I would adopt the distinction drawn in AWB v Terence Cole between a case where there is a definite and reasonable foundation in the contents of the document for the suggested inference as to the substance of the legal advice given and merely something which would allow one to wonder or speculate whether legal advice had been obtained and as to the substance of that advice.
  50. Having identified the legal test to be applied to the Litigation Funding Documents for the purpose of determining whether the documents withheld and the redacted parts are privileged, the next task is to ask whether that test has been correctly applied. I have summarised the witness statement of Mr Mervis who described the approach which was adopted. In paragraph 37.1 of his witness statement, Mr Mervis stated that documents had been withheld or redacted because "they tend to reveal the advice which the Petitioners have received in relation to the merits of the case, in relation to strategy and tactics, and in relation to the funding itself". Mr Mervis' reference to "advice" did not specifically say "legal advice" but I consider that read in context he is only referring to legal advice. The advice to which he referred was not confined to advice on the merits of the case but extended to advice on strategy, tactics and funding. It was not argued that privilege was not available in relation to legal advice on those subjects.
  51. Mr Mervis' description of the basis of the claim would satisfy the test in Lyell as to giving a clue as to the legal advice given and the test in Ventouris v Mountain as to betraying the trend of the legal advice. I also consider that Mr Mervis' description of the basis of the claim is on the right side of the line between documents from which a party's legal advice can be inferred and documents which allow one to wonder or speculate as to whether legal advice had been given and as to its possible substance.
  52. Mr Lightman submitted that privilege could only be claimed for documents which more directly revealed the substance of the legal advice but I have not accepted that submission. In the course of his submissions, he drew attention to some of the detailed points made by Mr Mervis and he submitted that the documents in question did not reveal the substance of the legal advice. Some of Mr Lightman's submissions might also be relevant to the question as to whether Mr Mervis did actually apply the test which he said that he applied. For example, when he referred to "cherry-picking", he seemed to refer to a process whereby he redacted parts of the documents which did not satisfy the stated test. Further, Mr Lightman questioned how a term as to the provision of security to a funder could give a clue as to the legal advice given. He made a similar submission in relation to a request by a funder for a copy of the Petitioners' legal advice. The submission was that, although the legal advice was privileged, the request to be given a copy of the advice would not be privileged.
  53. Apart from these submissions, I do harbour doubts as to whether Mr Mervis actually applied the test which he described. A large part of Mr Mervis' witness statement is devoted to emphasising how sensitive the redacted information was and how it would be very unfair to the Petitioners if they had to disclose it to the Respondents. His thoughts on that point might very well have led him to be too generous to the Petitioners when acting "as a judge in his own cause" (for this reference, see later in this judgment) when he came to apply the test he described in paragraph 37.1 of his witness statement. These doubts on my part were only heightened when Mr Fenwick presented the case for the Petitioners. Mr Fenwick's primary case was that the court should exercise what were said to be its case management powers so that it did not allow inspection of such sensitive documents. If the documents were truly privileged, then the court had no power to override that privilege and there would be no question of the court exercising any discretion in the matter whether pursuant to case management powers or otherwise.
  54. When the court is presented with a witness statement from a solicitor which claims legal professional privilege, the approach which the court may adopt is summarised in West London Pipeline and Storage Ltd v Total UK Ltd [2008] EWHC 1729 (Comm) at [86] (I will quote the paragraph with the references to earlier cases removed):
  55. "86. It is possible to distill the following propositions from the authorities on challenges to claims to privilege:
    (1) The burden of proof is on the party claiming privilege to establish it . A claim for privilege is an unusual claim in the sense that the party claiming privilege and that party's legal advisers are, subject to the power of the court to inspect the documents, the judges in their or their own client's cause. Because of this, the court must be particularly careful to consider how the claim for privilege is made out and affidavits should be as specific as possible without making disclosure of the very matters that the claim for privilege is designed to protect .
    (2) An assertion of privilege and a statement of the purpose of the communication over which privilege is claimed in an affidavit are not determinative and are evidence of a fact which may require to be independently proved .
    (3) It is, however, difficult to go behind an affidavit of documents at an interlocutory stage of proceedings. The affidavit is conclusive unless it is reasonably certain from:
    (a) the statements of the party making it that he has erroneously represented or has misconceived the character of the documents in respect of which privilege is claimed .
    (b) the evidence of the person who or entity which directed the creation of the communications or documents over which privilege is claimed that the affidavit is incorrect .
    (c) the other evidence before the court that the affidavit is incorrect or incomplete on the material points .
    (4) Where the court is not satisfied on the basis of the affidavit and the other evidence before it that the right to withhold inspection is established, there are four options open to it:
    (a) It may conclude that the evidence does not establish a legal right to withhold inspection and order inspection .
    (b) It may order a further affidavit to deal with matters which the earlier affidavit does not cover or on which it is unsatisfactory .
    (c) It may inspect the documents: see CPR 31.19(6) . Inspection should be a solution of last resort, in part because of the danger of looking at documents out of context at the interlocutory stage. It should not be undertaken unless there is credible evidence that those claiming privilege have either misunderstood their duty, or are not to be trusted with the decision making, or there is no reasonably practical alternative.
    (d) At an interlocutory stage a court may, in certain circumstances, order cross-examination of a person who has sworn an affidavit, for example, an affidavit sworn as a result of the order of the court that a defendant to a freezing injunction should disclose his assets . However, the weight of authority is that cross-examination may not be ordered in the case of an affidavit of documents . In cases where the issue is whether the documents exist the existence of the documents is likely to be an issue at the trial and there is a particular risk of a court at an interlocutory stage impinging on that issue."
  56. Although I have doubts as to the way in which Mr Mervis applied the test which he had identified in his witness statement, I am not able to conclude that it is "reasonably certain" that he has not applied that test correctly. If I had been reasonably certain that the test had not been applied correctly, then I would have to consider the possible courses of action identified in West London Pipeline and Storage Ltd. As to those possibilities, I was not asked to inspect the documents or to order the cross-examination of Mr Mervis and I would not, of my own motion, adopt either of these courses. The most that I would have considered doing would have been to order Mr Mervis to swear an affidavit in order to provide more detail as to the test which he applied and to explain why it would be wrong to hold that he had misapplied the test he had identified.
  57. Before expressing my overall conclusion in relation to the Litigation Funding Documents, I will refer to some of the other points which were raised in relation to the First Respondent's application.
  58. CPR rule 31.3 entitles the Petitioners to withhold inspection of documents which they have disclosed on the grounds that they have a right or a duty to withhold inspection. The only right to withhold inspection claimed was by reference to the claim to legal advice privilege to which I have referred. Mr Fenwick appeared to accept that he could not say that the Petitioners had a duty to withhold inspection although Mr Mervis did refer to documents in relation to which certain funders could claim privilege. Rules 31.3(1)(c) and (2) allow a party to withhold inspection where it considers it would be disproportionate for there to be inspection of documents in a specified category or class. In the disclosure statements, the Petitioners did not make a proper claim invoking this right to withhold inspection. However, they submitted that it would be disproportionate for the court to order that they give inspection of the redacted parts of the documents. The Petitioners put forward two matters in support of their arguments as to proportionality. One submission was that the Petitioners should not be put to the trouble and expense of reviewing and if necessary revising the redactions because they had already incurred considerable trouble and expense carrying out the redaction exercise first time around. I do not give any real weight to that consideration. The Petitioners acted unilaterally in carrying out this exercise. If it is the case that their solicitors did it in an inappropriate way, then that is not much of an excuse for not doing the exercise properly on the second attempt. The other submission as to proportionality has more weight. If the redaction exercise were to be done a second time and some of the present redactions were to be opened up, the documents would still be heavily redacted on account of privileged matters (including claims to privilege by the funders) and without prejudice matters. It may be right, as the Petitioners claim, that the opening up of some redactions in this way would not throw much light on the question whether the Petitioners actively sought funding and whether there was improper delay.
  59. I also wish to comment on the Petitioners' submissions to the effect that even if the redacted parts of the documents were not privileged, the court should exercise a discretion to prevent the Respondents being able to inspect the redacted parts. The Petitioners' case seemed to be that the court should not allow the Respondents to see relevant and non-privileged material because the Respondents would thereby be given a tactical advantage over the Petitioners because they would become aware of highly sensitive matters as to the Petitioners' funding arrangements. It was said that the Respondents could abuse that advantage by proposing terms of settlement which would create a conflict between the Petitioners and their funders which could operate to the Petitioners' disadvantage. In response to these suggestions, the Respondents submit that the Petitioners are now under a duty under CPR rule 31.3 to permit inspection, that the court does not have the discretionary power alleged and that the court should not exercise any such discretionary power. The Respondents submit that the Petitioners should either withdraw their pleaded Reply in so far as they refer to the time spent in obtaining funding (following which this disclosure will be irrelevant) or they should give disclosure and inspection as already ordered.
  60. In response to these submissions, I begin by referring to the relevant rules. CPR rule 31.5 would have allowed the Petitioners to ask the court to limit standard disclosure. I make no findings as to whether they would have persuaded the court to limit disclosure in a way which allowed them to redact documents to deny to the Respondents the tactical advantage which they claim the unredacted documents would give to the Respondents. The simple fact is that the Petitioners did not apply for any limitation on disclosure but they submitted to an order for standard disclosure. After that order was made, they did not apply, under CPR rule 3.1(7), for an order varying the obligation to give standard disclosure. That possibility is referred to in the White Book at para. 31.5.4 but there is no such application before me. The effect of CPR rule 31.3 is that the Respondents have a right to inspect the disclosed documents and I have drawn attention to the limits on this right under rule 31.3. Those limits do not confer a power on the court to withhold inspection if inspection would give an allegedly unfair tactical advantage to the inspecting party.
  61. Notwithstanding the position under the rules quoted above, Mr Fenwick submitted that the court had a discretion to withhold inspection of relevant and non-privileged documents. He cited Ventouris v Mountain [1991] 1 WLR 607 at 622 B-E (where earlier authorities are cited) and Sumitomo Corporation v Credit Lyonnais Rouse Ltd [2002] C P Rep 3 at [79]. The first of these cases involved the application of RSC Order 24 rule 13(1) which provided that an order for inspection should not be made unless the court was persuaded that the order was necessary for disposing fairly of the cause or matter or for saving costs. However, Sumitomo Corporation was decided after the coming into force of the CPR. At the hearing, I was not given any explanation as to why Sumitomo Corporation recognised the continuing relevance of the approach in Ventouris v Mountain after the repeal of the RSC. Mr Lightman submitted that I should not follow Sumitomo Corporation on this point. He relied on the terms of CPR 31.3 which provide for there to be a right to inspection subject to certain specified exceptions which do not extend to the discretion now contended for by the Petitioners.
  62. My attention was also drawn to Excalibur Ventures LLC v Texas Keystone Inc [2012] EWHC 2176 (QB) at [24] and re RBS Rights Issue Litigation [2017] 1 WLR 1999 at [175]-[187]. In both of these cases, the court proceeded on the basis that it had a discretion to withhold inspection of a relevant non-privileged document on grounds which appeared to go beyond the exceptions in rule 31.3. In the second case, the judge referred to the position under CPR rule 31.19(3) but that would not seem to go beyond the exceptions stated in rule 31.3.
  63. My own answer as to the source of the power to limit disclosure and inspection, following the coming into force of the CPR, is that the court's powers are conferred by the express terms of the rules, in particular CPR 31.5 (the power to limit disclosure), rules 31.3 and 31.19 (the exceptions to the right to inspect disclosed documents) and rule 31.12 where the court "may" decline to order disclosure and inspection. Even in a case where rule 31.3 provides that a party has a right to inspection, if that party wishes to have an order of the court providing for that inspection, it can seek such an order under rule 31.12. When the court is asked to make an order permitting inspection, rule 31.12 provides that the court "may" make such an order. This is not an appropriate case in which to rule on the scope of the court's power at that stage. In the present case, the Respondents have not asked me to make an order under rule 31.12 but instead to enforce the general order for inspection that was made on 7 July 2016. However, I consider that a court should be cautious before exercising its discretion under CPR r 31.12 in order to withhold proportionate inspection of relevant non-privileged documents on a ground which does not come within rule 31.3 but on account of an assertion that inspection would give the inspecting party a tactical advantage in the litigation.
  64. Having now dealt with the submissions made to me, I need to stand back and consider what should be done. I conclude that I should make no order on the First Respondent's application in relation to the Litigation Funding Documents. I am not persuaded that Mr Mervis has not properly applied the test for privilege although it is possible that he has not done so. Therefore, I am not "reasonably certain" that the claim to privilege has not been properly made. In addition, I consider that if it appeared that Mr Mervis had not correctly carried out the redaction exercise first time around, the court might not (on the ground of proportionality) require him to carry it out a second time. The advantage to the Respondents of the redaction exercise being reviewed and redone is likely to be slight. Further, the time between now and the trial in January 2018 is limited and it would be very undesirable to lose the trial date to allow time for a second redaction exercise to be carried out.
  65. Following the release to the parties of a draft of this judgment, Mr Lightman invited me to deal with the position in relation to the Petitioners' documents which related to their current funding. Following that request, I have added some wording earlier in this judgment to explain that I had proceeded on the basis that the application before me had been for inspection of documents which had been made available for inspection subject to redactions and had not extended to an application for specific disclosure of documents which had not been disclosed.
  66. Now that Mr Lightman has raised the point, I consider that I should not make an order that the Petitioners disclose any documents relating to their current funding. I say this for a number of reasons:
  67. (1) that was not the application that was before me;

    (2) if there were to be an application for specific disclosure, there would need to be a consideration of the relevance of the documents relating to current funding, given that the pleaded issue as to funding concerns delay prior to the time when the Petitioners were introduced to the current funders;

    (3) if it is suggested that the First Respondent should be allowed to see the terms of the current funding to enable him to argue that, in the light of the terms which the Petitioners ultimately accepted, they acted unreasonably in not accepting earlier terms which were on offer, it is not clear to me that, with the redactions which have been made to the documents already disclosed and with similar redactions made to the current funding documents (if they were to be disclosed) that a point of that kind could be effectively explored at the trial;

    (4) I am not persuaded, certainly on the material prepared for the inspection application, that the identity of the current funder will be material to the issues to be considered at the trial;

    (5) I am cautious about ordering the disclosure of the identity of the current funder without being satisfied that its identity will be relevant to an issue at the trial;

    (6) I doubt if the judge who conducts the Pre-Trial Review in this case will be in a better position than I am now in and I consider that if the First Respondent wishes to obtain an order that the Petitioners disclose the identity of the current funder, he makes that application to the trial judge at the trial.

    Part III: The Magwells Documents

  68. The Petitioners' disclosure statements referred to the Magwells Documents. These are documents which are held by Magwells and which were provided to Magwells by one or other of the Petitioners at a time when Magwells acted for one or other of the Petitioners in connection with the matters in dispute in the Petition and also when Magwells acted for Herinder in connection with a dispute which became the subject of litigation brought by Herinder's father against Jasminder and Herinder.
  69. The application notice served by the First Respondent asks for an order that the Petitioners give disclosure and permit inspection of the Magwells Documents. In support of that application, the First Respondent relies upon the witness statement of Mr Willis referred to above. Mr Willis states that the Magwells Documents are relevant to the issues raised by the Petition, are not privileged and it would not be disproportionate for the court to require the Petitioners to disclose and permit inspection of those documents. Mr Willis recognised that Magwells, now in receivership, was contending that it had a lien over the relevant documents whereas the Petitioners contended that there was no such lien. Mr Willis submitted that the Petitioners should bring proceedings against Magwells to determine whether it could claim a lien over the documents.
  70. In response to the application in relation to the Magwells Documents, the Petitioners rely on the witness statement of Mr Mervis who makes the following points:
  71. (1) the receivers of Magwells are asserting a lien over the relevant documents in relation to allegedly unpaid fees in the sum of 1.3 million;

    (2) the Petitioners assert that Magwells do not have the benefit of a lien and, further, that the sum of 1.3 million is excessive; Mr Mervis gives more detail in relation to both of these points;

    (3) the communications with the receivers for Magwells have included both open and without prejudice correspondence but agreement on the release of the documents has not been reached;

    (4) Mr Mervis is not in a position to fully describe the communications he has had with the solicitors for the receivers as those communications contain privileged references to the way in which Magwells conducted the case on behalf of the Petitioners and because some of Magwells' fees may be sought from some of the Respondents in these proceedings;

    (5) the Petitioners have proposed that the Respondents should apply under CPR 31.17 for an order that Magwells disclose the documents to them;

    (6) it is accepted that the Magwells Documents could include relevant documents but the number of such documents that have not already been disclosed by one or other party to the Petition is likely to be very small; Mr Mervis described his reasons for this conclusion over many pages of his witness statement;

    (7) it is suggested that the application for disclosure of the Magwells documents is made for an ulterior motive connected with Jasminder's position in relation to the litigation brought against him by his father (who is now deceased and whose estate is insolvent);

    (8) it would not be proportionate for the Petitioners to bring proceedings against the receivers of Magwells in an attempt to force production of the relevant documents;

    (9) it would not be reasonable to require the Petitioner to pay 1.3 million or any similar sum to the receivers of Magwells to obtain production of the relevant documents;

    (10) the Petitioners cannot be sure of reaching an agreement with the receivers of Magwells for the release of the documents and the First Respondent's application for disclosure and his solicitor's direct approach to the receivers has improved the negotiating position of the receivers.

  72. Mr Willis has served a witness statement in response to that of Mr Mervis. Mr Willis addresses the detailed points made by Mr Mervis and disagrees with many of them. He says that the Petitioners cannot say with certainty that Magwells' files do not contain relevant documents. He also says that it is not reasonable for the First Respondent to accept that the issue of the lien cannot be resolved when the First Respondent has not seen all of the communications between the Petitioners and the receivers.
  73. In addition to the lengthy witness statements of the solicitors for the parties, there has been lengthy inter-solicitor correspondence on this topic. In relation to many of the points which have been made by the parties in the witness statements and in the correspondence, it is not possible for the court to form a clear view as to who is right.
  74. At the hearing, Mr Lightman did not ask for an order for disclosure and inspection of the Magwells Documents. Instead he asked me to adjourn that application to the Pre-Trial Review due to take place later this month and to order that the Petitioners do serve a witness statement giving a complete account of their negotiations with the receivers regarding the alleged lien and the steps taken to challenge it and exhibiting all relevant correspondence and explaining why the Petitioners say they have done everything which they reasonably can do to obtain the documents. He thereby accepted that if it emerged that the Petitioners had acted reasonably in attempting to obtain the documents from the receivers, it would not be appropriate for the court to make an order that would require the Petitioners to litigate with the receivers over the claim to a lien or to require the Petitioners to comply with the receivers' demands as to payment of fees. Mr Lightman also submitted that it was not appropriate to require the First Respondent to issue an application under CPR 31.17 for the purpose of the First Respondent obtaining the Magwells Documents from the receivers.
  75. I am not attracted by the suggestion that the application for disclosure of the Magwells Documents should be adjourned to the Pre-Trial Review. There is unlikely to be adequate time between the Pre-Trial Review and the trial to enable anything worthwhile to be achieved in relation to the Magwells Documents. I consider that the application for disclosure of these documents should be dealt with on the information which I now have. Furthermore, I expect that any witness statement of the kind which I am asked to order the Petitioners to provide would be incomplete in that privilege would be claimed for some of the communications with the receivers and there is a real likelihood that such a witness statement would not satisfy the First Respondent.
  76. The information before me as to the Magwells Documents does not allow me to form a clear view on many of the large number of disputed matters of fact. Overall, I think it is likely that disclosure of all of the Magwells Documents would result in massive duplication of documents which have already been disclosed by one or other of the parties and that any new documents which might be disclosed would be few in number. From the description of the issues in the witness statements of Mr Willis and Mr Mervis, I doubt if the new documents which might be found would be of real significance. I also consider that it is likely that the Petitioners have acted reasonably so far in their attempts to obtain the relevant documents from the receivers. Conversely, I agree with the First Respondent that the solution to the difficulty in obtaining the Magwells Documents does not lie in an application under CPR rule 31.17.
  77. In these circumstances, I will make no order in relation to the Magwells Documents. I recognise that this means that in relation to disclosure there may be a stone which has been left unturned. However, it is not part of our law as to disclosure that every conceivable stone must be turned over.


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