BBGP Managing General Partner Ltd v Babcock & Brown Global Partners

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Norris
Judgment Date20 August 2010
Neutral Citation[2010] EWHC 2176 (Ch)
Docket NumberCase No: HC09C04618

[2010] EWHC 2176 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Before: Mr Justice Norris

Case No: HC09C04618

Between
(1) BBGP Managing General Partner Limited
Claimants
(2) BBGP Special Limited Partner LP
(3) B & B Bbgp Investor
(4) Babcock and Brown International Pty Ltd
(5) Babcock and Brown Ltd
and
Babcock & Brown Global Partners
Defendants

Mr J Crow QC and Mr P Goodall (instructed by Freshfields Bruckhaus Derringer) for the Claimants

Mr R Millett QC and Mr S Dhar(instructed by Thomas Eggar) also for the Claimants

Mr C Moger QC and Mr R Ritchie (instructed by Simmons & Simmons) for the Defendants

Hearing dates: 21—23 and 26—27 July 2010

Mr Justice Norris

Mr Justice Norris:

1. The Babcock & Brown Group (“B&B Group”) is a global investment, fund management and advisory group originally based in Australia. It undertook the provision of structured finance and the creation, syndication and management of asset and cash-flow based investments. There was a demand for it to establish a co-investment fund to afford investors (hedge funds, asset management funds, trusts, individuals and partnerships) to take advantage of opportunities identified by the B&B Group for its own investment. For that purpose Babcock & Brown Global Partners (“Global”) was established.

3

Disputes arose between the B&B Group and Global about how to deal with some of their joint investments. Eventually within Global disputes also arose between the managing general partner and the limited partners. On 18 October 2009 General was removed as managing general partner of Global by the limited partners. On 18 November 2009 the limited partners appointed Global Partners Fund Ltd (“GPF”) to be the new managing general partner of Global. It was therefore necessary for General to transfer Global's books documents and records to GPF.

4

The books documents and records were all held in digital form on the B&B Group database. In the course of separating out Global's materials and ensuring that material confidential to the B&B Group and to General was not handed over to GPF, Freshfields (to whom the task had been entrusted, given the existence of disputes) soon discovered that on the B&B Group database was legal advice from Slaughter and May. It was not immediately apparent whom Slaughter and May were advising. Freshfields therefore ceased their review and instructed Mr Bankim Thanki QC to prepare an independent expert report on whether any documents were confidential or privileged. Freshfields then canvassed his views with Slaughter and May, whose response was that they must assert all rights to claim privilege and/or confidentiality. As a result Freshfields ceased their review, the B&B Group and General did not demand to see the material, and a separate legal team from Thomas Eggar was instructed to inspect Global's material on B&B Group database but to keep their knowledge behind an information barrier. Obviously some material, such as correspondence passing between the parties or their solicitors, is open and available to all (“the open material”): but some is known only to Thomas Eggar (“the closed material”).

5

Solicitors for Global suggested that an independent solicitor might review the material and decide where the line between the open material and the closed material should be drawn. But Freshfields said (correctly in my view) that it was inevitable that the questions of principle would have to be grappled with. The present Part 8 claim was started. By it the Claimants seek a declaration that none of them is precluded by any professional privilege available to any client of Slaughter and May from inspecting any part of the data recorded on the B&B Group servers. Global has not sought to cross examine any of the Claimants witnesses: nor did Global seek a direction for disclosure in the Part 8 claim. In those circumstances I am unreceptive to arguments that the material before the court is not adequate to enable me to consider granting the relief sought.

6

The claim was argued between Mr Crow QC and Mr Goodall for the Claimants, and Mr Moger QC and Mr Ritchie for Global using the open material. I then took a morning to reflect on the arguments I had heard and form my views. I then heard argument from Mr Millett QC and Mr Dhar for the Claimants and Mr Moger QC and Mr Ritchie for Global on the closed material (which I then read de bene esse).

7

Global argued that I should not consider the claim since it posed a question in the abstract: it would be better to await a pleaded claim and an application by the Claimants for disclosure against defined issues. General argued that it needed to know where it stood:—

(a) Because it has commenced proceedings in the Commercial Court against Global and against GPF (arising out of its dismissal as managing general partner, claiming €7 million in unpaid management fees and €10 million in compensation) in which it is due to file and serve its Particulars of Claim by 23 September 2010 (although there is provision for an extension) and it needs to know what it can plead;

(b) Because a claim has been brought against it by Global and it needs to know what material it may deploy in its defence;

(c) Because it needs to achieve an orderly handover of books documents and records to GPF without compromising the confidentiality in its own documents;

(d) Because it needs for its own commercial purposes to have access to its own documents on its own database.

8

I propose to consider the claim for relief. The questions arising do not relate to disclosure. The claimants have possession and control of all of the material on their own database. They do not need the compulsive effect of CPR 31 to gain access to it: they do not need to assert any right to disclosure as against Global. They already have the ability look at the closed material: it is only their desire “to do the right thing” that brings them to Court. If Global wanted an issue formulated then Global should have sought an injunction to restrain General from inspecting defined documents or specified categories of the closed material, on the footing that although it is within General's power, possession and control there is some equitable or privacy right or some privilege that would be infringed by examination or use of the closed material: Goddard v Nationwide BS [1987] QB 670, Guinness Peat v Fitzroy Robinson Partnership [1987] 1 WLR 1027, Derby v Weldon (No.8) [1991] 1 WLR 73. Global knows exactly what material was produced in connection with legal advice because Slaughter and May have prepared 45 lever-arch files relating to their involvement in Global's affairs. No application was made. (In referring to “Global” I am simply using that term conveniently to describe the 130-odd limited partners and GPF who together now constitute the firm, and any one or more of whom could have advanced a positive claim to confidentiality, privacy or privilege).

9

It is necessary to start with the legal relationships, beginning with Global. Global is not a legal person. Global is a collection of legal persons. Their rights and obligations as partners as between themselves are defined by the Deed and by the 1907 Act. Their rights and obligations as partners in relation to the outside world are created by General (which alone has authority to act on behalf of and in the name of Global and to commit Global to the performance of any obligation).

10

The Deed provides:—

(a) by clause 5.1 that General has (i) exclusive responsibility for the operation of the partnership and management and control of its business and affairs and (ii) full power and authority to bind the partnership;

(b) by clause 5.2 that the limited partners shall take no part in the operation of the partnership and shall have no right or authority to act for the partnership or to take any part in or in any way to interfere in the conduct or management of the partnership other than as provided by the 1907 Act;

(c) by clause 5.3.1 that General has full power and authority to negotiate investment opportunities, procure the provision of office facilities and executive staff, to conduct litigation relating to the partnership, to pay fees and expenses (including its own management fee), and to engage lawyers and other advisers;

(d) by clause 5.5.1 that the partnership would be responsible for all expenses incurred in relation to the administration and business of the partnership (including legal fees);

(e) by clause 9 that General would be entitled to receive out of the partnership funds a management fee calculated by reference to the acquisition cost of investments held by the partnership;

(f) by clause 10 that every partner (which included General) had an interest in every asset of the partnership and that the gross income of the partnership reduced by the expenses of the partnership should be allocated in proportion to their capital contributions: the effect of this was that Generals management fee and recoverable disbursements were effectively a first charge on the partnership funds with the balance being distributable amongst the founders and the investors;

(g) by clause 11.4 that General should not be obliged to cause the partnership to make any distribution if it might leave the partnership with insufficient funds to meet any future obligations (including the management fee);

(h) by clause 11.7 that General should be entitled to draw quarterly in advance instalments of its management fee;

(i) by clause 14.4.1 that investors holding at least 75% of the relevant commitments could by resolution remove General which would entitle General to compensation in the amount of two times the management fee in respect of the calendar year immediately prior to that in which termination occurred;

(j) by clause 14.4.2 that General could be removed in like manner without compensation if the...

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