Derby & Company Ltd v Weldon (No. 7)
| Jurisdiction | England & Wales |
| Date | 1990 |
| Court | Chancery Division |
Practice - Discovery - Privilege - Professional privilege - Communications between defendants and legal advisers - Fraud alleged against defendants - Documents relating to steps allegedly taken by defendants to render irrecoverable sums claimed - Standard of proof required to override privilege - Whether plaintiffs entitled to particulars of privilege sought for documents brought into use for pending legal proceedings
The plaintiffs, all companies in a large group of associated companies, sought substantial damages for breach of contract, negligence, breach of fiduciary duty, deceit and conspiracy to defraud, alleging that the first two defendants had, contrary to their obligations, dealt in commodities on their own behalf and had allowed the plaintiffs to suffer huge trading losses. One of the allegations against the first two defendants was that they had had an interest in a Liberian company which had made profits in foreign exchange deals with the plaintiffs to which the plaintiffs claimed to be entitled and which they sought to trace. The fifth defendant was a Liechtenstein stiftung which owned a Panamanian company, the third defendant, and various other companies controlled by the first two defendants, under which the first defendant was a beneficiary. The remaining defendants were the trustees of two trusts set up to hold assets formerly held by the fifth defendant, and the companies through which some of those trust assets were held. The plaintiffs sought discovery and disclosure of all documents relating to the creation of the two trusts and the transfer of assets to them or to the companies through which they held assets notwithstanding that a claim for legal professional privilege might have been made in respect of them:—
Held, (1) that in deciding whether to order disclosure of documents for which legal professional privilege was claimed, the court had to weigh the public policy on which the privilege was founded, namely, the necessity for a party to be able to make a clean breast to his legal adviser, against the gravity of the charge of fraud or dishonesty made; that such an order would only be made in very exceptional circumstances, particularly on an interlocutory application, but that it was not necessary always to show that the plaintiff's case was founded on admission or supported by affidavit evidence, or that it would probably succeed; that, in the circumstances, the plaintiffs had established a strong prima facie case of fraud in relation to the profits made by the Liberian company in that the actions of the defendants were taken to conceal and render irrecoverable profits to which the plaintiffs asserted a proprietary claim, and would, even taken in isolation, negate the claim to privilege; and that, accordingly, the plaintiffs were entitled to the disclosure sought, save that they were not entitled to disclosure of any documents brought into existence for the dominant purpose of being used in pending or contemplated legal proceedings (post, pp. 1173A–B, E–1174A, D–F, H–1175A).
(2) That where privilege was claimed for professional communications of a confidential character obtained for the purpose of getting legal advice, the modern practice was to treat the claim for privilege as a sufficient description of them; and that the plaintiffs were not entitled to go behind specific assurances from the defendants' solicitors that all documents for which privilege was claimed had been carefully considered by solicitors and counsel before making a claim to privilege (post, pp. 1179A, F, G–H, 1180B–C).
The following cases are referred to in the judgment:
Anderson v. Bank of British Columbia (
Bankers Trust Co. v. Shapira [
Birmingham and Midland Motor Omnibus Co. Ltd. v. London and North Western Railway Co. [
Bullivant v. Attorney-General for Victoria [
Buttes Gas and Oil Co. v. Hammer (No. 3) [
Crescent Farm (Sidcup) Sports Ltd. v. Sterling Offices Ltd. [
Crompton (Alfred) Amusement Machines Ltd. v. Customs and Excise Commissioners [
Derby & Co. Ltd. v. Weldon [
Gamlen Chemical Co. (U.K.) Ltd. v. Rochem Ltd. (unreported), 7 December 1979; Court of Appeal (Civil Division) Transcript No. 777 of 1979,
Gardner v. Irvin (
Kain v. Farrer (
Reg. v. Cox and Railton (
Taylor v. Batten (
Taylor v. Oliver (
O'Rourke v. Darbishire [
Williams v. Quebrada Railway, Land and Copper Co. [
Willmott v. London Celluloid Co. (
The following additional cases were cited in argument:
Attorney-General v. Guardian Newspapers Ltd. (No. 2) [
Banque Keyser Ullmann S.A. v. Skandia (U.K.) Insurance Co. Ltd. [
Bewicke v. Graham (
Budden v. Wilkinson [
Butler v. Board of Trade [
Crompton (Alfred) Amusement Machines Ltd. v. Customs and Excise Commissioners (No. 2) [
Dependable Upholstery Ltd., In re [
Doland (George) Ltd. v. Blackburn Robson Coates & Co. [
Gamlen Chemical Co. (U.K.) Ltd. v. Rochem Ltd. [
O'Shea v. Wood [
Thompson's Settlement, In re [
MOTION
By a writ issued on 25 June 1987 and amended, the plaintiffs, Derby & Co. Ltd., Cocoa Merchants Ltd., Phibro-Salomon Finance A.G., Phibro-Salomon Ltd., Philipp Brothers Inc., Philipp Brothers Ltd., and Salomon Inc., claimed against the defendants, Anthony Henry David Weldon, Ian Jay, Milco Corporation, C.M.L. Holding S.A. Luxembourg, Wollstein Stiftung, Tim Schneider, Ernst Aeschbacher, Peter Ritter, Steelburg Management Inc., Pilgrim Enterprises Inc. and Dr. Louis Rohner, damages for breach of contract, negligence, breach of fiduciary duty, deceit and conspiracy to defraud in connection with dealings on the cocoa market and in foreign exchange — the sixth, seventh and eighth defendants being sued as the trustees of the Lagor Trust and of the Ralgo Trust, which the fifth defendant had set up.
In the course of discovery a claim for legal professional privilege was made in the first and second defendants' lists of documents, referring to “confidential correspondence, both original and copies, memoranda of instructions, opinions and other documents and notes of meetings and telephone conversations between the first and second defendants, their solicitors and counsel and other legal advisers, or any of them, and drafts of the same for the purpose of obtaining legal advice.” A claim made in the third to fifth defendants' list of documents was in similar terms except that it referred to “correspondence for the purpose of obtaining legal advice” without the qualification that the documents were “confidential.”
The plaintiffs applied by notice of motion dated 19 January 1990 for orders (1) that the defendants produce for inspection by the plaintiffs all documents in their possession power or control relating to the creation of the Lagor Trust or the Ralgo Trust, and to the transfer of assets in 1988 to either trust or to Steelburg Management Inc. of Panama (the ninth defendant) or to Pilgrim Enterprises Inc. of Panama (the tenth defendant); (2) that the third to fifth defendants make and serve on the plaintiffs a further and better list of all those documents in their possession custody or power for which a claim for privilege was made, identifying with full particularity the circumstances alleged to give rise to such a claim, and that the third to fifth defendants verify such list on oath.
The facts are stated in the judgment of Vinelott J.
Michael Lyndon-Stanford Q.C. and J. Stephen Smith for the plaintiffs.
Nicholas Chambers Q.C. and Mark Hapgood for the first and second defendants.
David Hunt Q.C. and Terence Mowschenson for the third to eleventh defendants.
12 March. VINELOTT J. read the following judgment.
The first issueIn these applications the plaintiffs seek discovery by the defendants of documents for which the protection of legal professional privilege is claimed. The interlocutory judgments that have been given and the orders that have so far been made in this action occupy four large ring binders. At least three of the judgments have been reported. I am reluctant to add another lengthy judgment to their bulk. However, the public policy, which requires that confidential communications between a client and his solicitor made in the course of obtaining legal advice are not to be subject to production, is of fundamental and constitutional importance. It is only in very exceptional circumstances that the privilege can be displaced. I must, therefore, set out in some detail the grounds on which the plaintiffs seek to displace or breach that privilege.
The action was started by writ issued on 25 June 1987. The plaintiffs are all members of a banking group headed by the fifth plaintiff, Salomon Inc., (“Salomon”). The litigation...
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