Enigma Diagnostics Ltd ((in Liquidation)) v Harvey Boulter
| Jurisdiction | England & Wales |
| Judge | Nicholas Thompsell |
| Judgment Date | 28 July 2023 |
| Neutral Citation | [2023] EWHC 1999 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No. BL-2021-001208 |
[2023] EWHC 1999 (Ch)
Mr Nicholas Thompsell
sitting as a Deputy Judge of the high court
Claim No. BL-2021-001208
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES
CHANCERY DIVISION
Rolls Building
Fetter Lane
London, EC4A 1NL
Neil Kitchener KC and Tom Foxton (instructed by Macfarlanes LLP) appeared on behalf of the Claimants
Patricia Robertson KC (instructed by Clyde and Co LLP) appeared on behalf of the Second and Third Defendants
BACKGROUND
The Claimants in this matter are Enigma Diagnostics Limited (“ Enigma”), a company in liquidation and its liquidators. Before going into liquidation, Enigma was a start-up company engaged in developing medical diagnostic equipment, commercialising technology originally developed by the Ministry of Defence.
The Claimants are pursuing claims based on a number of causes of action against the First Defendant, Mr Boulter, and the law firm used by him and his companies, which is the Second Defendant, DLA Piper UK LLP (“ DLA Piper”) as well as against one of the members of that firm who had conduct of matters instructed by Mr Boulter, the Third Defendant, Mr Cook.
It is not necessary for the purposes of this application to describe the nature of the claims made in detail, beyond saying that the Claimants allege that Mr Boulter acted wrongfully in relation to his dealings in shares of Enigma, via Porton Capital Limited (“ PCL”), a company owned and controlled by him.
PCL was a company based in the Cayman Islands but has been dissolved since the time of the matters in question. Mr Boulter arranged for shares in Enigma to be issued to PCL and subsequently sold by PCL at a higher price, an arrangement that the Claimants describe as the “ Enigma Investment Scheme”. The Claimants allege that he did so whilst he and PCL were under fiduciary and/or contractual duties to obtain the best price for the shares for the benefit of Enigma.
The Claimants are also making claims against DLA Piper and Mr Cook in relation to their involvement in these arrangements.
There is no dispute in relation to the basic facts that Enigma issued shares to PCL and PCL sold beneficial interests in those shares to third parties (whom I will refer to as “ Investors”), with PCL remaining on the share register as nominee for individual Investors. The matter disputed is whether it was entitled to do so without passing the entire sale proceeds, less commission, to Enigma rather than keeping a substantial profit for itself.
The Defendants object to the characterisation of these arrangements for investment as a “scheme” with the pejorative connotations that come with that word. For convenience, I will use the Claimants' nomenclature but this should not be taken at this stage, before the substantive matter has been tried, as any endorsement of any pejorative connotations that may be associated with this terminology.
By way of background to their claim, the Claimants allege that Mr Boulter wrongfully undertook similar schemes of investment in relation to certain other companies that were in the development stage and in need of capital. The Claimants refer to these companies as the “ Porton Portfolio Companies” and I will use the same term. This term refers to any companies in respect of which PCL sold shares where DLA Piper was involved in that sale.
The case before me today deals with an application for an order that:
(i) there is no legal professional privilege in respect of communications between DLA Piper and PCL and other members of that company's group, (collectively “ Porton” — a term which I will also use in relation to individual companies within that group who may have been in involved in the Enigma Investment Scheme or equivalent investment schemes in other Porton portfolio companies between 4 May 2004 and 29 July 2015); and that
(ii) the Second and Third Defendants should provide disclosure and inspection of all documents or notes of communications passing between DLA Piper and Porton and/or between either of them and (a) Porton Portfolio Companies and/or (b) actual or potential Investors in the Enigma Investment Scheme or equivalent investment schemes in other Porton portfolio companies between these dates.
This application is particularly important to the Claimants in this case as Enigma no longer holds its files relevant to these points and the First Defendant also claims to have lost much of his documentation. DLA Piper therefore is the only party left holding substantial contemporary documentation.
The basis for this application is that the Claimants consider that Mr Boulter and PCL are not entitled to legal professional privilege on the grounds of iniquity. The Claimants ask the court to base a finding in relation to iniquity on their contention that the Enigma Investment Scheme, and the similar arrangements made in respect of the other Porton Portfolio Companies, involved a fraud on the Investors that purchased shares from PCL.
The Claimants have helpfully provided a draft order that they invite the court to make. The Second and Third Defendants are neither resisting nor accepting the Claimants' argument but agree that if the court does find that legal professional privilege has been lost by reason of iniquity, that order is an appropriate one to make.
At this hearing the Claimants were represented by Mr Neil Kitchener KC and Mr Tom Foxton of counsel, and the Second and Third Defendants were represented by Patricia Robertson KC, and these counsel also provided helpful skeleton arguments.
The First Defendant did not attend this hearing, despite having notice of it. His solicitors, Kobre & Kim, wrote to the Claimants' solicitors, Macfarlanes on 26 May 2023 stating that, although Mr Boulter did not accept that there was any fraudulent conduct, he did not intend to play any substantive role in the hearing of the application.
Kobre & Kim had been copied into a significant amount of the correspondence prior to this application and Mr Boulter had ample opportunities to answer the allegations that form the basis of this application.
Mr Boulter has not asked for any adjournment and I see no reason not to proceed with this hearing, so I have seen no reason not to proceed with the hearing despite his not attending and not being represented here.
LEGAL PROFESSIONAL PRIVILEGE
The principles underlying legal professional privilege and the circumstances where this may be lost are well settled. I was referred by counsel amongst other cases to the summaries of the relevant legal principles by the Court of Appeal in Addlesee v Dentons Europe LLP [2020] EWHC 238 (CH) (“ Addlesee 1”); by Master Clark in relation to the same case at a later stage reported at 2020 EWHC 238 (Ch) (“ Addlesee 2”) and by Murray J in Al Sadeq v Dechert LLP & Ors [2023] EWHC 795 (KB) (“ Al Sadeq”).
For the present purposes, I will just highlight a few matters.
(i) The term legal professional privilege is used to encompass both advice privilege, which applies when legal advice is sought from a solicitor or barrister, and litigation privilege, which applies in relation to advice and materials in contemplation of or relating to the preparation for litigation. Slightly different rules apply in relation to the two different types of privilege. In the current case we are concerned only with legal advice privilege — the Second and Third Defendants proposed amendments to the proposed form of order before it got to the stage currently before the court to deal with this point and these proposed amendments were accepted by the Claimant.
(ii) The law jealously guards the principle of legal professional privilege since, in the words of Lord Hoffmann in R (Morgan, Grenfell & Co Limited) v Special Commissioner of Income Tax [2003] 1 AC 563 (HL) at [7], legal privilege is:
“… a fundamental human right long established in the common law. It is a necessary corollary of the right of any person to obtain skilled advice about the law. Such advice cannot be effectively obtained unless the client is able to put all the facts before the adviser without fear that...
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