Fortress Value Recovery Fund I LLC and Others v Blue Skye Special Opportunies Fund LP (A Firm)and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke |
| Judgment Date | 23 January 2014 |
| Neutral Citation | [2014] EWHC 1052 (Comm) |
| Date | 23 January 2014 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2011 Folio 1565 |
[2014] EWHC 1052 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
7 Rolls Building
Fetter Lane
London
EC4A 1NL
Mr Justice Cooke
Case No: 2011 Folio 1565
Ewan McQuater QC, David QuestQC, Mr Richard HankeandMiriam Schmelzer (Instructed by Messrs Slaughter & May) appeared on behalf of the Claimants
Mark Hapgood QC, Alan RoxburghandMr Nicholas Saunders (Instructed by Signature Litigation LLP) appeared on behalf of the Defendants
Approved Judgment
Thursday, 23 January 2014
In considering this application by the claimants for disclosure on the basis of a collateral waiver of privilege, I bear in mind the complex nature of this dispute and the range of issues between the parties as helpfully summarised in the interlocutory judgment of Flaux J of 16 January 2013 in paragraphs 1 through to 26. In particular, I am conscious of the serious nature of the allegations made by the claimants in respect of unlawful means conspiracy and unlawful interference.
In paragraph 7 of that interlocutory judgment, Flaux J summarised the claimants' case by reference to Mr McQuater QC's skeleton argument in this way:
"The claimants' case in summary is that in the course of 2011 Mr Cerchione and Mr D'Avanzo, acting in concert with the other defendants, designed and implemented a dishonest scheme to reorganise the Blue Skye Fund and its assets. The purpose and effect of the scheme was to diminish or eliminate the claimants' rights and interests in the investment property and underlying Italian assets, to take the control and benefit of the assets for themselves, and to enable them and their associated entities to extract fees and other value from the assets without reference to or oversight from the claimants."
He then referred to the defendants' position in paragraph 22 where he says that there was an emphatic denial in the Defences that the reorganisation was pursuant to a dishonest scheme. The Defences set out in considerable detail how every aspect of the alleged scheme was undertaken honestly and with a genuine commercial purpose and how the claimants were aware of what was going on. He said it was not necessary to refer to those Defences at length, as indeed it is not now, but it is contended that the transfer of the Italian assets to Blue Skye SCS was necessary to satisfy regulatory requirements under Italian banking law relating to persons holding controlling interests in financial intermediaries, which had been raised in discussions with the Bank of Italy during 2010.
The defendants say that they were concerned that Cypress Way and ZBS would not satisfy the "integrity" requirements because they were based in the Cayman Islands and Cypress Way had refused to disclose information concerning its ultimate beneficial ownership. It is in the context of the transfer of the Italian assets out of Blue Skye Fund's control and ultimately into Blue Skye SCS's control that the issue of waiver of privilege arises.
In a letter of 19 July 2013, the defendants' solicitors provided copies of various memoranda and letters of legal advice that had been obtained from Capilano, Legance and PwC. Inspection of those copies was stated to be on the basis of a limited waiver of privilege and the justification for and scope of the waiver was described in the following way:
"Mr Cerchione and Mr D'Avanzo believed the reorganisation to be necessary [in order to avoid the rejection, or improve the chance of avoiding the rejection, of Beta Skye's application for Article 107 registration] and proposed and implemented it for that reason …
Our clients' understanding at the material time of the nature and extent of the difficulties presented to Beta Skye's Article 107 application, under Italian law and regulation, by its existing structure of ownership and control, and of the relevant powers and/or practices of the Bank of Italy is therefore an important issue in these proceedings.
As you know, in February and March 2011, our clients received Italian legal advice from Capolino … Legance and PwC Italy which contributed to their understanding of these matters. The relevant advice from these advisers was as follows …"
Then there is reference to it and copies of documents which are referred to.
"For the avoidance of doubt, lists of whole of the privileged material relevant to our clients' contemporaneous understanding of the matters to which we have referred above. Our clients do not waive privilege in any other material."
The defendants thus put in issue the following. First, the second and third defendants' belief in the necessity of the reorganisation in the context of the Beta Skye Article 107 application for registration as a financial intermediary with a financial turnover above a specified figure. Secondly, the understanding of the second and third defendants of the nature and extent of the difficulties in the way of Beta Skye's Article 107 application as a result of the foreign ownership of Cypress Way, a company in the investment structure. Thirdly, the contribution of the disclosed advice from Capilano, Legance and PwC to that understanding.
The letter stated in terms that waiver of privilege related to the defendants' contemporaneous understanding and nothing else. This was repeated in a letter of 5 September 2013 and has been expressed in the same way by Miss Wicker in her witness statement before the court.
The claimants, however, through their solicitors, sought wider disclosure of privileged material in relation to the issue of the second and third defendants' belief in the necessity of reorganisation on the basis of such advice. But the defendants' response was to...
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...at §§16 – 19, 22 and 27: Fortress Value Recovery Fund 1 LLC & Others v Blue Skye Special Opportunities Fund LP (a firm) & Others [2014] EWHC 1052 (Comm) at §§1 – 6, 8, 11, 14 – 18, 20 and 23 (and in particular §§18 and 20); Holyoake v. Candy and others [2017] EWHC 387 (Ch) at §§1 to 8, 12,......