Henderson & Jones Ltd v David Jason Ross
| Jurisdiction | England & Wales |
| Judge | Mr Recorder Richard Smith |
| Judgment Date | 05 October 2022 |
| Neutral Citation | [2022] EWHC 2560 (Ch) |
| Docket Number | Claim No BL-2020-001435 |
| Court | Chancery Division |
| Year | 2022 |
[2022] EWHC 2560 (Ch)
Mr Recorder Richard Smith
(Sitting as a Judge of the Chancery Division)
Claim No BL-2020-001435
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
BUSINESS LIST (ChD)
Jeffery Onions KC, Hugh Sims KC, Stefan Ramel and Dan Butler (instructed by Harrison Clark Rickersbys, Inc. Spreicher Grier) for the Claimant
Adam Kramer KC and Hannah Glover (instructed by Addleshaw Goddard LLP) for the Fifth Defendant
APPROVED JUDGMENT
Hearing date: 5 October 2022
This judgment was handed down remotely by circulation to the parties' representatives by email and release to the National Archives. The date and time for hand-down is deemed to be 12 October 2022 at 10.30 am.
Introduction
On 5 October 2022, I heard the pre-trial review in this matter ( PTR) and made a series of orders for trial. That trial is now fixed to start on 3 November 2022 (with my pre-reading), albeit in earnest on 9 November (with oral openings). The length of trial, including pre-reading, is 18 days. I am grateful to the parties for their co-operation at the PTR.
On the same day, I also heard an application as between the Claimant and the Fifth Defendant, Barclays Bank plc ( Barclays), by which the former sought orders that:-
(a) having waived privilege therein, Barclays produce all documents involving Eversheds previously withheld on privilege grounds; and
(b) Barclays answer Request 7 of the Claimant's Request for Further Information dated 28 February 2022 ( RFI).
I am also grateful to the parties for their written and oral submissions on the applications. These were of considerable assistance.
The claim
The claim concerns a restructure of the Hospital Medical Group Limited ( Company) which took place from 30 November 2012. On 9 February 2016, the Company was placed into creditors' voluntary liquidation. Barclays was the Company's bank and held security over its assets, including a legal charge over property affected by the restructure. The Claimant (as assignee of the Company's relevant claims) alleges that:-
(a) the transactions executed as part of the restructure were unlawful distributions and transactions at an undervalue intended to defraud creditors;
(b) the First to Third Defendants acted in breach of fiduciary and other duties, including by causing the Company to enter into the restructure transactions and causing the Company's assets to be transferred to other group companies for insufficient consideration; and
(c) Barclays assisted in the breach of those duties, including by agreeing the restructure, permitting the transactions to proceed and by lending to the new trading company.
The Claimant also alleges that Barclays' assistance was dishonest in that Mr Sweeney, a director of Barclays' business support unit:-
(a) knew that the transactions were being made at an undervalue and that the restructure would leave the Company exposed to its remaining creditors but with no assets other than an insufficient intercompany balance from its parent company;
(b) did not act as an honest person would have acted in that he facilitated, participated in, and benefitted from, transactions that he knew were intended to defraud creditors and/or unlawful distributions and/or in breach of the directors' duties to the Company;
(c) had actual knowledge or targeted suspicion that the transactions were liable to avoidance as (i) being at an undervalue (ii) defrauding creditors (iii) an unlawful distribution and/or return of capital and/or (iv) a breach of the duties by the Company's directors; and/or
(d) suspected wrongdoing by the Company and its directors.
The Claimant alleges, in particular, that, because Mr Sweeney was directed to consideration of the balance sheets showing how the proposed restructure would work, he was aware that its intended effect was to (i) significantly decrease the net assets of the Company (ii) waive significant intercompany balances and (iii) declare a dividend of £6 million, at the same time leaving the Company with liabilities to creditors. The above allegations are also said to found a claim in unlawful conspiracy against all Defendants.
Barclays denies the allegations of dishonest assistance, pleading that Mr Sweeney did not know or suspect that any directors were breaching fiduciary or other duties and that he “ did not know or suspect that any transfers and/or any movements in intercompany balances… were at an undervalue… or unlawful… nor did he know about or suspect any reduction or intended reduction in the Company's net asset position”.
The applications
Barclays gave disclosure on 30 July 2021, stating in its disclosure certificate that it had withheld certain communications on privilege grounds. Barclays has since served the witness statement of Mr Sweeney in which he refers to Eversheds' role as Barclays' legal adviser and states, in the context of the dishonest assistance allegations, that there was “ nothing to put me on alert”. He also refers to an e-mail of advice he received from Mr Hill of Eversheds on 26 October 2012. Mr Sweeney says he understands the e-mail to be privileged. However, even though attached, he denies the Claimant's assertion that the e-mail “ referred to” the balance sheets. That e-mail was sent after Eversheds had raised issues concerning the restructure, following which, Mr Sweeney himself made enquiries of the Company.
The Claimant says that, in relation to his admitted communications with Eversheds, when Mr Sweeney's references in his statement to the role of Eversheds and its legal advice are considered as a whole and in proper context, there has been a waiver of privilege. Mr Sweeney's evidence that nothing put him “ on alert” must include the contents of the legal advice he received. The issue of Mr Sweeney's knowledge, and what did, or should have, put him “ on alert” cannot be fairly determined without disclosure of the legal advice. The Claimant now seeks such disclosure. Barclays resists the application, saying that there has been no waiver.
The Claimant also applies for an order, pursuant to CPR, Part 18, that Barclays provide the further information sought in Request 7 of the RFI on the basis that the allegations relating to Barclays' knowledge of the restructure arise in part from the e-mail from Eversheds to Mr Sweeney attaching the balance sheets. In response to the Claimant's Re-amended Particulars of Claim ( PoC), Barclays denied in its amended Defence ( Defence) that the e-mail “ referred to” those balance sheets. In light of that denial, the Claimant asked Barclays to ‘clarify’ whether its understanding of “ referred to” was limited to an express reference to the balance sheets or whether that also included any reference to their contents. Barclays has refused to answer this, including on the basis the further information sought is privileged.
Waiver of privilege — legal principles
The parties referred me to various authorities but the relevant principles were perhaps most usefully encapsulated in the three cases discussed below. In PCP Capital Partners LLP v Barclays Bank plc [2020] EWCH 1393 (Comm), Waksman J identified (at [47]) the following overarching points:-
(a) Legal professional privilege is a fundamental right of the client whose privilege it is. The loss of that right through waiver is therefore carefully controlled;
(b) Generally, privileged documents cannot be ordered to be disclosed by the party whose privilege it is unless as a result of waiver;
(c) Absent waiver, the fact that such documents might be highly relevant does not entail their production; and
(d) Applications for documents based on waiver of privilege entail at least the following two questions:-
(i) Has there been a waiver of privilege?
(ii) If so, is it appropriate to order production of privileged documents other than to which reference has been made as the foundation of the waiver?
Waksman J also explained (at [48–49]) that it was not easy to find a “ succinct and clear definition” of when waiver occurs beyond general statements that the waiving party has deployed the documents in some way as part of its case. However, on any view (i) reference to the legal advice must be sufficient and (ii) the waiving party must rely on that reference in some way to support or advance his case on an issue the Court has to decide. A purely ‘narrative reference’ to the giving of legal advice does not constitute waiver because there is no reliance upon it in relation to an issue in the case. Nor does a mere reference to the fact of legal advice and the entry into the contract the next day. If, however, the party refers to having entered into the contract “ as a result of the advice”, there will be waiver.
Waksman J also considered (at [51–60]) the “ vexed question” of waiver not arising if the reference is to the effect of the legal advice as opposed to its content. After summarising the related ‘judicial disquiet’, he considered the correct approach to the distinction in determining whether there had been a waiver. That distinction should not be applied “ mechanistically” rather than viewed through the prism of (i) whether there had been reliance on the privileged material adverted to (ii) the purpose of the reliance and (iii) the particular context of the case in question. This is an acutely fact-sensitive exercise and waiver may yet occur where only the conclusion of the legal advice is stated, as opposed to the detail.
In this context, Waksman J referred (as did the parties to me) to Digicel v Cable & Wireless [2009] EWHC 1437 in which there was a real issue as to what, if...
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