Raiffeisen Bank International AG v Asia Coal Energy Ventures

JurisdictionEngland & Wales
JudgeMrs Justice Moulder
Judgment Date15 January 2019
Neutral Citation[2019] EWHC 3 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: CL-2018-000283
Date15 January 2019

[2019] EWHC 3 (Comm)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

COMMERCIAL COURT (QBD)

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

THE HONOURABLE Mrs Justice Moulder

Case No: CL-2018-000283

Between:
Raiffeisen Bank International AG
Claimant
and
(1) Asia Coal Energy Ventures
(2) Ash M Ur Ed T LLP
Defendants

Jeffrey Gruder QC, David Foxton QC and Michael d'Arcy (instructed by Stephenson Harwood LLP) for the Claimant

Matthew Hardwick QC (instructed by Holman Fenwick Willan LLP) for the First Defendant

David Wolfson QC and Michael Watkins (instructed by Mayer Brown International LLP) for the Second Defendant

Hearing date: 17 December 2018

Approved Judgment

Mrs Justice Moulder
1

This is the claimant's application dated 21 November 2018 for the second defendant to answer the claimant's Request for Further Information dated 10 July 2018 (the “First RFI”) and to give specific disclosure of certain classes of documents (the “Disclosure Application”). The claimant also makes a second application for the second defendant to answer the claimant's Request for Further Information dated 6 November 2018 (the “Second RFI”).

2

The claimant's application is supported by a witness statement dated 21 November 2018 of Ms Newman, partner in the firm of Stephenson Harwood LLP, solicitors for the claimant.

3

The second defendant, Ashurst LLP (“Ashurst”) has filed evidence in response in a witness statement of Mr Glassey dated 5 December 2018. Mr Glassey is a partner in the firm Mayer Brown International LLP, solicitors for the second defendant.

4

The applications which fall for determination do not concern the first defendant, Asia Coal Energy Ventures Ltd (“ACE”) and no submissions were advanced for ACE at the hearing of the applications.

Background

5

The claim in this matter by Raiffeisen Bank International AG (“RBI”) arises out of a proposed public takeover by ACE of a company, Asia Resource Minerals plc (“ARM”). RBI held 23.8% of the shares in ARM together with the benefit of certain loans and associated collateral.

6

The purchase by ACE of the ARM shares and the loans made by RBI was financed by PT Sinar Mas Multiartha TBK (“SM Multiartha”).

7

The purchase price for the assets was to be paid directly to RBI.

8

In the transaction ACE was represented by Holman Fenwick Willan, RBI was represented by Allen & Overy and SM Multiartha was represented by Ashurst.

9

A sale and purchase agreement dated 7 May 2015 was entered into between ACE as purchaser and RBI as seller (the “SPA”) in relation to the sale of the loans and ancillary rights. The SPA contemplated the parties agreeing an escrow arrangement (clause 4.1) pursuant to which the documents relating to the transfer of the loan assets and the maximum amount due to the seller ($85 million) would be held in escrow and released upon satisfaction of the conditions precedent to the sale under the SPA.

10

The SPA also acknowledged that the seller, RBI, had received from Ashurst a confirmation that Ashurst would hold $85 million in their client account pending the transfer to the escrow agent and had instructions to transfer that amount to the escrow agent upon signing of the escrow agreement.

11

Clause 4.2 of the SPA provided that if the escrow agreement was not entered into within 30 days of the SPA, the parties would discuss alternative arrangements to achieve the same commercial purpose.

12

As provided in the SPA, Ashurst issued a confirmation (the “Confirmation”) dated 7 May 2015 stating:

“We confirm that:

(a) we have been put in funds in an amount that is not less than US$85 million…; and

(b) we have irrevocable instructions as follows:

(i) to transfer the Escrow Amount to the Escrow Agent upon the signing of the Escrow Agreement in accordance with the terms thereof; and

(ii) in the event that the Escrow Agreement is not signed within 30 days of the date hereof, to continue to hold the Escrow Amount pending agreement by the Parties contemplated by clause 4.2…”

The Confirmation was expressed to be governed by English law.

13

The shares in ARM were transferred to ACE on 1 July 2015 and $50 million was paid. However the loans and “ancillary rights” intended to be sold as part of the deal were not transferred and a dispute arose. ACE did not complete the purchase and the payment of the balance of US$70 million was not made.

14

RBI in these proceedings brings a claim against ACE for breach of contract and against Ashurst for misrepresentation in respect of the Confirmation and breach of a duty of care to RBI.

15

Ashurst's defence is that it gave warranties that it had been put in funds and had instructions to transfer the funds to the escrow agent when the escrow agreement was signed, or if it was not signed, to hold the funds whilst the parties were seeking to agree an alternative i.e. whilst such agreement was “pending”. Ashurst says this meant that they would hold the funds until there was no realistic prospect of an agreement being reached.

16

Whilst counsel for the claimant made submissions on the construction of the Confirmation advanced by Ashurst and in particular, made reference to the evidence of the intended value of the Confirmation to RBI, this court cannot of course consider the merits of the competing arguments as to the construction of the Confirmation which is a matter for trial. The court also notes that the issue of whether Ashurst made a warranty or a representation is disputed. Accordingly references in this judgment to “representations” made by Ashurst are for convenience and should not be taken as expressing any view on the legal nature of the assurances in this regard.

Relevant legal principles applying to the applications

17

Pursuant to CPR 18.1 the court may order a party to clarify any matter which is in dispute or to give additional information in relation to any such matter, whether or not the matters are contained or referred to in a statement of case. PD18 paragraph 1.2 states that the request should be:

“strictly confined to matters which are reasonably necessary and proportionate to enable the first party to prepare his case or to understand the case he has to meet.”

18

An application for specific disclosure is made pursuant to CPR 31.12. The court has a discretion and in exercising the discretion will take into account all the circumstances of the case and the overriding objective. The court needs to satisfy itself that the documents are relevant and that they are or have been in the party's control or at least that there is a prima facie case that these requirements will be met.

19

In this case Ashurst assert that it is not entitled to disclose or offer inspection of the instructions received by Ashurst from SM Multiartha in respect of the Confirmation because such instructions are subject to legal advice privilege and the right to privilege cannot be overridden simply because the information could be relevant to the issues in dispute. It is submitted that equally Ashurst cannot be required to plead a case which sets out the substance of those instructions in a pleading.

The claim for privilege and confidentiality in relation to both the RFI and the Disclosure Application.

Relevant legal principles

20

It was, I believe, accepted for RBI that legal professional privilege where it applies is absolute: Three Rivers DC v Bank of England (No 6) [2005] 1 AC 610 at [25]. Submissions therefore made on behalf of RBI that went to the relevance of the information which was sought cannot affect the decision whether to order disclosure and/or a response to the information sought if privilege is established.

21

Legal professional privilege can be waived by the client but in this case the court was informed that SM Multiartha has refused Ashurst's request to disclose its instructions to Ashurst so there has been no express waiver.

22

The claim for privilege was advanced by Ashurst on the basis that it has a duty to claim privilege where it arguably exists: Nationwide Building Society v Various Solicitors [1999] PNLR 52 at 65. Accordingly Ashurst advanced its analysis as an officer of the court.

23

It was also common ground that legal advice privilege arises out of a relationship of confidence between lawyer and client. Unless the communication or document for which privilege is sought is a confidential one, there can be no question of legal advice privilege arising. The confidential character of the communication or document is not by itself enough to enable privilege to be claimed but is an essential requirement. ( Three Rivers ibid at [24])

24

As to the scope of legal advice privilege, Lord Scott of Foscote at [38] in Three Rivers cited with approval Taylor LJ in Balabel v Air India [1988] Ch 317 at 330, that for the purposes of attracting legal advice privilege

“legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context”

25

By its Disclosure Application RBI seeks disclosure and inspection of:

(a) any document containing the “irrevocable instructions” referred to in the Confirmation;

(b) any document containing any variation or change of the “irrevocable instructions”;

(c) the balance of Ashurst's client account into which the escrow amount referred to in the Confirmation was paid, from the date on which the escrow amount entered the account until the date on which the escrow amount left the account: and

(d) all instructions given to the individuals at Ashurst concerning what was to be done with the US$85 million including instructions concerning the transfer of the amount upon signing of the escrow agreement, concerning the basis on which the amount was to be held in the account if the escrow agreement was not signed and any instructions as to when and where the...

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