Scottish Lion Insurance Company Ltd v Goodrich Corporation and Others [Court of Session Inner House Extra Division]
| Jurisdiction | Scotland |
| Judgment Date | 08 March 2011 |
| Neutral Citation | [2011] CSIH 18 |
| Date | 08 March 2011 |
| Court | Court of Session (Inner House) |
| Docket Number | No 39 |
Court of Session Inner House Extra Division
Lord Reed, Lord Hardie, Lady Dorrian
Company - Arrangement proposed between company and creditors - Legal professional privilege - Waiver - Creditors submitting privileged documents to company for the purpose of valuing creditors' votes at creditors' meeting fixed in relation to proposed arrangement between company and creditors - Whether creditors waiving right to object to disclosure of documents for purpose of assessing whether court had jurisdiction to grant application and whether sanction ought to be granted - Companies Act 2006 (cap 46), sec 899
Process - Recovery of documents - Privilege - Legal professional privilege - Waiver - Creditors submitting privileged documents to company for the purpose of valuing creditors' votes at creditors' meeting fixed in relation to proposed arrangement between company and creditors - Whether creditors waiving right to object to disclosure of documents for purpose of assessing whether court had jurisdiction to grant application and whether sanction ought to be granted - Companies Act 2006 (cap 46), sec 899
The Companies Act 2006 (cap 46) contains provisions which apply where a compromise or arrangement is proposed between a company and its creditors, or any class of them, or its members, or any class of them. Section 896 provides, inter alia, that the court may, on an application by the company, order a meeting of the creditors or class of creditors, or of the members or class of members, to be summoned in such manner as the court directs. Section 899 provides, inter alia, "(1) If a majority in number representing 75% in value of the creditors or class of creditors or members or class of members (as the case may be), present and voting either in person or by proxy at the meeting summoned under section 896, agree a compromise or arrangement, the court may, on an application under this section, sanction the compromise or arrangement. … (3) A compromise or agreement sanctioned by the court is binding on- (a) all creditors or the class of creditors or on the members or class of members (as the case may be), and (b) the company".
The petitioner petitioned the court for an order under sec 896 for meetings of creditors and for an order under sec 899 for sanction of a scheme of arrangement. The court ordered meetings at which the creditors cast their votes. Following the meetings, the votes were given a weighting according to the value placed upon each creditor's claims against the petitioner, on the basis that one vote would be allocated for each £1 Sterling which a claim was worth. For the purpose of that valuation exercise, creditors wishing to vote were invited to submit documentation supporting their valuation of their claims. The valuation exercise had a considerable effect upon the result of the voting: in broad terms, the claims of creditors who voted in favour of the scheme were attributed a relatively high value compared with the claims of creditors who voted against it. The respondent creditors opposed the application for sanction on grounds relating in part to the valuation process. In particular the respondents raised issues as to whether the voting majorities required by sec 899 were actually attained, so as to confer jurisdiction on the court to sanction the arrangement, and as to whether in any event the arrangement, which provided for the valuation of claims on a broadly similar basis, was so unfair to creditors such as the respondents that it should not be sanctioned. The respondents averred that they had been hampered by a lack of access to the materials necessary to undertake a full and detailed analysis of the methods and assumptions employed by the scheme advisers and independent vote assessor, including the materials submitted by scheme creditors. In particular the respondents noted that the votes of scheme creditors 44, 59, 105 and 106, all of which were cast in favour of the scheme, were accepted at 100 per cent of their claimed value, and that in the absence of underlying data it was impossible to identify what distinguished these votes from others such that it was appropriate to apply no discount. Creditors 44, 59, 105 and 106 were among the largest of all creditors once the valuation process had been completed. The Lord Ordinary granted the respondents' application for the production of the documentation which was submitted to the petitioner by certain creditors in support of the valuation of their claims, subject to conditions designed to protect confidentiality. Creditors 59, 105 and 106 applied to the court by note, objecting to the production of some of the documents on the ground of legal professional privilege. The Lord Ordinary upheld the respondents' contention that any privilege had been waived. The noters reclaimed with leave.
Held that: (1) the confidentiality agreements had no bearing on the case since they were not concerned with the provision of documents for the purpose of voting on the petitioner's proposed scheme of arrangement (paras 54, 55); (2) when the noters submitted privileged documents to the petitioner with the intention that they should be relied on for the purpose of valuing the noters' votes, they must be taken to have done so in the knowledge that the disclosure of those documents to the court, to the reporter, and to creditors who opposed the granting of the application under sec 899, might be necessary to satisfy the court that it had jurisdiction to grant the application and that sanction ought to be granted, and the noters must be taken to have waived any right to object to the disclosure of the documents in question in the present proceedings, to the extent that disclosure was necessary to enable the court to deal with the petitioner's application and the respondents' answers (paras 59-62); and reclaiming motion refused.
Observed that: (1) a decision that the documents could be used at the hearing of the sec 899 application and the respondents' answers did not infer any wider waiver of privilege, let alone the loss of privilege (para 63); (2) the confidentiality of the documents should be protected so far as that was consistent with the use which required to be made of them in the proceedings (para 64); (3) in the unusual circumstances of the case it was proper that the identities of the noters should be withheld (para 65).
Scottish Lion Insurance co ltd presented a petition to the Court of Session seeking an order under sec 896 of the Companies Act 2006 for meetings of creditors and for an order under sec 899 for sanction of a scheme of arrangement. On 15 December 2008 the Lord Ordinary (Glennie) ordered two separate meetings of creditors. Goodrich Corporation and others lodged answers to the petition. The cause called before the Lord Ordinary for a debate, on 7 to 9 July 2009, when the Lord Ordinary made avizandum.
On 10 July 2009 the Lord Ordinary granted the respondents' motion for the production of certain documents. The petitioners intimated that order to various creditors. Creditors 59, 105 and 106, companies domiciled in the United States of America, applied to the court by note seeking to make submissions relating to disclosure of the materials. On 25 August 2009 the Lord Ordinary varied the interlocutor in terms which allowed the petitioner to lodge the documentation relating to the noters' claims in encrypted form on computer disks. On 7 September 2009 the Lord Ordinary appointed the noters to lodge a schedule of the documents contained on the disks, identifying those documents in respect of which legal professional privilege was claimed.
On 10 September 2009 the Lord Ordinary issued his opinion on the issues which had been discussed at the hearing in July, and on 16 October 2009 dismissed the petition ([2009] CSOH 127). The petitioners reclaimed. The cause called before the First Division (Lord President (Hamilton), Lord Reed and Lord Mackay of Drumadoon), for a hearing on the summar roll, on 1 to 4 December 2009. At advising, on 29 January 2010, the court allowed the reclaiming motion, recalled the interlocutor of 16 October 2009, and remitted to the Lord Ordinary for further procedure ([2010] CSIH 6; 2010 SC 349). On 24 March 2010 the court refused the respondents' motion for leave to appeal to the Supreme Court. On 28 April 2010 the First Division determined the expenses ([2010] CSIH 34).
On 28 May 2010 the Lord Ordinary ordered the noters to lodge in process a summary note setting out the basis upon which privilege was asserted by them. A hearing on the question of waiver of privilege proceeded before the Lord Ordinary, on 11 June 2010. On 8 July 2010 the Lord Ordinary issued an opinion, and on 7 September 2010 repelled the noters' claims to privilege, remitted to a commissioner and granted the noters' motion for leave to reclaim ([2010] CSOH 87). The noters reclaimed with leave.
Cases referred to:
Armia Ltd v Daejan Developments LtdSC 1979 SC (HL) 56; 1979 SLT 147
B v Auckland District Law Society and anr sub nom Russell McVeagh McKenzie Bartleet & Co v Auckland District Law SocietyUNKELRWLRUNK [2003] UKPC 38; [2003] 2 AC 736; [2003] 3 WLR 859; [2004] 4 All ER 269
British Aviation Insurance Co Ltd (Re)UNKUNK [2005] EWHC 1621; [2006] BCC 14; [2006] 1 BCLC 665; [2010 Lloyd's Rep IR 254
British Coal Corp v Dennis Rye Ltd (No 2)WLRUNK [1988] 1 WLR 1113; [1988] 3 All ER 816
Fyffes plc v DCC plcUNK [2005] IESC 3
Goldberg v NgUNKUNKUNKUNK [1995] HCA 39; (1995) 185 CLR 83; 69 ALJR 919; 132 ALR 57
Goldman v HesperWLRUNKFLR [1988] 1 WLR 1238; [1988] 3 All ER 97; [1989] 1 FLR 195
Gotha City v Sotheby'sWLR [1998] 1 WLR 114; (1997) 94 (30) LSG 28; 141 SJLB 152
Great Atlantic Insurance Co v Home Insurance Co and ors sub nom Great Atlantic Insurance Co v American Foreign Insurance Association; Great Atlantic Insurance Co v CE Heath & Co (International); Great...
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