Petition Of The Scottish Lion Insurance Company Limited For An Order Under Section 896 Of The Companies Act 2006
| Jurisdiction | Scotland |
| Judge | Lord Glennie |
| Neutral Citation | [2010] CSOH 87 |
| Year | 2006 |
| Published date | 08 July 2010 |
| Date | 08 July 2010 |
| Court | Court of Session |
| Docket Number | P1981/08 |
| OUTER HOUSE, COURT OF SESSION [2010] CSOH 87 | |
| P1981/08 | OPINION OF LORD GLENNIE in the Petition THE SCOTTISH LION INSURANCE COMPANY LIMITED Petitioner; for an order under Section 896 of the Companies Act 2006 and for sanction of a Scheme of Arrangement under Section 899 of the Companies Act 2006 ________________ |
Pursuer: Howie QC; Morton Fraser LLP
Defender: McNeill QC, Munro; Simpson & Marwick
Noters: Hanretty QC, Ross; Dundas & Wilson
8 July 2010
Introduction
[1] The issue before the court raises a short but important question relating to waiver of privilege upon which, so far as the researches of counsel could reveal, there is no direct authority. It arises in the context of applications by the petitioners for orders under sections 896 and 899 of the Companies Act 2006 ("the Act").
Background
[2] The detailed background is set out in paras [2]-[32] of my earlier Opinion, reported at 2010 SLT 100. That decision was overturned in the Inner House on one of the two points argued before me, but not so as to cast doubt upon that summary of the background: see 2010 SLT 459.
[3] Briefly, the position is as follows. The petitioners seek sanction of a scheme of arrangement under section 899 of the Act. In terms of sub-section (1), the court may sanction the scheme if the scheme has the agreement of a majority in number of the creditors (or each class of creditors), that majority representing at least 75% in value of the creditors (or class of creditors) present and voting either in person or by proxy at a meeting or meetings summoned under section 896. The figures for the required majorities are important. The scheme needs the agreement of (a) a majority in number of the creditors in each particular class and (b) 75% in value of those creditors. The ascertainment of a "majority in number" may give rise to disputes if a person claiming to be a creditor has his claim downgraded to nil for voting purposes. However, there are potentially greater difficulties in ascertaining whether the majority in number represents 75% by value of the creditors. It is obvious that the ascertainment of whether the requisite majorities, and particularly the majority of 75% in value, have been achieved involves some mechanism or process for valuing the claims presented by each creditor.
[4] Meetings under section 896 were summoned pursuant to an order of the court dated 15 December 2008. There were two separate meetings of creditors, the first for those with non-IBNR claims and the second for those with IBNR claims. IBNR means "incurred but not reported". Creditors falling into both categories were entitled to participate in each meeting to the extent that their claims fell into the relevant category. The chairman of the meetings reported to the court on the outcome. The detailed figures reported by him are set out in paras [27]-[28] of my earlier Opinion. In short, he found that a majority in number of the creditors voting at each meeting voted in favour of the scheme, the figures being 78% for the first meeting (non-IBNR) and 61% for the second meeting (IBNR). On the basis of his assessment of the value of the creditors' claims in accordance with the interlocutor of 15 December 2008, those numerical majorities in favour of the scheme represented 89% in value at the first meeting (non-IBNR) and 97% in value at the second meeting (IBNR). However, in an Appendix to his report he also set out the figures as they would have been had the claims submitted been accepted at face value. On this basis, the figures for the first meeting (non-IBNR) would have shown 71% in number of the creditors voting in favour of the scheme, representing 72% in value, while those for the second meeting (IBNR) would have been 56% in number and only 35% in value. Accordingly, had the claims submitted been accepted at face value, both meetings would have achieved the requisite majority in number in favour of the scheme but would have failed to achieve the required 75% in value, albeit only narrowly so far as the first (non-IBNR) meeting is concerned.
[5] The respondents oppose the grant of sanction to the scheme. They ask the court to exercise its discretion against sanctioning it. More fundamentally, they challenge the chairman's report that the scheme achieved the required majorities both in number and in value at both meetings. The principle attack is on the figures for the majorities by value. The grounds of challenge are set out in more detail in my earlier Opinion, but for present purposes it is sufficient to note that they challenge the methodology used in the assessment of the value of claims and raise questions as to the consistency of application of the methodology between the claims submitted by supporting and opposing creditors. In my earlier Opinion I held that the respondents were entitled to mount such a challenge, and that part of my decision was not placed under review in the Inner House: see 2010 SLT 459 at para [6].
[6] To make an effective challenge, the respondents need to analyse not only the way in which the value of their own claims was assessed but also the way in the value was given to the claims of other creditors, particularly those who voted in favour of the scheme. They therefore require to have access inter alia not only to the documentation submitted in support of their own claims (which they have) but also (i) to the documentation submitted by other creditors in support of their claims, and (ii) to the workings showing the methodology applied to assessing the values of claims submitted, and how that methodology was applied to each case; and they need to be able to show their documentation to their expert advisers.
[7] The petitioners correctly anticipated that issues of confidentiality might arise and a detailed agreement was worked out providing a mechanism by which steps could be taken to protect that confidentiality. On 10 July 2009 I ordered production by the petitioners of documents identified in a Specification of Documents lodged by the respondents on the terms of that agreement, which terms were set out in the interlocutor of that date.
[8] The order for production (or notice of its terms) was, as I understand it, intimated by the petitioners to some or all of the creditors who had submitted claims for voting purposes. This prompted an application by the Noters, who (so great is their concern about confidentiality) have been referred to before the court only as Creditors 59, 105 and 106. A note of their identities has been lodged in process in sealed envelopes. They appeared by counsel to seek to prevent the production by the petitioners of some or all of the documents lodged in support of their claims. In addition to claiming confidentiality, they have put forward a claim for legal professional privilege. As a result of their intervention, on 25 August 2009 the interlocutor of 10 July 2009 was varied in terms which allowed the petitioners to lodge the documentation relating to the Noters' claims in process in encrypted form on computer disk. A further interlocutor of 7 September 2009 appointed the Noters to lodge in process a schedule of all the documents contained on the disk, identifying those documents in respect of which legal professional privilege was claimed and the basis of such claim. That has been done.
[9] This process of dealing with this issue was interrupted when the case went to the Inner House but has now resumed.
The claim for privilege
[10] In response to an interlocutor of 28 May 2010, the Noters lodged in process a "Summary Note in relation to privilege" setting out the basis upon which privilege was asserted by them. By way of background, they explained that the documents contained material which had a very high degree of commercial sensitivity. They were submitted to the petitioners subject to non-disclosure and confidentiality agreements ("the confidentiality agreements") between them and the petitioners, those confidentiality agreements reinforcing the existence of a "common interest" between them. On this basis, they contended that the documents were protected by (a) common interest privilege and (b) legal professional privilege, the latter being divided into (i) legal advice privilege and (ii) litigation privilege (post litem motam), both of which applied in the present case. Details of their contentions under these heads are set out in the Summary Note. As regards common interest privilege, it is pointed out that the relationship between the petitioners and the Noters was one of insurer and assured, that the documents in the hands of the Noters are both confidential and privileged, that the petitioners have a common interest with the Noters in the receipt of those documents and that, therefore, the Noters' privilege in those documents subsists notwithstanding that they are in the hands of the petitioners. As regards legal advice privilege, it is said that the documents contain information and advice prepared by or at the direction of the Noters' lawyers, acting as lawyers, within the ambit of the remarks of Lord Carswell in Three Rivers DC v. Bank of England (No. 6) [2005] 1 AC 610:
"... all communications between a solicitor and his client relating to a transaction to which the solicitor has been instructed for the purpose of obtaining legal advice will be privileged, notwithstanding that they do not contain advice on matters of law or construction, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser of his client."
As regards litigation privilege, they say that the purpose of submitting the documents was to ensure both proper valuation within the proposed scheme of arrangement and the fairness of the voting procedures as between and among the various creditors. But for the proposed a scheme of arrangement, the petitioners would not have required the documents. The scheme required litigation in...
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