Love v Fawcett & Anor

This is an application by the defendants for various orders, which are said to be appropriate as a result of the claimant having served three witness statements in these proceedings. The defendants are Mr Fawcett and Northam Worldwide Limited, to whom I will refer as Northam. The claimant is Mr Love. The application notice is dated 8^th April 2011, and refers to three witness statements. The first is by a Mr Ivan Barry; his statement is dated 1^st December 2010. Mr Barry is a solicitor with the firm Sharpe & Co. The second statement is by Andrew Reilly dated 29^th November 2010. The third statement is by the claimant himself, dated 1^st December 2010.

The defendants objected to parts of these witness statements by a letter dated 14^th January 2011 from their current solicitors to the solicitors for Mr Love. The solicitors for Mr Love replied promptly on 17^th January 2011, rejecting the suggested grounds of objection. Some time passed, but eventually this application notice was issued, as I have described, on 8^th April 2011. The application was heard before me, the hearing beginning on 20^th June 2011 and continuing today, 21^st June 2011.

This action is due to be tried in a trial window beginning on 4^th July 2011. That is under two weeks from today. The proximity of the hearing before me to the date of trial is unfortunate. No one suggests that the trial date should be vacated. When I decide what are the practical courses open to me in response to this application I will have to take into account the proximity of the trial date and the short period of time which elapses before the matter comes on for trial.

Some of the points which have been argued on this application are not free from difficulty. Ideally, I would have liked more time to consider the legal principles involved, but the parties need a decision and I must do my best to express my decision and my reasons for it.

I return to the relief sought by the application notice. The notice annexes a draft order, which the court is asked to make. As drafted the defendants sought an order that the entirety of the claim be struck out. Mr Moraes of counsel, who appeared before me on behalf of the defendants, does not pursue that head of relief and I need say no more about it. The second part of the order which is sought is that the entirety of the witness statement of Mr Barry be excluded or struck out. It was also explained in evidence in support of the application that the defendants would wish the court to make an order whereby Mr Barry should be debarred from coming to give evidence as a witness at this trial.

Paragraph 3 of the draft order identifies in the alternative to the earlier relief which I have described, the paragraphs of Mr Barry’s statement which it says should be excluded or struck out. Paragraphs 4 and 5 identify paragraphs in the statement of Mr Reilly and Mr Love respectively, which again it is said should be excluded or struck out. Paragraph 6 seeks an injunction restraining Mr Love from making use of confidential information arising from the retainer between Mr Barry of Sharpe & Co and Northam. Paragraph 7 seeks an order that there be delivery up of all documents and other records containing confidential information arising from the retainer of Mr Barry by Northam.

The principal issues which have been argued and on which I need to make a decision are as follows: (1) Were certain communications between the defendants and Mr Barry confidential so that they attracted legal professional privilege in this dispute or; were those communications not confidential so that: (a) Mr Barry was entitled to pass them on to Mr Love and (b) Mr Love was entitled to insist on Mr Barry passing them on to him so that (c) those communications were not subject to legal professional privilege in this dispute? (2) If the communications were the subject of legal professional privilege, have the defendants waived that privilege and if so what is the extent of the waiver? (3) Were certain negotiations between the parties without prejudice so that they may not be referred to at the trial of these proceedings? (4) If the negotiations were without prejudice have the parties waived the without prejudice privilege?

I will start by considering the question of confidentiality and privilege in relation to the communications between Mr Barry and the defendants. Some matters of fact are not seriously in dispute. It seems to be common ground that up to 21^st May 2007, Mr Barry was a solicitor acting for Mr Love. There is a dispute as to whether Mr Barry continued to be Mr Love’s solicitor after that date. Further, it is common ground that from June 2007 until a date that I need not specify, Mr Barry was acting as the solicitor for Northam.

Mr Warwick, counsel for Mr Love, submits as follows: (1) The retainer of Mr Barry from June 2007 onwards was a joint retainer by joint clients, Northam and Mr Love. (2) This was not a case of a sole retainer by Northam alone. (3) This was not a case of separate retainers by Northam and Mr Love. (4) In the alternative, if there was not a joint retainer, so that there was a sole retainer by Northam alone, it is submitted that Mr Love had a joint interest with Northam in the instructions to Mr Barry and the advice given by Mr Barry. (5) The result of the above is that communications between Mr Barry and Northam through Northam’s agents, such as Mr Fawcett and Mr Shaw, were not confidential as against Mr Love and are not privileged as against Mr Love in these proceedings.

Mr Moraes for the defendants joins issue with each step of that reasoning. Fortunately, there is no real disagreement about the underlying legal principles, although there is considerable disagreement about how those principles ought to be applied to the facts of this case.

Mr Warwick cited from The Law of Privilege by Mr Thanki, in particular chapter 6, which is headed “Joint and Common Interest Privilege.” In order to understand the distinctions which have been made in decided cases as analysed in the textbook, I think it is appropriate for me to read one or two passages from the textbook. Paragraph 6.01 refers to the concept of joint privilege. It says it can arise in two circumstances, either where there is a joint retainer of a single lawyer or a joint interest in the subject matter of the communication at the time the communication comes into existence. Paragraph 6.02 discusses the concept of a joint retainer and makes the point that there is no confidence between the two clients so that communications by one of them to the solicitor may be shared with the other client There being no confidence between them, there is no legal professional privilege that one can assert against the other. Paragraph 6.03 is in these terms:

“It will be a question of fact as to whether a solicitor is jointly acting for two parties. However, it is necessary to distinguish a joint retainer from three other situations where joint privilege will not arise.”

The textbook then identifies a number of alternative situations. The first is the separate retainer of a common solicitor. The second is consultation of a solicitor on an individual and exclusive basis and the third is the case of agency. I will read what is said about agency:

“If one party (party A) instructs a lawyer on behalf of another (party B) then party A is acting merely as an agent of party B. In such circumstances, a lawyer-client relationship will only exist between party B and the lawyer. Accordingly, party B will be able to maintain privilege against party A in respect of any independent communications it has with the lawyer to which party A is not privy. However, if parties A and B subsequently fall out, party B will not be able to maintain privilege in respect of communications to which party A was privy since such communications are not confidential from party A.

Paragraph 6.04 returns to the subject of the consequences of a joint retainer. Put shortly, if the two clients are A and B, A and B do not retain a confidence against one another and neither can assert privilege against the other in relation to any privileged communication arising out of the joint retainer. This means that if A and B subsequently fall out and sue one another, neither of them can claim privilege as against the other in respect of any documents created pursuant to the joint retainer. At paragraph 6.06 the textbook discusses the decision of the Court of Appeal in TSB Bank plc v. Robert Irving and Burns, reported at [2000] 2 AER 826. It is not necessary to analyse that decision in this judgment, indeed, the textbook goes so far as to be critical of the stated reasons, but not the result in that case. The point which was made in that case, however the analysis is expressed is that even when there is a joint retainer there may come a point in time when there is an actual conflict of interest between the two retained parties so that the lack of confidentiality between the parties comes to an end and a communication between one of them and the solicitor will again attract confidence and can be the subject of legal professional privilege.

The principles relating to a joint retainer appear to be relatively clear and well established. The principles in relation to joint interest appear also to be established, but they to some extent lack the clarity of the former principles. The difficulty is in knowing what is a joint interest and what fails to qualify as a joint interest. Paragraph 6.07 of the textbook reads as follows:

“Joint privilege can also arise where even though party A and party B have not jointly retained a lawyer (and only one of them is party to the relevant lawyer-client relationship), they have a joint interest in the subject matter of the communication. The defining characteristic of this aspect of joint privilege is that the joint interest must exist at the time that the communication comes into existence. So joint privilege will only arise in respect of a document created during the period when the joint interest subsists; in other words, the documents must have come into being for the furtherance of the joint purpose or interest.”

I can break off reading at that point and pick the matter up again at paragraph 6.08:

“If a joint interest exists then the same principles as those set out above in relation to joint retainers will apply. Accordingly, neither party can assert privilege as against the other in respect of communications coming into existence at the time the joint interest subsisted; hence, each party to the relationship can obtain disclosure of the other’s (otherwise privileged) documents so far as they concern the joint purpose or interest. However, both parties are entitled to maintain privilege as against the rest of the world. As with a joint retainer, the privilege is not lost simply because the parties subsequently fall out.”

Paragraph 6.09 is headed: “Examples of joint interests,” and it is in these terms:

“Whilst not a rigidly defined concept, common examples of where such a joint interest might arise are between:

a trustee and beneficiary;

a parent company and its wholly-owned subsidiary;

a company and its shareholders;

a company and its director, and

partners.”

The textbook then goes on by referring to a joint interest in this sense arising in a commercial context. An example is given of a joint venture and a reference is made to the case of CIA Barca de Panama v. George Wimpey & Co Limited [1080] 1 Lloyds Reports 598. There is also a helpful citation from an Australian case Yunghanns v. Elfic Pty Limited [2000] 1VR 92 at 104.

The textbook then in 6.12 has the heading: “Insufficient joint interests or a divergence of joint interests.” I will read this passage in extenso, it reads:

“As stated above, in order for a joint privilege to arise the joint interest must exist at the time that the communication comes into existence. If the parties subsequently fall out and sue one another, neither of them can claim privilege as against the other in respect of any documents that are caught by the joint privilege, as the original joint interest is not destroyed by a subsequent disagreement between the parties.

However, any documentation that comes into existence after a dispute arises between the parties, and thus at a time when the joint interest no longer subsists (and therefore outside the joint interest), will not be caught by the joint privilege. Therefore, a party will be able to assert privilege as against the other in relation to any such documentation, even if the latter has borne the expense of the communication. For example, privilege can be asserted for documents coming into existence in relation to hostile or adverse litigation between shareholders and the company, or communications concerning the directors in their personal capacity. Likewise, privilege can be asserted as against the beneficiary for communications between a trustee and his solicitor in relation to a dispute with the beneficiary or communications with the trustee not acting in that capacity. In a similar vein, advice obtained by a partner in dispute with his fellow partners in relation to his individual interests will be privileged as against the other partners.

Having identified with the assistance of the textbook the principles that I ought to apply, I now need to make my findings as to the underlying facts and the application of the principles to those facts. I find that from June 2007 Mr Barry was retained by Northam alone. From May 2007 there was no retainer of Mr Barry by Mr Love. This was not a case of a joint retainer. The fact that Mr Love acted as agent for Northam does not make it a case of a joint retainer by Northam and Mr Love. The retainer remains a sole retainer by the principal, Northam. The fact that Mr Love was expected to bear the costs of instructing Mr Barry is also not enough in my judgment, to make this case of a joint retainer. When I referred to the expectation that Mr Love was to bear the costs of instructing Mr Barry, that may or may not be a matter in dispute, but I am referring to the terms of the note dated 22^nd May 2007 and the way in which the question of legal costs was treated in a number of the loan schedules, which came into existence during subsequent negotiations between the parties. Further, the fact that Mr Love was interested in the grant of the lease of the premises to Gordon Ramsay Holdings Limited and also interested in a possible sale of the reversion on that lease does not of itself suffice to make Mr Love a client of Mr Barry under a joint retainer. My conclusion is therefore, this is not a case of a joint retainer.

The next question is whether Mr Love and Northam had a joint interest for present purposes. What are the relevant purposes behind this question? The relevant purpose, in my judgment, is to identify when a communication between Mr Barry and Northam is confidential to those two and when it is not confidential so that (in the latter case) Mr Barry is entitled to pass the information in question onto Mr Love and indeed Mr Love is entitled to have access to the matter communicated. If one puts the question in that way and focuses upon the purpose for which Mr Barry was instructed and the way in which Mr Love was or was not interested in that purpose, I make the following findings. Mr Love did have a joint interest with Northam in communications between Northam and Mr Barry for the purpose of the letting to Gordon Ramsay Holdings and of the purpose of the prospective sale of the reversion on the lease. Conversely, Mr Love did not have a joint interest, but rather a competing interest, in relation to communications between Northam and Mr Barry for the purpose of considering the financial relationship between Northam and Mr Love.

I should explain my reasons for those two contrasting conclusions. As to the joint interest, which I do find did exist for a certain purpose I put forward the following reasons. First, although the precise entitlement of Mr Love as against Northam is very much in dispute, I consider at this interlocutory stage that Mr Love has a strong prima facie case of entitlement to a share in the fruits of the development, so that his case for an entitlement to a share in the fruits of the development gives him an interest in the fruits of the development for present purposes. Secondly, the proposed letting and the proposed sale of the reversion were for the purpose of realising the fruits of the development. Thirdly, Mr Love was involved day to day in dealing with those matters and instructing the solicitors on behalf of Northam. Fourthly, the burden of the solicitor’s charges were expected to fall on Mr Love. Fifthly, although the precise line drawn by the authorities between cases of joint interest and other cases is not made wholly clear, I find that the facts of this case place this case on the side of the line where I should recognise the existence of a joint interest of Mr Love and Northam in relation to instructing the solicitor in respect of the letting and the sale of the development.

Why is there not a joint interest in relation to communications as to the financial dealings of Mr Love and Northam? Quite simply the financial relationship between Mr Love and Northam involves competing interests and not the same or a joint interest. Northam’s communications with Mr Barry in relation to how Northam should deal with Mr Love are to be expected to be confidential to Northam and Mr Barry. They are not to be automatically revealed by Mr Barry to Mr Love nor does Mr Love have an entitlement to be informed of those communications.

What is the result of these findings? Where there was a joint interest in the communications between Mr Barry and Mr Northam, those communications are not confidential and they cannot be kept from Mr Love. Further, the defendants cannot claim legal professional privilege against Mr Love in relation to such communications. Conversely, where there was not a joint interest in the communications between Mr Barry and the defendants, then those communications were confidential. The defendants are entitled to keep them from Mr Love; they are the subject of legal professional privilege in this litigation.

I turn then to consider Mr Barry’s statement. Mr Barry’s statement is a lengthy one and he refers in passing and in detail to many, many communications which took place between his clients, the defendants and/or Northam and himself. It is not always clear whether the comment or the matter of fact stated by Mr Barry depends upon a communication from his client or whether it is based on another source of information. But certain it is that there are many places in Mr Barry’s statement where he does draw upon communications from his client, which were confidential, which were not automatically to be passed on to Mr Love and where the defendants can claim legal professional privilege in relation to those communications. In short, Mr Barry’s statement does contain extensive reference to matters which were privileged, at any rate at one time.

Having made that finding I next consider the second principal issue: have the defendants waived privilege and if so what is the extent of the waiver? Applying conventional principles as to waiver, it seems to me to be clear and in the end it was not really disputed that the defendants have waived privilege in relation to the documents which are listed in the first defendant’s and in the second defendant’s lists of documents. Those documents as disclosed by the defendants have been inspected. Any privilege in them has been waived and that remains the position. They are therefore available to be used at the trial and questions can be asked about the content of those documents.

How extensive is the waiver? The short answer is that I am not able to say today how extensive the waiver has been. I can say that the privilege and the documents which have been listed has been waived. I am not able today to say whether the waiver goes further and extends to collateral or associated matters. The principles as to the more extensive waiver being a possibility were not explored in argument and I have not been shown a full set of the documents which were at one time privileged, but where privilege has now been waived. That means potentially there remains a difficulty in this area and in a moment I

There is one further matter before I indicate what should be done. Mr Warwick says that quite apart from the question of waiver this is a case where the defendants are not able to put forward a claim to legal professional privilege, because there is no legal professional privilege in iniquity. He cited the decision of the Court of Appeal in Barclays Bank plc v. Eustice [1995] 1 WLR 1238, which is an authority dealing with that subject and indeed where many of the earlier authorities were collected. I was shown in particular a passage in the judgment of Schiemann LJ at page 1249 C. What the Lord Justice said, referring to an earlier decision of Bingham LJ:

“In so doing he was recognising the effect of a line of cases which have established that advice sought or given for the purpose of effecting iniquity is not privileged.”

In my judgment this principle has no part to play in the present case, at any rate not in relation to the matters that have been debated on this application. There is simply no case that can be put or indeed has been put that the material which is otherwise privileged was brought into existence for a purpose of effecting iniquity. The criticism which Mr Warwick makes of the defendant’s conduct is not of that character. What is said on behalf of Mr Love is that the defence being run in this action is inequitable. That is not for me to decide. That will be investigated and determined at the trial. But even if Mr Love is right that the defence is an inequitable defence that does not mean that the communications about which there is a dispute today were brought into existence for the purpose of effecting iniquity. Indeed, Mr Love’s whole case now that he has seen those communications is not that they were brought into existence for the purpose of effecting iniquity; instead they were brought into existence for the purpose of discussing and giving effect to his entitlement. So I reject the argument based upon the absence of privilege in a case of iniquity.

That brings me to the question of what is to be done, in particular, what is to be done with the trial due to begin in under two weeks time. I have decided essentially two things. I have decided that certain communications between the solicitor and the defendants were the subject of legal professional privilege and I had attempted to define the category of such communications, but I have not attempted to draw up a list of the communications nor have I applied a blue pencil to Mr Barry’s witness statement to say which statements are permissible and which are not permissible. In addition to that finding, I have secondly found that that privilege has been waived to some extent, but that it is not possible today for me to define the outer limits of the waiver of privilege.

In my judgment I need to settle on a practical course which the parties can follow so that they will be ready for a trial and the trial judge will have less rather than more to decide in relation to any remaining dispute about the availability of legal professional privilege. Accordingly, I will direct that the following steps be taken. First, the claimant is to withdraw the entirety of Mr Barry’s statement from the documents which go before the trial judge. Secondly, the claimant has permission to serve a revised statement from Mr Barry, which removes all material in the category of originally privileged material I have described, that is without prejudice to what I will go on to say about a possible waiver of privilege. This first statement by Mr Barry is to stay away from the category of documents which were certainly at one time the subject of privilege. Thirdly, the claimant also has permission to serve a second statement from Mr Barry. This statement may set out material which was within my category of originally privileged material, but where the claimant contends there has been a waiver of privilege. This, of course, cannot contain privileged material where there is no contention as to a waiver of privilege.

I have to fix a date by which these two statements may be served if they are to be served. The date I have selected is 30^th June 2011, that is Thursday of next week. The statements are to be served by 12 noon, which will give the defendants an opportunity to consider their position. If there is a continuing dispute about the extent of the waiver, then I fear that will have to be resolved by the trial judge. I do not give any directions, which permit a hearing before myself or another judge in advance of the matter coming on for trial. That deals with the questions of legal professional privilege.

I can turn to the second group of issues, which concern the application of without prejudice privilege. The contention put forward by the defendants here is that certain negotiations between the parties as to the appropriate division of the fruits of the development were without prejudice and should not be referred to. In fact, although I have put the matter in absolute terms the defendant’s position on these negotiations is, I fear, much less clear. The defendants appear to accept that quite a lot of the negotiations can be referred to and documents that were brought into existence to set out proposals to be made in the negotiations can be referred to, but certain other, I fear, not clearly defined matters, are not to be referred to and are to be kept from the evidence at trial.

As I have stated there are essentially two issues, were the negotiations without prejudice and secondly, if they were without prejudice has the without prejudice privilege been lifted by the agreement or conduct of the parties. As to the first of these matters I comment as follows. The negotiations were not said to be without prejudice. Insofar as the negotiations were carried forward by documents the documents were not expressly without prejudice. Insofar as the negotiations took the form of oral discussions it did not occur to anyone to say that the matter was without prejudice. Those comments, of course, are not conclusive.

The question of when negotiations or discussions are to be treated as being without prejudice, even though no one has articulated that phrase, is considered in Phippson on Evidence, 17^th Ed, in particular at paragraphs 24.21 and 24.22. It said in the earlier paragraph:

“The starting point is the correspondence will only be protected by without prejudice privilege if it is written for the purpose of a genuine attempt to compromise a dispute between the parties. It is not a precondition that the correspondence bears the heading: “without prejudice.” If it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as general rule, not be admissible.”

The point is expanded on in paragraph 24.22. There it is described as being a difficult question, alternatively, a nice point and one where there is no easy rule. The textbook refers in a footnote to an unreported case Prudential Insurance Company of America v. Prudential Assurance Co. Limited [2003] EWCA Civ 1154 and a reported case, albeit reported under a different name, Barnetson v. Framlington Group Limited [2007] 1 WLR 2443. I was asked to consider both those cases, which went different ways. In the Prudential case the matter was held not to be without prejudice. In the Barnetson case the opposite result was reached. The principal judgment in Barnetson was given by Auld LJ and he summarised the correct approach to a question of this kind in paragraphs 33 and 34 in particular. In paragraph 33 he said this:

“It is undoubtedly a highly case sensitive question, or put another way, the dividing line may not always be clear. The various judicial pronouncements in the leading cases to which I have referred do not provide any precise pointers, and there are seemingly no other authorities directly in point.”

In this case, even if the precise test is not clear and is fact-sensitive, I have no hesitation in reaching the conclusion that the negotiations in question were not without prejudice. These were commercial negotiations to agree the financial terms which would apply and the result of applying those terms. I reach that conclusion simply by considering what is said in the evidence by both sides as to the content of the negotiations. I am encouraged to reach that conclusion by two other considerations. One is that Mr Fawcett, the first defendant, discusses these negotiations and at paragraphs 56 and 57 of his witness statement he expresses himself in a way which is incompatible with the submission being made that everyone understood that the negotiations were for the purpose of settling a legal dispute. Secondly, when the matter became more contentious in September 2009, when Mr Love went to solicitors Boodle Hatfield who wrote asserting his legal rights, there was a draft response prepared by Mr Barry, quite clearly on behalf of Northam, and in the draft response the solicitor added the words “Without prejudice.” Of course, that is not a conclusive matter, but it is an indicator that the legal adviser to the defendants knew well when to use the phrase “Without prejudice.” That phrase had not been suggested or used at an earlier point in the history. So those two matters do tend to support the conclusion which I have independently reached that these were not without prejudice negotiations.

The matter does not stop there. If I am wrong in that conclusion there is, in my judgment, a plain course of conduct between the two sides which amounts to a waiver of the without prejudice privilege, if any. The conduct evinces an intention that the negotiations should be referred to in the course of the proceedings. I am able to find that the parties have impliedly agreed that any pre-existing privilege is no longer to apply to the trial of these proceedings. In support of that conclusion I refer to, although I need not quote in detail, the pleadings that have been served by both the first defendant and the second defendant and the witness statement of Mr Fawcett. Those various documents, between them, refer to the content of the negotiations in question. It is incompatible with the course the defendants have themselves taken for them to assert that there is a without prejudice privilege which bars the claimant from referring to those negotiations.

I have now dealt with the principal issues. I have indicated the order I will make by way of directions in relation to the without prejudice part of the dispute. Apart from those directions I will make no other order on the application notice. I have held that it will potentially be the case that Mr Barry will not be able to say all the things in his evidence that he has so far put in his witness statement. I am not going to comment on how surprising or unsurprising it is that Mr Barry volunteered quite so much about what his client had told him on the matters in issue in these proceedings. If there is to be a criticism of Mr Barry that can be explored at the trial and the trial judge will form his view of that witness. However, I see no possible basis on which I could debar Mr Barry from giving relevant and admissible evidence. Mr Moraes did not cite any authority which gives me a power to prevent a trial judge hearing relevant and admissible evidence from a witness who it would be for the trial judge to assess. If I had such power I do not intend to exercise it. Mr Barry can be called and the trial judge will form his assessment of all of the evidence and make his findings.

Now that I have given my ruling on what is privileged and how the question of waiver is to be further determined, I do not see that this is a proper case for me to grant the injunction sought, nor an order for the delivery up of documents. This dispute is about what evidence can be tendered at the trial. I have done what I can, albeit in an incomplete way, to deal with that matter and that is, in my judgment, how this application should be disposed of.