England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BEFORE THE HON. MR JUSTICE NUGEE
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF SPARTAN CAPITAL LIMITED
AND IN THE MATTER OF THE INSOLVANCY ACT 1986
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
DERIVATIVE CLAIM

		16/12/2016

Mr Justice Nugee:

Introduction

1. This judgment addresses a number of applications which were made in the course of the third case management conference in these proceedings. The background is well known to the parties and does not need to be set out in detail. There are three sets of proceedings before the Court which are due to be heard together at a trial in May 2017. For present purposes the most directly relevant of the three proceedings is what has been variously described as the Part 7 proceedings or as the Sir Owen / Kea proceedings. This is a claim by Sir Owen Glenn ("Sir Owen") and Kea Investments Limited ("Kea"), a company now wholly owned by Sir Owen but at the material time owned by an offshore trust in Nevis called the Corona Trust, for relief in relation to transactions entered into by Kea which are said to have been entered into as a result of fraudulent misrepresentations or breaches of fiduciary duty. In these proceedings Mr Eric Watson is the first defendant and Novatrust Limited is the second defendant. In this judgment I will refer to Sir Owen and Kea as "the Claimants" and to Mr Watson and Novatrust as "the Defendants".
2. The present applications are:

(1) An application by the Defendants designed to enable them to speak to a prospective witness, Mr David Miller, about certain topics.

(2) A question as to the form of questions to be put to the US tax law experts.

(3) An application by Novatrust for certain specific disclosure.

The Miller topics

3. Mr Miller is introduced in the Particulars of Claim in the Sir Owen / Kea proceedings as follows:

"3.1 The Corona Trust was declared by Pizarro Company Limited ("Pizarro"), a Nevis company, by a deed of trust dated 12 February 2009. Pizarro, which became the sole trustee of the Corona Trust, was ultimately beneficially owned and controlled by a Mr Peter Dickson ("Mr Dickson"). The Protector of the Corona Trust was Mr David Miller ("Mr Miller"), who had been an employee and close friend and adviser of Sir Owen for about 30 years. Mr Miller was also the "policy director" of Pizarro. Sir Owen was not a named beneficiary of the Corona Trust (though the Corona Trust contained provisions whereby he could be added as a beneficiary).

3.2 On 12 February 2009 Pizarro also declared a trust called the Regency Trust. Mr Miller was also the protector of the Regency Trust. The Regency Trust contained extensive powers reserved to Sir Owen, including the power to revoke the Regency Trust and to re-vest its assets in Sir Owen.

…

3.5 On 31 October 2011, and without the knowledge of Sir Owen, Mr Miller and Mr Dickson caused the Regency Trust to transfer all its assets to the Corona Trust, thus placing all the wealth which Sir Owen had created in an irrevocable trust of which he was not a beneficiary, and to which he could only be added as beneficiary if they so decided."

4. Mr Miller played a significant role in the matters of which the Claimants complain. They do not propose to call him as a witness. The Defendants do wish to call him, or at any rate consider calling him, as their witness. For that purpose they would, for obvious reasons, wish to talk to him first about the evidence he would give if called. The Defendants accept that Mr Miller prima facie owed duties of confidentiality in relation to the matters about which they wish to talk to him. A long negotiation, which I need not detail, has led to an agreed protocol under which the Defendants can talk to Mr Miller about certain specific topics relevant to these proceedings. That protocol includes undertakings given by nominated representatives of the Defendants' solicitors, Wilson Gilmore for Novatrust and Oury Clark for Mr Watson, including an undertaking only to discuss with Mr Miller the matters which the parties have agreed may be discussed and not to trespass beyond those boundaries without further agreement or order of the Court, and an undertaking to use best endeavours to prevent Mr Miller (or his US attorney Mr Webb) from disclosing any material which is privileged or irrelevant to the action. It also includes a letter from Sir Owen to Mr Miller confirming on behalf of himself and Kea that they expressly consent to his meeting with Wilson Gilmore and Oury Clark to discuss the specific agreed topics and that neither he nor Kea will sue him for breach of confidence (or breach of a settlement agreement) for so doing, but fully reserving all other rights of confidentiality. It also includes a letter from Mr Miller confirming that he will attend trial.
5. The Defendants now wish to add to the agreed topics. Mr Hossain QC, who appeared for Novatrust, did not suggest that they could do that unless there had been a waiver of the duty of confidentiality, but his case is that the Claimants have indeed waived confidentiality in the topics which the Defendants now wish to ask Mr Miller about. I need not set out all the disputed topics but will give some examples. One of the matters pleaded by the Claimants is pleaded as follows:

"36. In early January 2012, OTSLG was sold. The sale of OTSLG provided the Corona Trust with a substantial amount of cash for investment.

37. Mr Miller and Mr Dickson came to see Sir Owen in Sydney shortly after the sale. They stated that there would now be rules about Sir Owen's involvement in the affairs and investments of the Corona Trust which owned the proceeds of sale and that effectively Mr Miller and Mr Dickson would be in charge while Sir Owen would have little or no say in what investments were made by the trust. This came as a total surprise to Sir Owen.

38. This attempt by Mr Miller and Mr Dickson to change the basis on which the Corona Trust had operated to that date and to marginalise Sir Owen caused a breakdown of relations between Sir Owen and Mr Miller and Mr Dickson in the early part of 2012."

Another matter pleaded by the Claimants is as follows:

"76. Sir Owen's relationship with Mr Miller began to break down following the 31 March 2012 meeting referred to above. After Mr Leahy had left, Sir Owen informed Mr Miller that he wanted Mr Dickson removed and a new trustee appointed. Mr Miller terminated any discussion, to Sir Owen's surprise and disappointment. Thereafter, on 14 April 2012, Pizarro, acting by Mr Miller, sent a letter dated 13 April 2012 to Sir Owen. This letter asserted that Sir Owen was not entitled to make investment decisions on behalf of the Corona Trust, that Sir Owen had given up all rights, control, title and powers in respect of the trust property and that Project Spartan was being addressed and considered by Pizarro."

6. On the basis of that, among the topics which the Defendants wish to add are as follows:

"2. With respect to the dispute in 2012 between Sir Owen and Messrs Miller and Dickson about the operation of the Corona Trust:

a) The communications between Sir Owen and Messrs Miller and Dickson at the meetings in early January 2012 and 31 March 2012 (APOC/37,76);

…

c) Whether in January 2012 Messrs Miller and Dickson attempted to change the basis on which the Corona Trust operated and to marginalise Sir Owen (APOC/38);

d) Whether this caused the breakdown of relations between Sir Owen and Messrs Miller and Dickson in the early part of 2012 (APOC/38);"

7. It is clear that the Claimants are unwilling to allow that to take place. In those circumstances the Defendants have brought this application. What is in fact sought in the applications by each of Novatrust and Mr Watson is as follows:

"An interim declaration under CPR r 25.2(1)(b) that it is not a breach of confidence (or an inducement of a breach of confidence) for Novatrust to obtain evidence and information from Mr Miller for use in these proceedings on the [specified topics]."

Ms Jones QC, who appears for the Claimants, has a point on whether the Court can grant an interim declaration of this sort at all in this way, but her main point is a much more fundamental one, which is that the Claimants have not waived their right of confidentiality in these topics. Mr Hossain accepts that unless they have done so he cannot obtain the declaration he seeks. So that squarely raises the question of whether the Claimants have waived confidentiality in certain matters by reference to them in their pleadings.

8. The starting point in the analysis is not disputed. Where A sues B and there is a prospective witness W who can give relevant evidence, but who owes a duty of confidentiality to A, then first, B is free to call W to give evidence at trial and may ask him any question relevant to the dispute even if the answer would otherwise be confidential to A, and W is, subject to questions of privilege and to any judicial discretion, both entitled and indeed obliged to answer such questions: see Porton Capital Technology Funds v 3M UK Holdings Ltd [2010] EWHC 114 (Comm) ("Porton") at [18]. In doing so W is not in breach of any obligation of confidence owed to A, nor is B liable for inducing such a breach. The obligation of a witness to answer relevant questions at a trial overrides the duty of confidence which would otherwise subsist.
9. Second, this does not mean that W is free to reveal to B before the trial matters that are confidential on the supposed basis that the answers would be relevant and admissible at trial. In Porton the claimants sued the defendants for damages for failing to develop and market a product, thereby allegedly depriving the claimants of an earn-out under a share purchase agreement. The claimants wished to speak to ex-employees of a subsidiary of the defendants, but these potential witnesses owed express post-employment duties of confidentiality. The claimants' argument was that they could use documents disclosed by the defendants to ask the ex-employees questions about the disclosed documents for the purposes of the proceedings. The argument was summarised by Christopher Clarke J in his judgment at [22] as follows:

"Once disclosure has taken place the receiving party becomes privy to any confidential information relating to a matter in issue in the proceedings. As between the disclosing and the receiving party confidentiality is, so as far as the prosecution of the action is concerned, lost. The disclosing party ceases to be able to assert a claim to breach of confidence against the receiving party if the latter does no more than use the information for the purposes of the action to which it is relevant e.g. by questioning potential witnesses in relation to matters in issue in the proceedings. Such witnesses may answer such questions without being in breach of any duty of confidentiality they would otherwise have."

10. That submission was rejected by Christopher Clarke J for the reasons given by him at [28]-[31]. The ratio of the decision is at [28] where he said as follows:

"I do not, however, accept that the effect of disclosure is in any way to alter any duty of confidence owed by (say) an employee or former employee (save that compliance with the obligations of disclosure would, obviously, not be a breach of duty). Subject to any special order of the Court the receiving party is entitled to use the documents disclosed for the purpose of the action. He may show the documents to a potential witness or provider of relevant information. But that does not mean that the witness is absolved from any duty of confidence he may owe to an opposing party (or anyone else). Fulfilment of that duty may preclude him from answering some of the questions that may be asked of him. The fact that the disclosing party has been compelled to disclose the documents to the receiving party does not alter that duty."

11. Ms Jones also drew my attention in particular to [30] and [31] where Christopher Clarke J said this:

"30. Such a principle would enable one party to question his opponent's employees and confidential agents about anything which could plausibly be said to relate to something in dispute in the action. Whether the questions did so relate could be the subject of much debate and, even if they did, the answers might extend into matters that did not. Mr Onions, prompted by a suggestion of mine, proffered the proposal that the first order sought might have a proviso that information related to matters in dispute when it related to a matter on which the claimants relied or which adversely affected the case of either side or supported the defendants' case. But that could be the subject of equal if not greater debate. Whether or not the question or answer was illicit would not be likely to become known, unless the questioning took place in the presence of the disclosing party's solicitor, because it would be the subject of privilege. In the present case it is apparent that MWE do not intend to ask questions with S & S present.

31. Further it would seem illogical for any release from the duty of confidentiality to be dependent on disclosure having taken place. If the two individuals may be examined, free from any duty of confidentiality, on matters upon which the disclosed documents are silent, provided those matters are in issue, it is difficult to understand why such freedom can only be obtained once disclosure takes place."

12. That, Ms Jones submitted, made it clear that although the decision was in terms concerned with the effect of disclosure, Christopher Clarke J would equally have rejected any submission that a witness could be asked questions before trial about matters on the basis that they were relevant to issues which had been pleaded and were therefore in issue in trial.
13. Mr Hossain did not dispute the principle that the Defendants are not in general at liberty to ask Mr Miller to talk about confidential matters before the trial, but submitted that the Claimants had waived confidentiality in certain specific matters by pleading them. He relied on a number of authorities concerning the waiver of privilege, his submission being that the principles applicable to waiver of privilege are equally applicable to a waiver of confidentiality. I will have to come back to that question, but will do so after considering what can be derived from the cases I was referred to about the waiver of privilege.
14. Mr Hossain distinguished three types of such waiver, namely express, collateral and implied. The most obvious example of express waiver of privilege is when a party puts in evidence at trial a privileged document, or refers in evidence at trial to a privileged communication; but a party can also waive privilege by voluntarily disclosing a privileged document before trial (as in Fulham Leisure Holdings Ltd v Nicholson Graham & Jones [2006] EWHC 158 (Ch)), or by deploying privileged material at an interlocutory hearing (as in Berezovsky v Abramovich [2011] EWHC 1143 (Comm)). That leaves the question of express waiver by pleading, which I will have to look at more closely.
15. Where there has been express waiver, there may also be a collateral waiver, that is waiver of other privileged material that is part of the same "transaction". The principle is long established (see the reference by Cotton LJ in Lyell v Kennedy (1884) 27 Ch D 1 at 24 to "the case of a man who gives part of a conversation and then claims protection for the remainder") and exemplified by a number of cases (Nea Karteria Maritime Co Ltd v The Atlantic and Great Lakes Steamship Co (No 2) [1981] Com LR 138, General Accident Fire and Life Assurance Corp Ltd v Tanter, The Zephyr [1984] 1 WLR 100, R v Secretary of State for Transport, ex p Factortame (1997) 9 Admin LR 591) which are collected and discussed by Mann J in the Fulham case at [10]-[20]. As the decision in that case illustrates, it is a narrow principle: the express waiver by disclosure of advice from counsel (Mr Michael Briggs QC, as he then was) and from solicitors (DJ Freeman) did not amount to a collateral waiver of all their advice but (at [23]) only of :

"such later advice as was given by Mr Briggs or by DJ Freeman which is an alteration, amplification or extension of the advice already disclosed."

16. Implied waiver is a separate principle. The paradigm example is where a party sues his solicitor: see Paragon Finance plc v Freshfields [1999] 1 WLR 1183 ("Paragon"). There Lord Bingham of Cornhill CJ, giving the judgment of the Court of Appeal, explains both the case of express and collateral waiver, and the different basis for implied waiver, as follows at 1188B-G:

"A client expressly waives his legal professional privilege when he elects to disclose communications which the privilege would entitle him not to disclose. Where the disclosure is partial, issues may arise on the scope of the waiver. Practical difficulties occur in determining such issues, as in Nea Karteria Maritime Co Ltd v Atlantic and Great Lakes Steamship Corporation (No 2) [1981] Com LR 138, General Accident Fire and Life Insurance Corporation Ltd v Tanter [1984] 1 WLR 100 and Reg v Secretary of State for Transport, Ex parte Factortame (1997) 9 Admin LR 591). But the law is clear. While there is no rule that a party who waives privilege in relation to one communication is taken to waive privilege in relation to all, a party may not waive privilege in such a partial and selective manner that unfairness or misunderstanding may result.

When a client sues a solicitor who has formerly acted for him, complaining that the solicitor has acted negligently, he invites the court to adjudicate on questions directly arising from the confidential relationship which formerly existed between them. Since court proceedings are public, the client brings that formerly confidential relationship into the public domain. He thereby waives any right to claim the protection of legal and professional privilege in relation to any communication between them so far as necessary for the just determination of his claim; or, putting the same proposition in different terms, he releases the solicitor to that extent from the obligation of confidence by which he was formerly bound. This is an implication of law, the rationale of which is plain. A party cannot deliberately subject a relationship to public scrutiny and at the same time seek to preserve its confidentiality. He cannot pick and choose, disclosing such incidents of the relationship as strengthen his claim for damages and concealing from forensic scrutiny such incidents as weaken it. He cannot attack his former solicitor and deny the solicitor the use of materials relevant to his defence. But since the implied waiver applies to communications between client and solicitor, it will cover no communication to which the solicitor was not privy and so will disclose to the solicitor nothing of which he is not already aware."

As the decision in that case establishes, implied waiver does not extend to advice taken from other solicitors later instructed in the same matter.

17. Mr Hossain does not in this case rely on the principle of implied waiver. His submission is that there has been an express waiver by the Claimants by the way they have pleaded the case. That raises the question whether there is a waiver of privilege by pleading a privileged document. The general principle is that mere reference in a pleading to a privileged document does not waive privilege in that document; see Buttes Gas and Oil Co v Hammer (No 3) [1981] QB 223 at 252E (Donaldson LJ) and 268B (Brightman LJ). But relying on a document at trial does waive privilege in it (see at 268C per Brightman LJ), and by pleading the document a party shows that he intends to rely on it at trial. In those circumstances, Lord Denning MR said that by pleading the documents in question Buttes showed they intended to rely on them and should either make them available for production or amend by striking out any reference to them (see at 246F); while Brightman LJ said Buttes would sooner or later have to decide whether to forgo privilege or abandon reliance on the documents, and although the point did not arise on the appeal, he thought the Defendants might be able to force Buttes to step down from the fence prior to trial (see at 268D). That case was a decision under the RSC. So far as the position under the CPR is concerned, Style and Hollander, Documentary Evidence (12^th edn, 2015) at §23-23, having referred to Buttes and to two Court of Appeal cases (namely Lucas v Barking, Havering and Redbridge Hospitals NHS Trust [2003] 4 AER 720 and Expandable Ltd v Rubin [2008] EWCA Civ 59), said:

"Neither Lucas nor Expandable considered the effect of there being no automatic waiver by reference in the pleading. It must follow that the party referring to a privileged document would be entitled to refuse to give inspection under CPR r 31.14 on grounds of privilege, but the issue would then arise separately whether there was reliance on the document so that the reliance gave rise to a waiver of privilege. There is unlikely to be a problem if the party withdraws his reference to the document in his pleading. But if he does not so do, his Statement of Case is evidence in the case. It is hard to see how he could continue to rely on his Statement of Case and then refuse to give disclosure of the document he had relied upon in that Statement of Case. So it seems unlikely that these decisions are important other than in relation to the question of whether disclosure of privileged documents referred to in pleadings can be obtained in advance of the usual date for disclosure."

18. Mr Hossain also relied on the decision of Birss J in Property Alliance Group Ltd v Royal Bank of Scotland plc [2015] EWHC 1557 (Ch). The case concerned allegations of misconduct by RBS in relation to GBP LIBOR. The issue was whether RBS had to disclose communications between itself and the FCA which were part of genuine settlement discussions. Having held that in general such a firm had the right to withhold such communications by analogy with the without prejudice rule, Birss J considered whether that right had been lost. RBS had pleaded that there had been no regulatory findings of misconduct on the part of RBS in connection with GBP LIBOR. Birss J held that that put in issue in those proceedings the basis on which the FCA's final notice had been decided. That made the communications admissible and hence disclosable: see at [99]-[100]. He made an order for inspection subject to a four week grace period. As I understand it that "grace period" was to enable RBS to decide whether to maintain its plea and provide inspection, or amend to withdraw its plea. That seems to be a reflection of the procedure contemplated by both Lord Denning and Brightman LJ in Buttes. Mr Hossain told me that his junior informed him that RBS had in fact withdrawn the plea.
19. Those cases therefore appear to be authority for the principle that if a party by his pleading puts in issue in the proceedings a particular privileged communication, it can be held to have lost its right to object to production of documents that it would otherwise been entitled to withhold. That looks very much like a doctrine of waiver of privilege by pleading, subject to the right to amend to delete the pleading rather than give inspection. Ms Jones however said that such a conclusion would be contrary to the decision of the Court of Appeal in Paragon. Her submission was that that case was authority for the proposition that the waiver of the confidence in the relationship only happens when you sue the actual person who owes the duty, and in respect of documents to which he is already privy. She submitted that the ratio of Paragon is that it has to be the person you are actually suing, and did not extend to all documents which are relevant to the issue which had been brought into the public domain.
20. In support of that submission, she pointed to the fact that in Paragon the Court of Appeal overruled a case called Hayes v Dowding [1996] PNLR 578 as not representing the law in this country, as follows (at 1193F-H):

"We need not linger on Hayes v Dowding [1996] PNLR 578, a case in which the plaintiffs were held to have impliedly waived their right to legal professional privilege by bringing proceedings even though the proceedings were not against any legal adviser. In reaching that conclusion the judge relied heavily on Australian and United States authorities. Neither party before us sought to contend that this case was correctly decided, and we are satisfied that it was not. The authorities on which the judge principally relied do not represent the law in this country, and the decision must be overruled."

That brief reference led to a debate between the parties as to what Hayes v Dowding decided and in what respect it was overruled, and I received further submissions from counsel on these matters by e-mail after the hearing. I think in the circumstances I ought probably to express my views on these questions, even though they do not in the end appear to me to be of central relevance to the questions I have to decide.

21. In Hayes v Dowding the plaintiffs alleged that the defendants induced them to enter into a settlement of earlier litigation by fraudulent misrepresentations. The question of inducement was "well and truly placed in issue" and the defendants sought specific discovery of certain classes of documents, which are set out at 581. Jonathan Parker J dealt first with class (iii) which was as follows:

"all documentation passing between the plaintiffs' former solicitors Edge & Ellison and the plaintiffs' current solicitors, Rollit Farrell & Bladon including but not limited to that relating to the care and conduct of [the earlier proceedings]."

22. Importantly, Jonathan Parker J said that no question of privilege arose in relation to the documents in that category. The only question was one of relevance. In that connection he referred to a paragraph of the plaintiffs' reply, where, in referring to a letter from Edge & Ellison, they pleaded that the last paragraph of the letter was "written without or indeed contrary to the instruction of the plaintiffs" (see at 582). Jonathan Parker J regarded that as a sufficient ground for ordering discovery of all documents passing between Rollits and Edge & Ellison containing or relating to criticisms or complaints made by Rollits concerning Edge & Ellison's conduct of the earlier proceedings on behalf of the plaintiffs. But it is clear that that part of the case did not raise any issue about waiver of privilege, because there was no privilege in the communications in any event. The only purpose of referring to that plea was to decide if the communications were potentially relevant. As such, this part of the case does not decide anything novel about waiver (and indeed is not mentioned in the head note in the PNLR).
23. The second issue discussed by Jonathan Parker J was one of waiver and raised much more far-reaching questions. Here the defendants sought discovery of what were accepted to have been privileged documents – indeed they sought discovery of the entire files of Edge & Ellison, including instructions to, and advice from, counsel. It was not suggested that the plaintiffs had pleaded, or would be seeking to rely in evidence, on such material. Rather, the defendants' argument was that the privileged documents were relevant to the inducement issue, and that by raising the inducement issue the plaintiffs had impliedly waived privilege in the file (see at 583). I agree with Mr Hossain that this part of the case is therefore concerned with the scope of the doctrine of implied waiver where privileged documents have not been expressly pleaded; it was not concerned with any question of express waiver of a privileged document by pleading it. On that issue Jonathan Parker J held that there had been an implied waiver, in part in reliance on his understanding of what the Court of Appeal had said in Lillicrap v Nalder [1993] 1 WLR 94, and in part by adopting by what had been said in an Australian case, Waldrope v Dunne [1996] 1 Qd R 224. The principle he derived (at 594) was that:

"In inviting the court to adjudicate on, inter alia, the inducement issue, the plaintiffs in the present case must be taken to have waived privilege in such documentary material as is relevant to the determination of that issue."

24. That involved the rejection of the submission for the plaintiffs that insofar as the pleadings were relied on as the ground for implying waiver of privilege, privilege is impliedly waived in relation to a particular matter only when a party puts that particular matter directly in issue on the pleadings; and that in the instant case the plaintiffs had not put their solicitors' advice in issue and accordingly privilege should not be impliedly waived in respect of documents containing or referring to such advice (see at 584).
25. There was also a third issue. The defendants argued that by disclosing certain privileged attendance notes, the plaintiffs had expressly waived privilege in them and sought wider disclosure on the principle of collateral waiver which I have already referred to. The plaintiffs brought a cross motion seeking delivery up of the attendance notes as having been disclosed by mistake. On that Jonathan Parker J accepted the plaintiffs' submissions and ordered the defendants to deliver up any material not covered by his ruling on the second issue.
26. It is now possible to revert to the respect in which the Court of Appeal in Paragon overruled the decision. It is pertinent to note that Paragon was also a case of implied waiver. Paragon had sued its former solicitors Freshfields for damages for alleged negligence. There was no dispute that by doing so Paragon had waived privilege in relation to communications between themselves and Freshfields. That was because of the principles of implied waiver which I have already referred to. The issue was in relation to communications, otherwise privileged, between Paragon and its subsequent solicitors, Slaughter & May, in relation to the same matters. That was put as a case of implied waiver. But as Lord Bingham said at 1188H:

"The plaintiffs have not sued Slaughter & May. They have not invited the court to adjudicate on any question arising from their confidential relationship with Slaughter & May, so have not brought that confidential relationship into the public domain. They have done nothing to release Slaughter & May from the obligation of confidence by which they are bound. They have chosen to subject their relationship with Freshfields to public scrutiny, but not their relationship with Slaughter & May. They are not seeking to pick and choose among the confidential communications passing between themselves and Slaughter & May: none of them is (so far) in the forensic arena."

27. That seems, with respect, obviously right – nothing in the way the case was pleaded against Freshfields was said to amount to an express waiver of privilege in the communications with Slaughter & May, and it is very difficult to see how it could be said that by subjecting the relationship with Freshfields to the scrutiny of the Court Paragon had also impliedly subjected a different and subsequent relationship with Slaughter & May to the scrutiny of the Court: (see also at 1192G-H). The whole question therefore in Paragon was whether the plaintiffs had impliedly waived privilege by pleading a case which raised an issue, but where they had not pleaded reliance on any privileged communication. When, in that context, the Court of Appeal referred to Hayes v Dowding as "a case in which the plaintiffs were held to have impliedly waived their right to legal professional privilege by bringing proceedings even though the proceedings were not against any legal adviser", it seems obvious that the aspect of Hayes v Dowding which is being overruled is the decision on what I have called the second issue decided by Jonathan Parker J in that case, namely that of implied waiver. In short, I agree entirely with the analysis of the point put forward by Mr Hossain in his e-mail submission to me.
28. Ms Jones referred me to the fact that in Farm Assist Ltd (in liquidation) v DEFRA [2008] EWHC 3079 (TCC) at [43] Ramsey J said that Paragon "overruled the whole of the decision in Hayes v Dowding." But it seems clear from his judgment (which I need not set out in detail) that what he meant by that in context was not literally the whole of the decision, but the whole of the decision on implied waiver: see eg [44] and [47], especially at [47] when after referring to Lord Bingham's judgment he said:

"This shows that the decision was overruled both to the extent that it was based on Lillicrap v Nalder and to the extent it was based on decisions in Australia and the United States. The commentary in Matthews and Malek and Thanki which suggest that some part of Hayes v Dowding based on Waldrope v Dunne was not overruled by Paragon Finance is not, respectfully, a correct analysis of the effect of Paragon Finance on the decision in Hayes v Dowding."

There is a brief reference by Morgan J in Digicel (St Lucia) Ltd v Cable & Wireless plc [2009] EWHC 1437 (Ch) at [50] to his agreeing with Ramsey J, but this does not take the point any further.

29. I have spent a little time on this partly because it was a matter of sustained contention between the parties but also because one needs to read Hayes v Dowding quite closely in order to understand both what it did and what it did not decide. At the hearing before me, I assumed from the brief reference made to it in submissions that the point which had been argued and decided in the defendants' favour and then later overruled in Paragon was that by pleading that Edge & Ellison had sent a letter "without and indeed contrary to the instructions of the plaintiffs", the plaintiffs had put their instructions to Edge & Ellison in issue and so expressly waived privilege in those instructions. That seems to me to have been an argument that might indeed have been open to the defendants. But a reading of the decision as a whole shows that that argument was not the argument in fact run by the defendants, and that although Jonathan Parker J referred to that plea in the context of the first issue, that was only in relation to relevance and not waiver; and when he came to consider the second issue, that of waiver, no reference at all was made to the fact that the plaintiffs had indeed expressly pleaded the content of their instructions.
30. In the end therefore, I do not find Hayes v Dowding, or the fact that it was overruled, of any real assistance. As I have said, I accept that it was concerned with implied waiver, which is not the principle on which Mr Hossain relies. It does not seem to me to say anything about express waiver by pleading, which is the principle on which he does rely, although it is noticeable that the plaintiffs would have accepted in that case that if they had expressly pleaded their solicitors' advice, and thereby put the content of that advice directly in issue, that would have amounted to a waiver even though they were not suing their solicitor but a third party: see the reference to the plaintiffs' submission above.
31. After that, rather lengthy, digression into what has turned out to be somewhat of a dead end, I can return to the question which is directly raised by Mr Hossain's argument. If a claimant, in a case in which he is suing not his former solicitor but a third party, pleads a privileged document, does this amount to an express waiver of privilege in that document? My answer is "Yes". Or, to be more precise, it amounts to an announced intention to rely on, and hence waive privilege in, the document at trial, and thus attracts the consequences identified by Lord Denning MR in Buttes, namely that he is put to an election either to abandon his reliance on the document, or to accept that privilege has been waived. I see nothing in Paragon or the other cases which is inconsistent with that conclusion.
32. The next question is whether precisely the same principles apply to waiver of confidentiality in non-privileged communications. Mr Hossain submitted that they did on the basis that confidentiality is "a necessary predicate" of privilege and hence there is no reason to distinguish between loss of privilege and loss of confidentiality; equally, although the cases normally refer to waiver of privilege in documents, there is in his submission no reason to distinguish between documents, oral communications or actions which take place in the context of a confidential relationship.
33. This aspect of the case did not receive as much attention in submissions as other aspects, but I think it conceals some quite difficult questions. Take the case of a confidential document, for example the letter dated 13 April 2012 pleaded by the Claimants at paragraph 76 of the Particulars of Claim. Had that been a privileged document, the principles which I have referred to above about waiver of privilege would entail the consequence that by pleading the contents of the letter, the Claimants had waived privilege in the letter, or to be more precise had put themselves in a position where they either had to delete the reference to the letter in the pleading or be treated in due course as waiving privilege in it. The letter is in fact not privileged but is prima facie confidential. Mr Hossain's submission is that in precisely the same way by pleading it, the Claimants have waived any confidence in the letter, and that as a result the Defendants are free to speak to Mr Miller about the letter and the circumstances in which it came to be written.
34. That however immediately raises the question of how such a conclusion can be squared with the decision in Porton. In Porton, the defendants had disclosed certain documents. That did not cause them to lose their confidentiality in the transactions which the documents referred to, and they were still entitled to prevent the claimants from talking to the ex-employees about such topics. As referred to above, it seems clear that Christopher Clarke J would have taken the same view of topics raised in the pleadings: see the passage from his judgment at [31] cited above.
35. The key to this conundrum is in my judgment to focus on the different practical effect that privilege and confidentiality have. The basic principles relating to privilege are well known. The paradigm case is a document recording legal advice and which is therefore the subject of legal professional privilege. The fact that the document is privileged has three practical consequences when it comes to litigation. First, even though the advice is directly relevant to the pleaded issues, the party with the benefit of the privilege is not obliged to disclose the document for inspection. Second, if that party gives evidence he cannot be asked, and if asked is not obliged to answer, any questions about the content of the advice. Third, any other witness who is asked questions is obliged not to give evidence about the contents of the advice, and the party with the benefit of the privilege can object to him doing so. Although privilege arises out of a confidential relationship these immunities and protections go far beyond the normal incidents of material that is merely confidential. By voluntarily waiving privilege the person with the benefit of the privilege gives up these rights and therefore comes under an obligation to disclose the document, is not immune from answering questions about it, and is unable to stop others from giving evidence about it.
36. Confidentiality however does not work like that at all. A party who has a confidential document, for example the letter dated 13 April 2012 from Pizarro to Sir Owen which is pleaded at paragraph 76 of the Particulars of Claim, is unable to keep the contents of the document secret in the course of litigation. If the document is relevant to the pleaded issues, then whether or not the document itself is referred to in the pleading, the party in whose possession the document is, is obliged to give disclosure of it. In that way the litigation process forces him to reveal what would otherwise be confidential to the other parties. And if he gives evidence he can be asked about the document, and if anyone else gives evidence they can be asked about the contents of the document. These consequences follow so long as the document is relevant to the issues in the action, whether the party with the benefit of the confidence pleads the document or not. So to take the example of the letter of 13 April 2012, that letter would be disclosable by the Claimants so long as it was relevant to the pleaded issues, whether or not reference had been made to it in the Particulars of Claim. If therefore the Claimants had simply pleaded, without reference to the letter of 13 April 2012, that the relationship between Sir Owen and Mr Miller began to break down, and Sir Owen kept Mr Watson informed about the dispute he had with Mr Miller and Mr Dickson, the letter would no doubt be disclosable; and Sir Owen, if he gave evidence, could no doubt be asked questions about it. In that sense it is not the pleading of the letter that opens up the question of the relationship between Sir Owen and Mr Miller as a topic for trial, but the mere fact that the relationship between Sir Owen and Mr Miller is one of the issues that will be issues for trial.
37. But it is at this point that one goes back to the decision in Porton and the practical effect of it. Sir Owen's right of confidentiality entitled him, so long as he was not involved in litigation, to keep the letter of 13 April 2012 to himself and not disclose it to anyone else; it also entitled him to stop Mr Miller from talking about such matters with anybody else. By suing the Defendants and by pleading as one of the issues the breakdown of his relationship with Mr Miller, thereby making it an issue for trial, Sir Owen came under an obligation to disclose the letter of 13 April 2012, and so lost the right to keep the contents of that letter secret from the defendants. In that sense it is a necessary consequence of suing that he loses or waives his confidentiality in the contents of the letter to the extent necessary for the purposes of the proceedings. That does not mean he loses all rights in relation to that because of the implied obligation on the other parties (now enshrined in CPR r 31.22(1)) only to use the document for the purposes of the proceedings, subject to certain exceptions. But the ratio of Porton is that even though such confidential matters have been referred to in disclosed documents and thereby have come into the possession of the other party, that does not entail the further consequence that a potential witness who owes a duty of confidentiality to the disclosing party is now free to talk about such matters to anybody he wishes to. It follows from Porton that if Sir Owen had on disclosure disclosed the letter of 13 April 2012 that would not release Mr Miller from his duty not to talk about such matters to the Defendants before trial. I do not see that the pleading of the letter of 13 April 2012, which is merely pleaded as an example of the breakdown of the relationship between Sir Owen and Mr Miller, has significantly changed the position. It remains the case that the relationship between Sir Owen and Mr Miller is an issue for trial; it remains the case that Sir Owen has had to give disclosure of documents that would otherwise be confidential (but not privileged); and it seems to me to follow from Porton that it remains the case that neither of these facts means that Sir Owen has thereby released Mr Miller from any obligation not to talk about such matters before trial. I do not see that the mere fact that the letter of 13 April 2012 has been specifically pleaded makes any difference.
38. If that is true of the pleading of a specific document, the same must also be true of oral communications between Mr Miller and Sir Owen, and a fortiori of actions carried out, or not carried out, by Mr Miller in the course of the relationship. These topics have been pleaded, and will be issues for trial; but there has in my judgment been no waiver by the Claimants of any duty of confidentiality owed by Mr Miller in relation to them.
39. Putting the matter another way, when a party waives privilege, that changes fundamentally the parties' rights in relation to the privileged communication: as I have sought to explain, the nature of the privilege is one that casts a blanket over the privileged communication so that it cannot be referred to at trial at all. By waiving the privilege the party has lifted the blanket and made the question of the advice received an issue that can be gone into at trial. That is obviously a significant shift in the party's rights in relation to the communication which would otherwise be privileged. But it does not seem to me that the same is true of a matter which is prima facie confidential. Here as I have sought to explain the very fact that there is litigation in which issues are raised to which the confidential communication is relevant has the consequence that the party cannot resist disclosure and cannot prevent witnesses being asked about it at trial, but he can, according to the decision in Porton, ensure that those who owe existing duties of confidentiality do not discuss these matters before trial. By pleading reference to such a communication in his statement of case, the party does not, it seems to me, fundamentally change the nature of the communication; it remains something relevant to the proceedings, it remains disclosable, and it remains something about which witnesses can be asked questions, but equally it seems to me it remains something in relation to which the party is entitled to continue to insist that those who owe duties of confidentiality keep those matters confidential until called as a witness at trial.
40. Although therefore I have in effect accepted the analysis of waiver of privilege that Mr Hossain has put before me based on the authorities, in the end in my judgment Ms Jones is right that what the Claimants have done in this case does not take the position outside that in Porton. Questions arising out of the relationship between Sir Owen and Mr Miller can be gone into at trial and both Sir Owen and Mr Miller can be asked questions about that relationship at trial. Subject to privilege, disclosure has been (or should have been) given of documents relating to that relationship. But this does not mean that Sir Owen has thereby waived his right to insist that Mr Miller does not talk to the Defendants before the trial about such matters.
41. It was accepted by Mr Hossain that if I reached the conclusion that Mr Miller still owed a duty of confidentiality to the Claimants, then no question of discretion arose. Unless he could persuade me that they had lost that right the decision is not a decision for the Court but for the Claimants; it is for them to decide as a matter of right whether to release Mr Miller before the trial from the duties of confidentiality he owes or not. In those circumstances, having concluded that the Claimants have not lost that right, it follows that I must dismiss this application, and it is not necessary to go into the question raised by Ms Jones as to whether the procedure adopted was an appropriate one or not. I will therefore briefly say that I do not think, had I reached a different conclusion on the substantive question, that I would have regarded it as either impossible or inappropriate for the Court to give the Defendants some form of effective relief along the lines that they sought.

Questions to the US tax law experts

42. In a judgment ("the Tax Judgment") given by me arising out of an earlier CMC, which was handed down on 22 July 2016 and whose neutral citation is [2016] EWHC 1928 (Ch), I decided that I would not strike out all allegations in relation to what have been called compendiously the US tax law issues. On the question of expert evidence I said this at [78ff]:

"78. I take the view that the court would be assisted by being educated by expert evidence that is narrowly focused on the question whether the fact that the grantor or economic settlor of a trust who is consulted about proposed investments and given information about proposed investments but who has no right to direct or veto the investments as such is a fact that could lead to the consequence that the trust is includible in his estate for the purposes of US estate duty.

79. I would regard as likely to be far more helpful for that question to be asked in the abstract, as it were, as a proposition of US tax law rather than experts being asked to address it in the context of the particular allegations in this case and being asked to opine on what might or might not have been the position in this case. That will avoid any impression being given that the experts are asked to pass judgment on what Sir Owen or Messrs Miller and Dickson or Mr Watson did or did not do in fact, matters which are likely to be highly contentious at trial.

80. Evidence of that limited [the transcript reads united but it should read limited] and focused type seems to me to be likely to be fairly short and not likely to add significantly to the length of the trial. I will hear counsel on whether it is more appropriate to be given, as in this case it I think it might be, by a single joint expert to whom both parties can address questions, or two experts, in the way that is done in contentious issues.

81. I hope I have made it clear that the main purpose of the expert evidence is not to resolve a central issue in the case but to educate the court into the law and practice of US estate tax."

43. That led to an order in which among other things it was provided that the Claimants and the Defendants should endeavour to agree the questions that were to be put to the experts in relation to US estate duty and that in the event they were unable to agree the Court should settle the questions at the further CMC which I have just heard. The parties have agreed that there should be one expert each, and have also largely agreed the questions for the US tax experts, the agreed questions being:

"1 To what extent (if at all) could a Settlor be consulted or given information about proposed trust investments by a trustee and/or influence the investment decisions of such trustee, without undermining (or potentially undermining) the tax planning purposes of the trust?

2 To what extent (if at all) could a Settlor be consulted or given information about proposed trust investments by the proposed counterparty to such investments, without undermining (or potentially undermining) the tax planning purposes of the trust?"

44. To those questions the Claimants wish to add the following follow up questions, firstly:

"Would it make a difference to the answer to question 1 if the settlor/grantor had significant business experience?"

and to question 2:

"Would it make a difference to the answer … if the information disclosed by the proposed counterparty disclosed matters which should be of concern to the trustees and the beneficiaries?"

45. In those circumstances Novatrust wished to add its own follow up questions which were as follows:

"Would it make a difference to the answer to question 1 if the purpose for which the Settlor wanted to be consulted / provided with information was to exercise control over the trust investments through the trustees (even though he had no right to do so)?"

and a suggested follow up to question 2:

"Would it make a difference if the purpose for which the Settlor wanted to be consulted / provided with information was to exercise control over the trust investments through the counterparty or the beneficiaries of the trust (even though he had no right to do so)?"

46. The principles are not in dispute. Questions should only be asked of the experts to the extent that they help to resolve the pleaded issues. Ms Jones says that the Claimants' proposed follow up questions do arise out of the pleaded issues. The first is whether it would make a difference if the settlor had significant business experience; and the Claimants rely on their pleading, which is found in response 1.3 of a response of the Claimants to the First and Second Defendants' joint request dated 10 March 2016 for further information, that:

"As the creator of the wealth settled in the Corona Trust with a long track record of successful investment and building of businesses, Sir Owen had a legitimate expectation that Messrs Miller and Dickson, who had no such experience, would consult with him and avail themselves of his experience and expertise."

47. In relation to the second follow up question, that is whether it would make a difference if the information disclosed by the proposed counterparty disclosed matters that should be of concern to the trustees and beneficiaries, the Claimants rely upon a pleading in various places that if Mr Watson had informed Sir Owen of various things, the latter would have immediately taken steps to restrain Messrs Miller and Dickson from doing various things, an example being paragraph 134 of the Particulars of Claim in which it is pleaded:

"If Mr Watson had informed Sir Owen at any material time that Messrs Miller and Dickson were intending to commit Kea to a transaction which would result in the payment of a very significant sum to Mr Watson's interests for no consideration Sir Owen would have immediately taken steps to restrain them from so doing."

Similar pleas are found at paragraphs 153, 158 and 178 of the Particulars of Claim. In response to a request as to what right Sir Owen had to take such steps, the Claimants have pleaded (in the response to the request for further information already referred to) a cross reference to paragraph 123.1 of the Reply, which pleads:

"Sir Owen had informed the beneficiaries of the Corona Trust of his concerns and in fact proceedings were brought in Nevis in February 2013 which had the effect of preventing Mr Dickson and Mr Miller from taking further steps in relation to the Corona Trust and Kea and which led to Pizarro bring replaced as trustee by HML."

48. That is not perhaps as tightly pleaded as it might be, but it does seem to me to amount to an assertion that if Sir Owen had been told of the various things which he says he ought to have been told of, he would have taken steps to bring them to the attention of the beneficiaries as he later did. In those circumstances it does seem to me that there is no reasonable objection to the Claimants' proposed follow up questions and I will allow them.
49. So far as Novatrust's proposed follow up questions are concerned, Ms Jones objects to them on the basis that they do not arise out of the pleaded issues. The Claimants' case accepts that Sir Owen did not in fact have any control over the Corona Trust. That is something which was gone into in great detail in the argument before me which led to the Tax Judgment; for present purposes it is sufficient to refer to response 1.3(d) of the response to the request for further information which reads:

"Sir Owen did not have any right to control the actions of the trustee of the Corona Trust."

50. I accept that Ms Jones is right that the Claimants' case is not that Sir Owen did in fact have control of the Corona Trust; indeed one of his complaints is that in a way which he did not understand he had lost control of the assets which had been decanted into Corona Trust. Nor do I see anywhere in the Defendants' pleading an allegation that he did in fact have control of the Corona Trust. It does seem to me therefore that Ms Jones is right that a follow up question which is predicated on the basis that he did have control is not one which arises out of the pleaded issues.
51. Mr Hossain however says that that is not the follow up question which is proposed. What is proposed is a follow up question which is based on the purpose for which the settlor wanted to be consulted being to exercise control over the trust investments, that is as a de facto matter. It is Novatrust's case as set out in Mr Hossain's written submissions, that "even though Sir Owen had no right to direct or veto trust investments, the purpose for which he wanted to be consulted / provided with information was to do precisely that." That submission is bolstered by reference to various parts of the Claimants' pleading in which it is pleaded for example that (i) Sir Owen told Mr Miller and Mr Watson that "he was to be involved in every decision" (paragraph 73 of the Particulars of Claim); or (ii) that "Sir Owen made it clear to all concerned that he wished to be fully engaged in the due diligence process and all decision making relating to the proposed investments" (paragraph 15.3 of the Reply to the Defence of the First Defendant).
52. That therefore raises the question whether there is any difference between Sir Owen saying he wished to be involved in or fully engaged in the decision making relating to investments, and the Defendants saying that the purpose for which he wanted to be consulted was to exercise de facto control over the trust investments even though he had no right to do so. I do not think I should on this application prejudge the question whether the two formulations amount to the same thing or whether they are, as Ms Jones would say, quite different. It seems to me that it would be safer for follow up questions to follow the language of the pleading. I will therefore allow the follow up questions by Novatrust in this form:

"Would it make a difference to the answer [to the relevant question] if the purpose for which the settlor wanted to be consulted / provided with information was because he wished to be involved in or fully engaged in all decision making related to the proposed investments to be made through the trustees?"

In that form, I do not think that the Claimants can object that it does not arise out of the pleaded case, nor does it attribute to the Claimants something which is not expressly pleaded by them, namely a desire by Sir Owen to control the trust investments. With that amendment I propose to allow Novatrust's follow up questions but not to allow them in the form in which Novatrust has asked for them.

Specific disclosure application

53. Novatrust's specific disclosure application raises a number of issues. I have decided to address these in a separate judgment so that this judgment dealing with the first two applications can be given to the parties sooner rather than later. I will therefore deal with the third application separately.