High Court of Justice in Northern Ireland Chancery Division Decisions

The present Application

"3. Advices obtained from the Company's solicitors and relating to the following issues:

b. Queries raised by Dr Lennon in respect of the Deloitte and Touche valuation;

c. The request made by Dr Lennon for management accounts for the Company in respect of the months November 2001 and December 2001;

d. The drawing up of and contents of the Board Statement of 15^th April 2002 in respect of the reconciliation of the accounts;

e. Disclosure of documents requested by Dr Lennon;

f. The marketing of the Company for sale in 2003/2004 by PWC under "Project Ocean" and the conclusion of that process;

g. Activation or use of any process contained within the Articles of Association concerning Dr. Lennon's shareholding;

h. Correspondence with Deloitte and Touche, PWC and KPMG.

4. Advices obtained from Counsel and relating to:

b. Disclosure of documents requested by Dr. Lennon;

c. The marketing of the Company for sale in 2003/2004 by PWC under "Project Ocean" and the conclusion of that process;

d. Activation or use of any process contained within the Articles of Association concerning Dr Lennon's shareholding;

e. The involvement of and valuations prepared by Deloitte and Touche, PWC and KPMG."

There was no challenge to the discoverability of any of the above other than on the ground of privilege.

The competing arguments summarised

[3} Mr Horner QC submitted in a helpful skeleton argument augmented by oral submissions that there is nothing in the facts of the present case to displace what he submitted is the general principle applying to the entitlement of shareholders to obtain production of documents acquired by the company in which they hold shares. Where, as he submitted is the case here, the dispute is essentially one between the shareholders in control of the Company and others seeking relief rather than hostile litigation between the Company and shareholders the shareholder is entitled to disclosure of all documents obtained by the Company in the course of the Company's administration including legal advice about its affairs. He conceded that this principle does not apply where there is hostile litigation against the company itself. I presume that it was on the basis of this distinction that the claim for discovery of any legal advice obtained by the Company relating to the Petitioner's dismissal by it was not further pursued by him.

[4] Mr Orr QC for the Company, supported pithily by Mr Shaw QC for the respondent shareholders, submitted that, as these proceedings were initially, and incorrectly, commenced against the Company only and continued against it alone for some time before the respondent shareholders were joined, there was at least during that initial period "hostile litigation" against the Company which operates to protect by legal professional privilege the types of documents sought to be discovered. He further submitted that, depending on the final outcome of the proceedings, the Company may in due course be ordered to purchase the Petitioner's shares in it and therefore the Company itself continues to be in dispute with the Petitioner, at least to that extent.

Conclusion

"The principle was that if people had a common interest in property, an opinion having regard to that property, paid for out of the common fund, i.e. company's money or trust fund, was the common property of the shareholders, or cestui qui trust. But where the parties were sundered by litigation such an opinion obtained by one of them was privileged."

That case, which on its facts is quite unlike the present, was one brought by the company against the defendant who had formerly been a director of the company claiming the return of certain company monies allegedly expended by him for his own purposes. By contrast, in the present case, to borrow an expression of Harman J in Re Hydrosan Ltd [1991] BCLC 418, "the wrongs claimed and the nature of the allegations are of wrongs by those in control of the company against a shareholder rather than by the company itself in any real sense." He distinguished that situation from a claim for unfair dismissal which he considered is truly a claim against the company. Interestingly, the Hydrosan case involved a claim that the company's funds had been improperly employed in financing the defence of earlier proceedings which chimes with a previous application by the Petitioner in the present proceedings. I therefore conclude that the present case falls within the principle in Woodhouse.

"There is…one matter that has given me considerable concern. At a meeting of the board of directors of the company…it was resolved to instruct solicitors to act on behalf of the company. In reliance on that resolution solicitors retained by the company have incurred considerable expense in filing evidence and instructing counsel to oppose this application. I can see no possible justification for this course. The directors no doubt have very strong feelings as to the person they would like to see in control of the company and able to appoint and remove its directors including themselves. But they are not entitled at the expense of the company to take part in a dispute as to whether Mr Kenyon's shares should be compulsorily acquired by Mr Mitchell or by the company."

To that Harman J added:

"Plainly an order that the shares be acquired by the company would be an order affecting the company and yet Vinelott J said, and I wholly agree with him, it could not properly be an action where the company's finances should be employed to influence the result of the claim.

In my view that supports the proposition that I have already enunciated that a contributories' petition for just and equitable winding up, although it does produce severe results upon the company if it succeeds, yet is not properly within the classification of Phillimore LJ and Lush J in the Woodhouse case I have already cited.

For those reasons it seems to me that all the documents concerning the solicitors acting in the earlier petition are discoverable documents and should be produced. I do not include in the category of discoverable documents those relating to any steps taken by solicitors acting in the course of the Chancery proceedings for wrongful dismissal or the industrial tribunal proceedings for unfair dismissal. As it seems to me completely different considerations apply to those latter sorts of proceedings."