Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 87
P1981/08	OPINION OF LORD GLENNIE in the Petition THE SCOTTISH LION INSURANCE COMPANY LIMITED Petitioner; for an order under Section 896 of the Companies Act 2006 and for sanction of a Scheme of Arrangement under Section 899 of the Companies Act 2006 ­­­­­­­­­­­­­­­­­________________ ­­­­­­­­­­­­­

Pursuer: Howie QC; Morton Fraser LLP

Defender: McNeill QC, Munro; Simpson & Marwick

Noters: Hanretty QC, Ross; Dundas & Wilson

8 July 2010

Introduction

[1] The issue before the court raises a short but important question relating to waiver of privilege upon which, so far as the researches of counsel could reveal, there is no direct authority. It arises in the context of applications by the petitioners for orders under sections 896 and 899 of the Companies Act 2006 ("the Act").

Background

[2] The detailed background is set out in paras [2]-[32] of my earlier Opinion, reported at 2010 SLT 100. That decision was overturned in the Inner House on one of the two points argued before me, but not so as to cast doubt upon that summary of the background: see 2010 SLT 459.

[3] Briefly, the position is as follows. The petitioners seek sanction of a scheme of arrangement under section 899 of the Act. In terms of sub-section (1), the court may sanction the scheme if the scheme has the agreement of a majority in number of the creditors (or each class of creditors), that majority representing at least 75% in value of the creditors (or class of creditors) present and voting either in person or by proxy at a meeting or meetings summoned under section 896. The figures for the required majorities are important. The scheme needs the agreement of (a) a majority in number of the creditors in each particular class and (b) 75% in value of those creditors. The ascertainment of a "majority in number" may give rise to disputes if a person claiming to be a creditor has his claim downgraded to nil for voting purposes. However, there are potentially greater difficulties in ascertaining whether the majority in number represents 75% by value of the creditors. It is obvious that the ascertainment of whether the requisite majorities, and particularly the majority of 75% in value, have been achieved involves some mechanism or process for valuing the claims presented by each creditor.

[4] Meetings under section 896 were summoned pursuant to an order of the court dated 15 December 2008. There were two separate meetings of creditors, the first for those with non-IBNR claims and the second for those with IBNR claims. IBNR means "incurred but not reported". Creditors falling into both categories were entitled to participate in each meeting to the extent that their claims fell into the relevant category. The chairman of the meetings reported to the court on the outcome. The detailed figures reported by him are set out in paras [27]-[28] of my earlier Opinion. In short, he found that a majority in number of the creditors voting at each meeting voted in favour of the scheme, the figures being 78% for the first meeting (non-IBNR) and 61% for the second meeting (IBNR). On the basis of his assessment of the value of the creditors' claims in accordance with the interlocutor of 15 December 2008, those numerical majorities in favour of the scheme represented 89% in value at the first meeting (non-IBNR) and 97% in value at the second meeting (IBNR). However, in an Appendix to his report he also set out the figures as they would have been had the claims submitted been accepted at face value. On this basis, the figures for the first meeting (non-IBNR) would have shown 71% in number of the creditors voting in favour of the scheme, representing 72% in value, while those for the second meeting (IBNR) would have been 56% in number and only 35% in value. Accordingly, had the claims submitted been accepted at face value, both meetings would have achieved the requisite majority in number in favour of the scheme but would have failed to achieve the required 75% in value, albeit only narrowly so far as the first (non-IBNR) meeting is concerned.

[5] The respondents oppose the grant of sanction to the scheme. They ask the court to exercise its discretion against sanctioning it. More fundamentally, they challenge the chairman's report that the scheme achieved the required majorities both in number and in value at both meetings. The principle attack is on the figures for the majorities by value. The grounds of challenge are set out in more detail in my earlier Opinion, but for present purposes it is sufficient to note that they challenge the methodology used in the assessment of the value of claims and raise questions as to the consistency of application of the methodology between the claims submitted by supporting and opposing creditors. In my earlier Opinion I held that the respondents were entitled to mount such a challenge, and that part of my decision was not placed under review in the Inner House: see 2010 SLT 459 at para [6].

[6] To make an effective challenge, the respondents need to analyse not only the way in which the value of their own claims was assessed but also the way in the value was given to the claims of other creditors, particularly those who voted in favour of the scheme. They therefore require to have access inter alia not only to the documentation submitted in support of their own claims (which they have) but also (i) to the documentation submitted by other creditors in support of their claims, and (ii) to the workings showing the methodology applied to assessing the values of claims submitted, and how that methodology was applied to each case; and they need to be able to show their documentation to their expert advisers.

[7] The petitioners correctly anticipated that issues of confidentiality might arise and a detailed agreement was worked out providing a mechanism by which steps could be taken to protect that confidentiality. On 10 July 2009 I ordered production by the petitioners of documents identified in a Specification of Documents lodged by the respondents on the terms of that agreement, which terms were set out in the interlocutor of that date.

[8] The order for production (or notice of its terms) was, as I understand it, intimated by the petitioners to some or all of the creditors who had submitted claims for voting purposes. This prompted an application by the Noters, who (so great is their concern about confidentiality) have been referred to before the court only as Creditors 59, 105 and 106. A note of their identities has been lodged in process in sealed envelopes. They appeared by counsel to seek to prevent the production by the petitioners of some or all of the documents lodged in support of their claims. In addition to claiming confidentiality, they have put forward a claim for legal professional privilege. As a result of their intervention, on 25 August 2009 the interlocutor of 10 July 2009 was varied in terms which allowed the petitioners to lodge the documentation relating to the Noters' claims in process in encrypted form on computer disk. A further interlocutor of 7 September 2009 appointed the Noters to lodge in process a schedule of all the documents contained on the disk, identifying those documents in respect of which legal professional privilege was claimed and the basis of such claim. That has been done.

[9] This process of dealing with this issue was interrupted when the case went to the Inner House but has now resumed.

The claim for privilege

[10] In response to an interlocutor of 28 May 2010, the Noters lodged in process a "Summary Note in relation to privilege" setting out the basis upon which privilege was asserted by them. By way of background, they explained that the documents contained material which had a very high degree of commercial sensitivity. They were submitted to the petitioners subject to non-disclosure and confidentiality agreements ("the confidentiality agreements") between them and the petitioners, those confidentiality agreements reinforcing the existence of a "common interest" between them. On this basis, they contended that the documents were protected by (a) common interest privilege and (b) legal professional privilege, the latter being divided into (i) legal advice privilege and (ii) litigation privilege (post litem motam), both of which applied in the present case. Details of their contentions under these heads are set out in the Summary Note. As regards common interest privilege, it is pointed out that the relationship between the petitioners and the Noters was one of insurer and assured, that the documents in the hands of the Noters are both confidential and privileged, that the petitioners have a common interest with the Noters in the receipt of those documents and that, therefore, the Noters' privilege in those documents subsists notwithstanding that they are in the hands of the petitioners. As regards legal advice privilege, it is said that the documents contain information and advice prepared by or at the direction of the Noters' lawyers, acting as lawyers, within the ambit of the remarks of Lord Carswell in Three Rivers DC v. Bank of England (No. 6) [2005] 1 AC 610:

"... all communications between a solicitor and his client relating to a transaction to which the solicitor has been instructed for the purpose of obtaining legal advice will be privileged, notwithstanding that they do not contain advice on matters of law or construction, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser of his client."

As regards litigation privilege, they say that the purpose of submitting the documents was to ensure both proper valuation within the proposed scheme of arrangement and the fairness of the voting procedures as between and among the various creditors. But for the proposed a scheme of arrangement, the petitioners would not have required the documents. The scheme required litigation in the form of the current petition proceedings and the Noters were at all material times potential parties - and are now actual parties - to those proceedings. The documents, they contend, are also subject to the privilege attaching to attorney work product, within litigation privilege. The Noters are corporations registered in the United States of America and, as a matter of the law of the United States, the doctrines of attorney work product, attorney-client privilege and common interest privilege apply to protect the documents in question from discovery.

[11] The Noters' claims to privilege are contentious. There are potentially issues of private international law, as to the relevance of the law of the United States, or any part thereof, in relation to the assertion of legal professional privilege in Scotland. There may also be issues about the law in the United States, or the relevant parts thereof, on these matters, if that law is held to be relevant. In addition, there is a question of whether common interest privilege is recognised in Scotland. But in any event, and of greater importance for present purposes, even if the claims to privilege, or some of them, are prima facie valid, the respondents argue that any privilege in these documents has been waived.

[12] It was recognised by the parties that a full investigation into the issues of privilege would require investigation into, and the calling of evidence about, foreign law, especially if the law of more than one state within the United States would be involved. That would take time. Further, a full hearing involving evidence and argument about the law of the United States, as well as a full argument on issues both of Scottish private international law and Scottish substantive law in relation to questions of privilege, would take some days and could not proceed without serious delay to the hearing and ultimate disposal of the petition. Of course, if it were necessary to go down this road, that would have to be done even if progress in the petition procedure was thereby delayed. However, the respondents argued that the question of waiver could be dealt with at a relatively short hearing without undue delay, it being assumed for the purpose of the hearing that the Noters were, subject to the question of waiver, entitled to claim privilege on the grounds advanced in their Summary Note. The petitioners supported this approach, their interest being to progress the petition to a conclusion without undue delay. After hearing argument I decided that it would be in the interests of all parties, particularly having regard to the legitimate interests of the petitioners that their petition should be heard and the possible saving in expense, that the question of waiver be taken as a preliminary point. The argument would proceed on the basis that, subject to waiver, the Noters were entitled to claim privilege on those grounds. If it were held that any such claims for privilege had been waived, there would be no purpose in further investigating those claims. If, on the other hand, it were held without they had not been waived, then there would have to be a full hearing to determine their validity.

Waiver - submissions

[13] In view of the potential importance of the point, I shall set out the submissions for the parties in some detail.

[14] For the respondents, Mr McNeill QC submitted that any privilege in the Noters' documentation had been waived so far as concerned other objecting policyholders such as the respondents. He emphasised the importance of the circumstances in which the documents came to be produced to the petitioners. The context was the application by the petitioners for sanction of the scheme of arrangement under the Act. In that context, the petitioners invited all policyholders to participate in a judicially regulated process under the procedures laid down by the orders of the court. Not every policyholder was required to participate. Each policyholder had to decide for itself whether to participate in the voting stage or leave it to others and await the outcome. But every policyholder who decided to participate in the voting process laid down by the order of the court of 15 December 2008 agreed to engage in a system regulated by the court process. That was a system which could be expected to have some degree of transparency as regards the valuation of claims subject, of course, to such protection of confidentiality as was not inconsistent with the proper working out of the process. The valuation of the votes of creditors, and the methodology to be applied in arriving at that valuation, would be expected to be open to scrutiny by or on behalf of the court. It was a court managed process in terms of which the court appointed a Reporter to report to it on the regularity of the proceedings. And a policyholder who had grounds for concern about the valuation given to the votes of different creditors was entitled, under this process, to scrutinise what had occurred. The court's decision on this aspect in this case has not been challenged, and it was known from the Sovereign decision well before the order of 15 December 2008 that in a solvent scheme issues could be raised which required scrutiny of the assessment of the voting: c.f. Re. Sovereign Marine & General Insurance Co. Ltd. [2007] EWHC 1331 (Ch), [2006] EWHC 1335 (Ch), [2006] BCC 774. This was not a case, as the Noters appeared to suggest, of them having submitted documents to the petitioners in an awareness that litigation would ensue and might be contested: the documents were lodged in a legal process and it is in that same legal process that inspection is sought. A policyholder deciding to participate in the voting and deciding to have a valuation of his interest for voting purposes puts himself in a position where he may be in opposition to other policyholders. In some cases he will be in opposition to the scheme, in other cases in support of it; but in either event the process will be potentially adversarial. The Noters' argument that they were entitled to withhold scrutiny of documentation relating to their claims on grounds of privilege would produce extreme results, for example if they objected to the documents being seen not only by other creditors but also by the Reporter, on grounds that his firm might act or have acted for other creditors or competitors in the market. The confidentiality agreements relied upon by the Noters did not take them anywhere. Those agreements recognised the potential for disclosure; and, in any event, parties could not, by private agreement, escape the ordinary consequences of taking part in a legal process.

[15] Mr McNeill QC submitted that the question of waiver did not depend on the nature of the privilege which was asserted. The basic rule in Scotland was that where a party who was entitled to claim legal professional privilege nonetheless deployed some of the privileged material in litigation, he may be held to have waived privilege in that material. The waiver will not necessarily be confined to the privileged material deployed by the party but may extend further to other parts of that privileged material. A party who makes a partial waiver of privileged material is not entitled to "cherry pick" from that material, so as to deploy that part which suits him without revealing other parts which might not suit him. In Scotland the leading authority was Wylie v. Wylie 1967 SLT (Notes) 9. Mr McNeill QC referred also to the recent decision of Morgan J in Digicell Ltd. v. Cable & Wireless plc [2009] EWHC 1437 (Ch) and the summary of the law contained at para 16 of the judgement of Elias J sitting as President of the Employment Appeal Tribunal in Brennan v. Sunderland City Council [2009] ICR 470. The legal principles applicable to waiver of privilege were the same north and south of the border, albeit that in Scotland, apparently unlike England, it was not necessary to wait until one party had used the otherwise privileged material in evidence before the question of waiver could be raised and decided: see Whitbread v. Goldapple 2005 SLT 281 and BSA International SA v. Irvine 2009 SLT 1180. Here the court was not concerned with "cherry picking" in the sense of a party seeking to disclose only part of privileged material on a particular issue. The question here was as to whether, having disclosed the privileged material to one party in the process, for it to be relied on in the process and for conclusions based on it to be put it before the court, it could withhold disclosure from other parties to the process. But the basic principle underlying the rule was analogous. It concerned fairness between parties in litigation and in the deployment of relevant material, though it was recognised that fairness alone was not the "touchstone" by which the question of waiver of privilege was determined: Paragon Finance Ltd. v. Freshfields [1999] 1 WLR 1183 at p.1194B. "Cherry picking" was but one example of a wider principle. Any person seeking to pursue a claim in litigation in competition with others waives any privilege in respect of documents put forward to an adjudicating officer in support of his claim. The position was the same where the claim was put forward in a judicially controlled statutory process, which had to be open to appraisal and challenge.

[16] For the Noters, Mr Hanretty QC pointed out that all the cases cited concerning waiver of privilege were "cherry picking" cases. They were not in point here. The Noters were not originally parties to these proceedings. They had become parties to these proceedings only because they sought to protect the confidentiality and privilege attaching to the documents which they had submitted. Nor did the Noters seek in this litigation to place reliance in any way upon the documents which they provided to the petitioners. To use the language of Elias J in Brennan, they placed no cherries before the court. He referred to the confidentiality agreements entered into between the petitioners and the Noters in 2005 and 2008. That of July 2005 was between the petitioners and Creditor 59, whereas that of November 2008 was between the petitioners and Creditors 105 and 106. They were the basis upon which documents had been produced to the petitioners. The fact that those agreements referred to the possibility of documents having to be produced in court as a result of a court order did not give rise to any argument that the Noters had waived the power to withhold them. The inference was quite the opposite - the agreements gave the Noters the opportunity to assert privilege. The case of Brennan showed that waiver was not easily established. The onus lay on the respondents. If the respondents' argument was successful, it would mean that no solvent scheme could ever succeed, since no one wishing to maintain confidentiality in their documents could take part in the voting process without waiving their right to privilege.

[17] Mr Hanretty referred to a number of cases in which privileged material placed in the hands of another party remained protected from an opponent in litigation. These included Gotha City v. Sotheby's [1998] 1 WLR 114, in which the Court of Appeal referred with approval to the following excerpt from Style and Hollander on Documentary Evidence:

"If A shows a privileged document to his six best friends, he will not be able to assert privilege if one of the friends sues him, because the document is not confidential as between him and the friend. But the fact six other people have seen it does not prevent him claiming privilege as against the rest of the world."

He also referred to Goldman v. Hesper [1988] 1 WLR 1238, a case concerned with taxation of costs, British Coal Corporation v. Dennis Rye Ltd. (No.2) [1988] 1 WLR 1113, USP Strategies v. London General Holdings Ltd. [2004] EWHC 373 (Ch) and Barclay v. Morris 1997 SC 74 as examples of cases in which there could be a relaxation, or release, of privilege for limited purposes. He submitted that in this case privilege was relaxed so far as submission of the documents to the chairman of the meetings and the scheme actuaries was concerned, but not beyond that. It was for the chairman as adjudicating officer, exercising his functions under the scheme, to determine the voting entitlement of each participating creditor. In answer to a question from the court, he accepted that privilege would be relaxed also vis-a-vis the Reporter appointed by the court and any assistants that he might employ. He also accepted that there was some force in the respondents' position that once a party takes part in a judicial process he has to take it "warts and all". Nonetheless, he insisted that the use of the documents in the process did not involve a waiver of privilege to the extent contended for. Privilege was not lightly to be interfered with. There was no basis for a finding of waiver in the present case. If that meant that the court did not have the full information before it, so be it. The privileged documents should not be produced in any form, redacted or otherwise.

[18] The petitioners' interest lies in obtaining sanction for the scheme. Their interest in this application arises out of a practical consideration, namely a concern that if the Noters' documents were not made available so as to enable the votes and the attribution of value to be adequately scrutinised in the face of a serious challenge, the court might not feel able to give its sanction to the scheme. Accordingly, although Mr Howie QC, acting for them, formally adopted a neutral stance, it quickly became one of armed neutrality with the guns pointed decidedly towards the Noters' position. He submitted that all the documents for which privilege was now claimed were made available to the petitioners for the purposes of the scheme. The first confidentiality agreement, that between the petitioners and Creditor 59, was irrelevant, since it related to the 2005 petition which had been abandoned. Only the second confidentiality agreement, that between the petitioners and Creditors 105 and 106, related to the present scheme. In providing documents for the purposes of the scheme, those creditors will have known that they would have to be shown to various people in terms of the scheme, so that a value could be placed upon claims made by creditors for the purpose of determining whether the scheme was approved by a majority in number of the creditors and, more significantly here, by a majority of 75% in value. The scheme required to come before the court for its sanction, and it was open to objectors to come before the court and contend that sanction should be refused, either as a matter of discretion or because the statutory majorities had not in fact been achieved. It was therefore open to objectors, in an appropriate case, to challenge the values attributed to the votes. And it was open to the petitioners to defend the values which had been placed upon the votes cast for and against the scheme. The interests of the petitioners supporting the scheme were as important as those of the respondents who opposed it. Both petitioners and respondents had an interest in the documents being made available for scrutiny. The Noters could have decided not to participate; or they could have decided to produce non-privileged material in support of their claims. Instead, they did participate and they put forward material which, it is to be assumed for present purposes, included privileged material. They put that material forward for adjudication under the scheme and the chairman, taking into account (a) that documentation, (b) any information available to the petitioners from their records, (c) the advice of the Scheme Actuarial Adviser applying Estimation Guidelines mentioned in the scheme and (d) the report of the Independent Vote Assessor, determined the value for voting purposes of their claims. Any challenge made by objectors, such as the respondents, must involve an assessment of all that material. Similarly, if the petitioners are to be able to meet that challenge, they must be able to support the valuation given by the chairman by reference to the whole of the material before him. The Noters' argument, if successful, would mean that the challenge and the defence to that challenge would proceed upon an entirely false basis, i.e. without the primary material upon which the chairman reached his valuation. Having lodged the documentation and achieved a certain result, the Noters now wished, in effect, to take that documentation back. In short, the arguments for the respondents were correct. If a party decides to vote, he is acting so as to waive privilege in the documents submitted for that purpose. It was not necessary here to consider whether privilege might be lost in other related documents. That was not in issue. But in respect of the documents that he did put in for the purpose of voting under the scheme, he clearly waived privilege, albeit only for limited purposes, only as regards the other participants, and only so far as necessary to enable proper scrutiny to be given to the value attributed to their votes. After all, in a court supervised process the documentation was available not only to the Scheme Actuarial Advisers and the Independent Vote Assessor but also to the court appointed chairman of the meetings, for the purpose of him reporting to the court, and, if he wanted to see it, to the Reporter who acted throughout the process as the eyes and ears of the court. The respondents' argument would involve the court, through the Reporter, in effect receiving evidence from one party and not allowing other interested parties to have the opportunity of challenging it. That was fundamentally wrong.

[19] Mr Howie emphasised that a finding of waiver did not deprive the Noters of all protection as regards confidentiality in their documents. First, because the process was a court process, there was an implied obligation of confidentiality, so that documents obtained for the purpose of the process could not be used for any other purpose: Iomega Corp. v. Myrica (UK) Ltd. 1998 SC 636. Secondly, the court was always prepared to allow redaction of material to protect commercial confidentiality, provided that this was consistent with the fair disposal of the proceedings. There had to be a balancing exercise. The interlocutor of 10 July 2008 sought to do this. Third, it should not be assumed that this problem was likely to occur often. To that extent Mr Hanretty was unduly pessimistic in submitting that if the argument for waiver was upheld, no solvent scheme would ever be sanctioned. The court will not allow full investigation into the voting process unless a sufficient case is made out. In any event, the submission for the Noters that it was of no concern if the scheme failed for want of any ability on the part of the court properly to scrutinise the voting, was inconsistent with the policy of the Act sanctioned by Parliament. The petitioners are entitled to come to court to seek sanction for the scheme, and that statutory right should not be stultified by the fact that a supporting creditor wished to take back his documents. This, ultimately, was a straightforward case of waiver and the plea of waiver should be upheld.

Discussion

[20] There are strong policy reasons behind the doctrine of legal professional privilege. However, it is clear that the privilege may be waived. It is waived expressly when a party discloses or relies on documents which the privilege would entitle him not to disclose. The waiver may extend beyond the specific documents disclosed or relied on. This is sometimes regarded as a form of implied waiver. It is in this area that difficulties have often arisen. Waiver is not lightly to be inferred. As the cases demonstrate, the courts have proceeded carefully in considering claims of implied waiver. The summary of the principles set out by Elias J at para 16 of his judgment in Brennan explains the typical circumstance in which a claim that privilege has been waived tends to arise. That is where a party to legal proceedings refers to and seeks to rely upon part of a document, or part of a series of documents, containing privileged material. In such cases there is a concern that he may, inadvertently or otherwise, be guilty of "cherry picking", putting forward the good bits without allowing sight of the bad bits, or, perhaps more dispassionately, without affording the opposite party a proper opportunity of seeing the parts relied upon in their proper context. As Lord Bingham put it in Paramount at p 1188D, a party may not waive privilege in such a partial and selective manner that unfairness or misunderstanding may result. The summary at para 16 of Brennan refers to many of the leading English cases on the question. That same approach applies also in Scots law, where the basic principle was set out by Lord Fraser in Wylie. It has been applied, in differing circumstances, in Whitbread Group Ltd. v. Goldapple and BSA v. Irvine amongst other cases.

[21] This case is not a case of cherry picking. It raises a rather different problem which is not addressed in the authorities. Before seeking to answer it, it is important to understand the context in which the question arises. That involves a consideration of the process in which the Noters participated when submitting their documents, including privileged documents, to the petitioners.

[22] The application for sanction of the scheme of arrangement is made under section 899 of the Act. The court has a discretion as to whether or not to sanction the scheme, but only where a majority in number representing 75% in value of the creditors, or each class of creditors, agree to it. That agreement must be expressed by a vote taken at the meeting or meetings of the creditors summoned under section 896 of the Act. In terms of that section, the meeting is summoned pursuant to an order of the court. It has long been the practice of the court in Scotland and, I suspect, in the companies court in London, to give directions, in the order requiring the meeting to be summoned, regulating the conduct of the meeting. The court appoints the chairman. It sets out the power of the chairman as regards such matters as acceptance of proxy votes and what is required by way of evidence to support a person's claim to represent a scheme creditor. The order directs the chairman to fix the value to be placed upon creditors' claims for the purpose of voting at the meeting. In terms of the obligation on the chairman to fix that value for that purpose, the interlocutor of 15 December 2008 required him, failing agreement,

"to fix that amount in such manner as shall appear to [him] to be fair and reasonable having regard to (a) any supporting information produced by the Scheme Creditor, (b) the information available to the Company [i.e. the petitioners] from its own records, (c) any advice received from the Scheme Actuarial Adviser mentioned in the Scheme, who shall apply the principles mentioned in the Estimation Guidelines mentioned in the Scheme and (d) the report of the Independent Vote Assessor mentioned in the petition ..."

The interlocutor required him to report the outcome of the meetings to the court.

[23] The chairman does not act on behalf of the court, but he does act pursuant to its order; and he plays his part in the statutory process pursuant to which the court is invited to sanction the scheme. The scheme cannot be sanctioned by the court without there having been a meeting summoned at the instance of the court at which the votes of creditors not only have to be counted numerically but their value, for voting purposes, has to be assessed. In these circumstances, when creditors who wish to vote for or against the scheme submit documentation showing that they are creditors, they do so against a background where it is clear that that documentation will be assessed for two reasons: first, to establish their status as creditors, and creditors of a particular class (in this case IBNR and non-IBNR); and second, so that the chairman, on expert advice, can fix a value for their claims for voting purposes. Further, it is inherent in the statutory scheme that where the scheme is contentious, any decision by the chairman fixing the value of their claims may be subject to challenge by creditors with an opposing interest. That challenge may go to the question of the exercise of the court's discretion; or it may go to the question of whether the threshold entitling the court to sanction the scheme has been crossed: see paras [34]-[40] of my earlier Opinion in this matter. Another line of argument is suggested in para [48] of the Opinion of the Inner House delivered by the Lord President, where he refers to the possibility, subject to amendment of the respondents' answers to the petition, of a contention that some of the creditors who voted in favour of the scheme had a special interest by reason of their compositions had been agreed privately with them in advance of the vote. The precise circumstances that may arise in a particular case do not matter; what is clear is that the voting, the fixing of the value of creditors' claims for the purpose of voting and, in some cases, the motivation behind some creditors giving support to the scheme, may all in an appropriate case be subject to scrutiny at the instance of other creditors with a different interest and, ultimately, by the court.

[24] The meeting summoned under section 896 of the Act is the second stage of a process which begins with the court order requiring the meeting to be summoned, moves through the creditors' meeting itself, and ends with the application to the court for sanction of the scheme under section 899. In formal terms, the process is a single court process, which is begun by petition and ends when the prayer of the petition for sanction of the scheme is granted or refused. But the role of the court, in Scotland at least, is not limited to the grant of the first order, the regulation of procedure and the substantive hearing to decide whether sanction will be granted. Invariably in company petition procedure in Scotland, the court appoints a Reporter

"to enquire into and report to the Court upon the facts and circumstances set forth in the petition and the regularity of the present proceedings."

The wording is that of the interlocutor of 15 December 2008. The Reporter is, as Mr Howie QC submitted, the eyes and ears of the court. He is there to assist the court, to ensure that there is before the court an impartial assessment of the relevant material. The work of the Reporter is invaluable in cases where there is no real opposition to the order sought by the petitioner. But it can also be important even in a case where there is an opponent to challenge the grant of the relief sought in the petition. As part of his role, the Reporter will be expected to report on the facts and circumstances set out in the petition and relating to the steps in the process, and to focus particularly on those matters which appear to him to merit further scrutiny. In a case where there is a real question as to the value of creditors' claims fixed by the chairman of the meeting for voting purposes, the Reporter is entitled, indeed bound, to make such enquiries as he thinks necessary to enable him to report adequately to the court. Those enquiries may involve him in scrutinising some of the work carried out by the chairman of the meeting in fixing the value of creditors' claims, and, in cases where a real issue is raised, assessing both the methodology used by the chairman and those advising him and the consistency of its application to claims of creditors supporting and opposing the scheme.

[25] Accordingly, creditors lodging documentation with the petitioners for voting purposes are lodging it in a court process which is always potentially adversarial and may well become highly contentious. This to my mind is where Mr Hanretty's reliance on the excerpt from Stile and Hollander breaks down; the example given there is of documents being revealed to friends outside the court process, whereas here the documents are given within that process for the purpose of being used and relied upon by the petitioners and, in a real sense, the Noters, who want the scheme to succeed. The Noters lodged the documentation knowing that it would be examined by the Scheme Actuarial Adviser and, possibly, by the Independent Vote Assessor, and knowing also that it might be subject to inspection and scrutiny by the Reporter, who will incorporate his findings on it in his report to the court. By submitting their documentation to the petitioners and allowing it to be assessed by the chairman, with the help of professional advisers, and allowing it to be seen, if called for, by the Reporter, and knowing that reports based upon it (amongst other material) will be placed before the court, all for the purpose of satisfying the court that the requisite majorities in number and in value have been achieved, the creditors must be taken, in my opinion, to have waived, vis-a-vis other creditors and those involved in the court process, any privilege in the documents that they may have had. That is not to say, of course, that the court will allow the documents to be put into circulation without any regard for legitimate concerns about commercial confidentiality. That is a different matter and the court is both willing and able, so far as is consistent with the fair disposal of the petition, to take steps to protect such confidentiality. That was the purpose of the very detailed order made by the court on 10 July 2009 and, if the waiver argument is upheld, further discussion about the provisions of that order may well be appropriate. But the willingness of the court to uphold commercial confidentiality is, as I have said, an entirely different matter from the question of whether privilege in the documentation has been waived.

[26] Seen in this light, it is, I think, clear that the Noters' reliance on the confidentiality agreements between themselves and the petitioners is misplaced. I put to one side the fact that the confidentiality agreement of 16 June 2005, between the petitioners and Creditor 59, relates to an earlier petition. I also put to one side of the fact that both confidentiality agreements anticipate that there may be applications in the legal process by which sanction is sought, i.e. the petition process, to compel disclosure of the documents otherwise protected by the agreements, a fact which seems to me to indicate that the parties to the confidentiality agreements were fully aware that disclosure might have to be given pursuant to an order of the court. Of greater importance, to my mind, is the fact that the documents are submitted to the petitioners as part of the court process which I have described, and were relied on by both the petitioners and the Noters in order that a vote of appropriate value would be registered in support of the arrangement and , therefore, in support of the petitioners' application to the court for sanction. There is no room in such a process for a party who has lodged evidence to seek by private agreement to prevent its circulation to other parties to the litigation. The cases in which, for security reasons, evidence has been permitted to be led by one party while being kept secret from the other parties to the litigation are far removed from the present. Whatever one may think of them, they can provide no support for the position of the Noters in the present case.

[27] There are certain cases, of which Goldman v. Hesper is one, where privileged documents lodged by one party to a litigation have been withheld from the other. The well-known example, exemplified in that case, concerns taxation of costs. The rules of court in that case required that a party who began proceedings for taxation of his costs was required to lodge in process all relevant documents, including instructions to counsel and solicitors' correspondence, all material which is, on the face of it, covered by legal professional privilege. In the Court of Appeal, Taylor LJ, with whom the other members of the court agreed, upheld the decision of the judge that the other party was not entitled to see that this privileged material. He said, at p.1244:

"It is therefore clear that there is now a statutory requirement on a claimant for costs to disclose privileged documents to the court. Normally, where privilege exists it applies to protect disclosure not only to the opposing party, but also to the court. So the rule clearly makes inroads into the general protection. It follows that once a party puts forward privileged documents as part of his case for costs some measure of their privilege is temporarily and pro hac vice relaxed. In most cases ... no problem would arise on taxation about privilege. However, when the problem does arise the taxing officer has the duty of being fair to both parties: on the one hand, to maintain privilege so far as possible and not disclose the contents of a privileged document to the paying party unnecessarily; on the other hand, he has to see that that party is treated fairly and given a proper opportunity to raise a bona fide challenge. The contents of documents will almost always be irrelevant to considerations of taxation which are more concerned with time taken, the length of documents, the frequency of correspondence and other aspects reflecting on costs. ... There may be instances in which a taxing officer may need to disclose part, if not all, of the contents of a privileged document in striking the appropriate balance. He will no doubt use all his expertise and tact in seeking to avoid that situation wherever he can. I do not envisage it occurring, except very rarely. Of course it is always open to the claimant not to rely on privileged documents which he regards as peculiarly sensitive."

An important feature of that type of case, as Taylor LJ pointed out, is that the contents of documents will seldom be relevant to considerations of taxation. In Bourns Inc. v. Raychem Corporation [1999] FSR 641, another case concerned with taxation of costs, to which I referred in BSA v. Irvine, the court suggested that disclosure might be ordered for a limited purpose and upon terms. In a case such as that, where the contents of the documents were likely to be of little importance, this may provide a solution.

[28] In my opinion, however, this line of authority does not assist the Noters in the present case. In the petition for sanction of the scheme of arrangement, the value fixed for voting purposes of the claims put forward by the various creditors is absolutely central to the issues before the court, both because it goes to discretion and also, and more importantly, because it goes to the question of whether the jurisdictional threshold for sanction has been crossed. It is essential, in the rare case where there is a full challenge to the voting process, that the documents lodged by creditors for the purpose of valuing their claims for voting purposes should be available to the other parties to the process. That does not mean that commercial confidentiality will not be protected so far as possible. But the protection of commercial confidentiality is a quite different question from that of privilege and waiver of privilege. Steps taken to protect commercial confidentiality will not prevent the substance of the documents being scrutinised so far as is relevant to the exercise to be undertaken and should still enable a proper assessment to be made as to the fairness and consistency of the valuation process. A careful balance may have to be drawn between, on the one hand, the desire to protect confidentiality and, on the other, the legitimate interests of other parties to examine the facts relevant to the dispute, but ultimately the interests of justice must prevail. By contrast, where privilege is asserted and arguments of waiver are raised in opposition, the exercise is entirely different. The court is not concerned to weigh the balance so much as to give effect to legal rights. Privilege is a legal right, established for good policy reasons. If it exists, and has not been waived, it may be asserted even though the consequence is that relevant material is not before the court. Waiver is also a question of law. If privilege has been waived, then it has been waived as between the parties to the litigation, subject in some cases to a consideration of the purpose for which the documents were used, a factor which cannot be relevant here for reasons already discussed. There is no question of exercising some discretion, deciding where the balance lies between disclosure and non-disclosure. If the waiver is established, as in my opinion it is here established, then the documents must be produced and may be seen by other parties to the proceedings subject to whatever conditions may be imposed by the court on the quite separate grounds of commercial confidentiality.

Disposal

[27] For the reasons set out above, I uphold the argument for the respondents that any legal professional privilege in the documents submitted by the Noters to the petitioners has been waived. The next stage is for the parties to finalise the arrangements for allowing inspection of the documents subject to such measures as are reasonably necessary to protect commercial confidentiality. I shall put the case out By Order to discuss what steps are necessary to progress this matter.