F & C Reit Property Asset Management Plc v Friends First Managed Pension Funds Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Murphy
• Judgment Date: 01 June 2017
• Neutral Citation: [2017] IEHC 383
• Docket Number: [2015 No. 3510 P]
• Court: High Court
• Date: 01 June 2017

BETWEEN

F&C REIT PROPERTY ASSET MANAGEMENT PLC

PLAINTIFF/RESPONDENT

AND

FRIENDS FIRST MANAGED PENSION FUNDS LIMITED

DEFENDANT/APPLICANT

[2017] IEHC 383

Murphy Deirdre J.

[2015 No. 3510 P]

THE HIGH COURT

Practice & Procedure – O.31, r. 18 of the Rules of the Superior Courts – Inspection of disclosed documents – Legal professional privilege – Litigation privilege – Calculation of fees

Facts: The defendant/applicant filed an application for inspection of certain documents disclosed by the plaintiff/company in an affidavit of discovery sworn by the general counsel of the plaintiff/company. The said counsel claimed legal professional and litigation privilege over the documents in question.

Ms. Justice Murphy made an order to the effect that the defendant/applicant was entitled to inspect all the documents over which legal professional and litigation privilege had been claimed. The Court held that in order to determine whether the plaintiff/company could claim asserted privilege, the Court must look to the evidence and the capacity in which counsel worked. The Court held that counsel had worked as the principal and conducted negotiations as to the contents of the investment management agreement and thus, no privilege could be attached.

EX TEMPORE JUDGMENT of Ms. Justice Murphy delivered on the 1st day of June, 2017.

1 This is the defendant's application for inspection of certain documents disclosed by the plaintiff in an affidavit of discovery sworn by its general counsel and partnership secretary, Paul Meads, on 21st November, 2016. The application is brought pursuant to O. 31, r. 18 of the Rules of the Superior Courts. That rule requires that the application be founded on an affidavit showing:-

'...of what documents inspection is sought, that the party applying is entitled to inspect them and that they are in the possession or power of the other party.'

The only matter in issue between the parties is the defendant's entitlement to inspection of certain documents. The parties indicated to the Court that the application is urgent on the grounds that this case has been strictly case managed and is due for hearing in November, 2017.

2 The underlying dispute between the parties concerns fees allegedly due to the plaintiff arising from an investment management agreement between the parties which commenced in 2010 but in respect of which a written agreement was not concluded until July, 2012. Pursuant to the said agreement, the plaintiff claims entitlement to a performance fee of in excess of £5 million; alternatively the plaintiff seeks an order calculating the sum due; or in the further alternative, rectification of the investment management agreement to reflect the true agreement of the parties.

3 This application is grounded on the affidavit of Eugene McGibney, head of investment of the defendant company, who avers that he was directly involved in the negotiation of the investment management agreement. He sets out the documents of which inspection is sought being a number of internal emails of the plaintiff company, passing between Paul Meads, general counsel and partnership secretary, Des Dennehy, director property funds, Nick Criticos, chief executive and Iain Reichwald, whose status relative to the plaintiff company, is not clear to the Court. Three of the emails of which inspection is sought, BMO-0311, BMO-0315 and BMO-0354, were sent during the negotiation of the terms of the investment management agreement in the months of February and March, 2012. Two other emails post-date the signing of the agreement in July, 2012. These are dated 21st/22nd March, 2013 and 4th September, 2013.

4 The other documents identified by the applicant of which inspection is sought are a number of draft performance fee calculations prepared by the plaintiff between 4th/5th September, 2013 and 18th September, 2013.

5 The affidavit of discovery in this case was sworn by Paul Meads, general counsel and partnership secretary of the plaintiff company. He has claimed legal professional privilege in respect of the foregoing five emails and litigation privilege in respect of the fee calculations. On the hearing of this motion, counsel for the plaintiff submitted that these documents enjoyed legal professional privilege as well as litigation privilege though such a position was not advanced in the affidavit of discovery.

6 On the hearing of the motion there was no real difference between the parties on the applicable law. Both parties agreed that where legal advice privilege exists, it is absolute. Both parties agreed with the definition in McGrath on Evidence, 2nd Ed., (Dublin, 2014) as set out at para. 10-36:-

'The definition of lawyer for this purpose includes, obviously, solicitors and barristers but also salaried in-house legal advisers, foreign lawyers, and the Attorney General.'

There is no dispute that Mr. Meads, the deponent in the affidavit of discovery, is a solicitor and though not on affidavit, counsel for the applicant accepted that he had at all material times a practicing certificate.

7 While in principle, legal professional privilege can attach to in-house legal advisers, whether or not privilege actually attaches will depend on the facts of the particular case. Courts have had no difficulty in deciding those cases where an organisation has a separate legal department whose purpose is to advise the organisation. This is clear from the review of legal professional privilege by Barr J. in McMahon v. Irish Aviation [2016] IEHC 221. More difficult are those cases where a lawyer appears to have a multiplicity of roles or functions within a company. If a lawyer within a company structure acts as a principal rather than as an independent adviser, then the privilege does not attach. In Alfred Crompton Amusement Machines Limited v. Customs and Excise Commissioners (No. 2) [1972] 2 Q.B. 102, Lord Denning M.R. identified the problem as follows:-

'I have always proceeded on the footing that the communications between the legal advisers and their employer (who is their client) are the subject of legal professional privilege [...]

I speak, of course, of their communications in the capacity of legal advisers. It does sometimes happen that such a legal adviser does work for his employer in another capacity, perhaps of an executive nature. Their communications in that capacity would not be the subject of legal professional privilege. So the legal adviser must be scrupulous to make the distinction.'

The problem presented by lawyers who perform a multiplicity of roles within a company appears to have had greater scrutiny in other jurisdictions. Mr. Farrelly B.L. on behalf of the applicant cited Telstra Corporation Limited v. Minister for Communications, Information Technology and the Arts (No. 2) [2007] FCA 1445. In his judgment, Graham J. quoted Tamberlin J. in Seven Network Limited v. News Limited [2005] FCA 142. That latter case concerned the legal professional privilege of the chief general counsel for News Limited, a Mr. Philip. At para. 38, Tamberlin J. stated:-

'... I am cognisant of the fact that there is no bright line separating the role of an employed legal counsel as a lawyer advising in-house and his participation in commercial decisions. In other words, it is often practically impossible to segregate commercial activities from purely "legal" functions. The two will often be intertwined and privilege should not be denied simply on the basis of some commercial involvement ... In many circumstances where in-house counsel are employed there will be considerable overlap between commercial participation and legal functions and opinions ... I am not persuaded that in this proceeding Mr Philip was acting in a legal context or role in relation to a number of the documents in respect of which privilege was claimed. Nor am I persuaded that the privilege claims were based on an independent and impartial legal appraisal.'

Graham J. went on to observe:-

'... there is no evidence, as I have earlier remarked, going to the independence of the internal legal advisers involved in the communications said to have been brought into existence for the dominant purpose of providing or receiving legal advice.'

The Court went on to hold that certain documents in issue were disclosable.

8 In respect of in-house counsel who are directly involved in negotiations, Mr. Farrelly B.L. opened Georgia Pacific Corporation v. GAF Roofing Manufacturing Corporation No. 93 Civ. 5125 (RPP), 1996 U.S. Dist. LEXIS 671 (S.D.N.Y. Jan. 25, 1996). That case involved the entitlement to legal professional privilege claimed by a lawyer involved in the negotiation between the plaintiff and the defendant. The Court held:-

' Since Mr Scott [the lawyer] negotiated the environmental terms of the Agreement, GP is entitled to know what environmental matters he determined would not be covered in the proposed agreement; the extent to which they were covered in the provisions he negotiated in the Agreement; and whether Scott advised GAF Management of the degree to which his negotiations had left GAF protected and unprotected. Only by such testimony can it be determined whether GAF, as a matter of business judgment, agreed to assume certain environmental risks when it entered the Agreement.'

The Court went on to state:-

'It seems clear Mr. Scott [the lawyer] acted as negotiator of the terms of Schedule 1 and that his conversation ... as regards the status of the negotiations, the tradeoffs that Mr. Scott perceived GP was willing to make, and GAF's options, involved business judgments of environmental risks. Such reporting of developments and negotiations, if divorced from legal advice, is not protected by the privilege under New York law.'

9 It appears to the Court that whether or not legal professional privilege attaches to a lawyer employed by a...