Linfen Ltd and Others v Rocca and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice John MacMenamin
• Judgment Date: 13 March 2009
• Neutral Citation: [2009] IEHC 292
• Court: High Court
• Date: 13 March 2009

Linfen Ltd & Ors v Rocca & Ors

BETWEEN/

LINFEN LTD., ZEIST ENTERPRISES LTD., THE SIMMONS TRUST CO., KINGSLINE PROPERTIES LTD., MARTIN SIMMONS, CHARLIE SHERLING, VINCENTE ALONSO AND JOHN PARNELL

PLAINTIFFS

AND

PATRICK J. ROCCA, LAURA ROCCA MAHONY, BERNARD ROCCA, BELETON LTD., PATRICK N. ROCCA, ARTHUR COX (A FIRM), BDO SIMPSON XAVIER (A FIRM) AND NATIONAL IRISH BANK LTD.

DEFENDANTS

[2009] IEHC 292

[No. 10315 P/2002]

THE HIGH COURT

Abstract:

Practice and procedure - Discovery - Parties - Multi party action - Agents who combine that role with one as professional adviser - Appropriate parties to make discovery - Documents in possession or power of party - Relevance - Necessity - Whether orders for discovery should be made against principal, agent or professional adviser who combines both roles - Rules of the Superior Courts 1986, O 31, r 12.

Facts the proceedings arose out of the sale of two companies by the first five defendants to the plaintiffs. The plaintiffs alleged that the sixth defendant acted in breach of contract and negligently in the transaction and that a conflict of interest arose. The plaintiffs sought discovery of twelve categories of documents from the sixth defendant who had acted as legal adviser to both parties in the transaction. The Master made an order directing the sixth defendant to make discovery of four categories of documents and limited in scope to documents that may not have been encompassed in prior disclosure of files, in the context of the sixth defendant having previously provided its full file to the plaintiffs. The plaintiffs appealed the order of the Master on the basis that it was insufficiently broad and the sixth defendant cross-appealed the order on the basis that the discovery ordered was not relevant or necessary.

Held by MacMenamin J in varying the Master's order so as to broaden its scope that documents held by an agent in that capacity were deemed to be in the possession of that agent's principal and therefore discovery should properly be sought against the principal, while by contrast, documents prepared by a professional adviser in that capacity were not deemed to be in the client's possession and discovery of the relevant documents should properly be sought against the professional adviser rather than the client.

That, in a multi party case, discovery had to be necessary between a particular applicant and respondent. In considering whether discovery should be ordered against a respondent party in a multi party action, the following factors had to be considered:

the evidence on the extent of discovery or disclosure already made;

the identity and legal status of the parties to the motion (for example as to whether they were principal or agent);

issues in the action as between the parties to the motion as they appeared from the pleadings;

degree or nature of engagement of the parties in such disputed issues;

whether discovery directed to another party might be more expeditious, economic, effective or less burdensome;

whether there was an alternative or more economic means of proof available to the applicant;

the attitude of the defendant or other defendants as discernable from the pleadings, correspondence or their responses to discovery already brought, and;

whether there were any identified deficiencies in the discovery order obtained.

Leicestershire County Council v. Michael Faraday and Partners [1941] 2 KB 205 considered. Bula v. Tara Mines [1994] 1 ILRM 111 applied.

Reporter: P.C.

RSC O.31 r12

RSC O.31 r12(1)

RSC O.31 r12(2)

LEICESTERSHIRE CO COUNCIL v MICHAEL FARADAY & PARTNERS LTD 1941 2 KB 205

BULA LTD v TARA MINES LTD (NO 6) 1994 1 ILRM 111 1993/6/1653

ABRAHAMSON & FITZPATRICK & DWYER DISCOVERY & DISCLOSURE 2007 36

RSC O.31 r12(3)

COMPAGNIE FINANCIERE ET COMMERCIALE DU PACIFIQUE v PERUVIAN GUANO CO 1882-83 11 QBD 55

RULES OF THE SUPERIOR COURTS (NO 2) (DISCOVERY) 1999 SI 233/1999

RYANAIR PLC v AER RIANTA CPT 2003 4 IR 264 2004 1 ILRM 241 2003/46/11374

COOPER-FLYNN v RTE 2000 3 IR 344 2001 1 ILRM 208 2000/4/1394

FRAMUS LTD & ORS v CRH PLC & ORS 2004 2 IR 20 2004 2 ILRM 439 2004/18/4116 2004 IESC 25

VLM LTD v XEROX (IRL) LTD UNREP CLARKE 25.2.2005 2005/57/12052 2005 IEHC 46

HANNON v CMRS OF PUBLIC WORKS & ORS UNREP MCCRACKEN 4.4.2001 2001/11/3168

RSC O.31

RSC O.31 r29

1 1. This matter comes before the court on foot of two notices of motion brought respectively by the plaintiffs, and the sixth named defendant (Arthur Cox), appealing orders made by the Master directing discovery. The judgment deals with the tests of necessity and relevance as understood in the context of discovery pursuant to O. 31, r. 12 of the Rules of the Superior Courts 1986 (as amended); considerations which arise in identifying whether orders for discovery should be made as against a principal, agent, or a professional adviser who combines both roles, and also certain discretionary factors which may be taken into account in identifying which party should appropriately make discovery in a multi-party action.

The proceedings

2 2. The proceedings arise out of the sale of two companies, Rocca Tiles Ltd. and Tilebusters Ltd. ("the companies") pursuant to a share sale agreement dated 26 ^th May, 2000, by the first five named defendants ("the Rocca defendants") to the first named plaintiff ("Linfen"). The plaintiffs, who were investors in Linfen, and thereby effectively the purchasers of the Rocca companies, make a number of claims of breaches of warranty, misrepresentation and deceit against these first five defendants. It is alleged that there was want of disclosure and/or concealment of certain financial information relating to the business of the companies at the time of the sale and beforehand. The allegations against the sixth named defendant are set out below. The Rocca defendants are not directly concerned in these applications.

3 3. Arthur Cox, the sixth named defendant, acted for both the plaintiffs and the Rocca defendants in relation to the sale. That firm pleads that this situation arose at the request and with the consent, of all parties and that an arrangement was put in place whereby Mr. Michael Meghen, one partner in the firm, acted on behalf of the purchasers/plaintiffs and Mr. Rory Williams, another partner, acted on behalf of the Rocca vendor/defendants. It is said that this arrangement allowed for a "Chinese wall" between the solicitors who were acting for the parties to the sale.

4 4. The plaintiffs' case specifically against Arthur Cox is that they acted in breach of contract and negligently in the transaction. Particulars of the allegations are set out in the statement of claim. Inter alia the plaintiffs say that a conflict of interest arose in that Mr. Rory Williams (who acted on behalf of the vendors/Rocca defendants) was aware of a dispute between the Rocca companies and their largest trade debtor, a Mr. Patrick O'Connor, prior to the completion of the sale. They say that this dispute was wrongfully not disclosed to the plaintiffs/purchasers. This allegation is denied by counsel for Arthur Cox, for the reasons outlined. This respondent says that the plaintiffs' essential concern that there was a failure of duty is unfounded and that the solicitors for the parties to the sale in fact performed their obligations to their respective clients in a manner entirely consistent with their professional and fiduciary duties.

The discovery as originally sought by the plaintiffs

5 5. Before the Master, the plaintiffs sought discovery of twelve categories of documents from Arthur Cox. For clarity these categories must be fully identified. They were:

2 2 "1. All documentation relating to the role of the sixth defendant in acting for both parties in the purchase and sale of Rocca Tiles Ltd. and Tilebuster Ltd. ("the Rocca companies").

2 2. All documentation relating to measures or arrangements put in place or to be put in place to enable the sixth defendant to act for both sets of parties.

3 3. All documentation relating to the terms of the sixth defendant's retainer as solicitors for the plaintiffs.

4 4. All documentation relating to provisions of finance for the purchase of the Rocca companies and the provision of finance facilities to Linfen Ltd. and the Rocca companies.

5 5. All documentation including in particular correspondence or other communications between the sixth defendant and the seventh defendant BDO relating to purchase of the "Rocca companies" by the plaintiffs and the involvement of BDO therein.

6 6. All documentation relating to the terms and conditions of the engagement of Chapman Flood Mazars, including any advice given by the sixth defendant with respect thereof and all documentation relating to the due diligence conducted by Chapman Flood Mazars, including any advices given by the sixth defendant to the plaintiffs in respect thereof.

7 7. All documentation relating to advices concerning the negotiation, drafting and completion of the share purchase agreement including but not limited to advices on the provision of a reasonable mechanism to test compliance of the vendor's financial obligations under the said agreement.

8 8. All documentation relating to advice, if any, given by the sixth defendant to the plaintiffs regarding compliance by the vendors with their financial obligations under the share purchase agreement.

9 9. All documentation concerning actions, if any, taken by the sixth defendant to enquire into or otherwise check the performance of the Rocca companies between 26 ^th May, 2000 and 16 ^th June, 2000, including, at completion, and any advice given to the plaintiffs in respect thereof.

10 10. All documentation of whatever nature relating to the account of Rocca Tiles Ltd. and/or Tilebuster...