In Murray Consultants Limited and Nocrumb Limited.

Terence P. Horgan (petioner) V Patrick Joseph Murray and James Milton (respondents).

Practice and Procedure - Discovery - Motion issued in the context of section 205 proceedings - Whether documents issued to company were within the power or procurement of the respondents - Companies Act 1963 (No 33), section 205.

Practice and Procedure - Discovery - Legal professional privilege - Whether documents prepared in the context of negotiations for the settlement of avoidance of anticipated litigation are privileged.

The High Court (before Mr Justice O'Sullivan); judgement delivered 9 October 1998.

In the context of section 205 proceedings, documents which were in the possession of a company could be regarded as being within the power or procurement of those persons who controlled the company. Legal professional privilege extended to those documents which were created in an effort to avoid litigation.

Mr Justice O'Sullivan so held in compelling the production of documents by the respondents and in declaring documents in the possession of the petitioner to be privileged.

Paul Gardiner BL for the petitioner; Brian Murray BL for the respondents.

Mr justice O'Sullivan said list there were two issues before him. The first related to the Petitioner's motion for discovery in his section 205 petition. Heclaimed that the respondents had failed to refer to files of advise given to Murray Consultants Limited and Nocrumb Limited by several categories of third party advisers. There was a deep controversy between the parties in relation to the historical practice of running the two companies, of which the petitioner and the two respondents were directors.

The petitioner claimed that the business of the companies had been conducted by all three equally. He claimed that the advice of the third parties would tend to support this account. The question was whither these files were within the power of possession of the respondents.

The respondents had submitted that the advice was given to the companies and not to the respondents personally, and that the petitioner should issue a motion for Third party discovery.

Mr Justice O'Sullivan said that in the context of a section 205 application, the company could not be said to be a 'third party' in the usual sense of that term. The advices were given within the power of the respondents in The circumstances of the case and should be produced as part of discovery unless they were privileged.

The second issue arose from the respondents motion for discovery. The petitioner claimed privilege in relation to advice obtained by him in relation to the value of his shares on the ground that the advice was obtained for the purpose of litigation. This advice had been obtained while he was negotiating with the respondents for the purchase of those shares. Those negotiations had subsequently broken down. The respondents now claimed that this advice was not privileged since it was obtained for the purpose of avoiding litigation.

Mr Justice O'Sullivan said that there was no clear authority to say that a document was not privileged where it had been brought into existence specifically for the settlement negotiations of anticilusion in the judgment of Lord Justice Denning in Rabin v Mandosa & Co (1954) 1 All ER 247, at 248, which appeared to acknowledge that there can be a dominant intention of avoiding litigation, but that case did not decide that such a category of documents is not privileged.

Mr Justice O'Sullivan ruled that, in the absence of clear authority to the contrary, these documents were privileged. The policy of the courts is to encourage settlement and, in any event, it was his view that documents prepared for the purposes of litigation included those purposes of litigation.

There was a further issue in relation to a memorandum prepared by petitioner in the context of settlement negotiations specifically for the purpose of handing it to the respondents. The relationship had deteriorated rapidly and the memorandum had never been handed over.

Mr Justice O'Sullivan rejected the contention that the dominant intention under which this document came into being was the intention of handing it over to the respondents and that the document therefore was not privileged. It was unrealistic to require the production of such a document if the negotiations went sour, because this document still came into being for the purpose of litigation, albeit for the specific purpose of being presented to the other side as part of an effort t achieve compromise and so avoid litigation. This memorandum was privileged.

There was a further issue raised by the respondents in relation to notes prepared by the petitioner prior to the institution of proceedings, but after trust between the parties had broken down. These notes were described in the affidavit of discovery as being notes prepared for the purpose of taking legal advice in these proceedings.

Mr Justice O'Sullivan, applying Dunnes Stores Limited v Smyth (High Court, 24 July 1995, unreported), ruled that these notes were privileged if they were in fact prepared for that purpose.

Note: Mr Justice O'Sullivan left over the question of whether other classes of documents were privileged for determination on another date.

Solicitors: L. K. Shields & Partners (Dublin) for the petitioner; Mason Hayes & Curran (Dublin) for the respondents.