"Don't write this down, don't write this down, oh no, I'm writing it down and now I've sent it too."
A judge has written to the Senior Partners of Latham & Watkins, Kirkland & Ellis and Walkers to complain about their lawyers' "ethical issues" with disclosure.
Justice Adrian Jack, sitting in the High Court in the British Virgin Islands, blasted the firms' conduct in his ruling on a shareholder dispute concerning the control of Nam Tai, a property company based in China.
US investment fund IsZo sued Nam Tai for allegedly squeezing it out of a decision-making role on the board in order to keep Nam Tai under the de facto control of Kasai, the company's Chinese holding company.
Nam Tai secretly issued $175 million of new shares to a wholly owned subsidiary of Kaisa and a company which was supportive of it, said IsZo, and then appointed new directors loyal to Kaisa who included a 25-year-old jeweller whose only experience of property development was being the son of Nam Tai's CEO.
When IsZo spearheaded an attempt by dissident shareholders to replace the board in July 2020, Nam Tai enlisted Latham & Watkins in New York and Walkers in the BVI, followed by Kirkland & Ellis.
Their assistance extended to a consideration of Nam Tai's disclosure obligations if IsZo sued.
Kirkland and Walkers emailed Olivia Tan, Nam Tai’s legal officer, advising that "there are privilege and discovery obligations in the BVI and the work product of both Walkers and K&E may ultimately be discoverable. We suggest parties discussing [sic] live regarding certain of your questions".
Unfortunately for the firms, their email about avoiding disclosure was itself subject to disclosure.
It helped lead Justice Jack to conclude that, given the "dearth of attendance notes produced on disclosure" by Latham, all three firms had made a "deliberate decision to prevent documents coming into existence".
And by deciding not to keep attendance notes because they might become known to shareholders, "the law firms were, it seems to me, preferring the interests of the directors and managers who were instructing them (but who were not even clients) over the interests of their true clients, the shareholders in the incorporated form of the company", he said.
"If that is right, then the actions of these firms constitute a very grievous breach of the most fundamental imperatives of legal ethics, to act in the best interests of the client with honesty and integrity", said the judge.
He was so concerned that he decided to contact the firms directly, ending his judgment by finding against Nam Tai and promising that "I shall direct that a copy of this judgment be sent to the senior partners” of Kirkland & Ellis, Latham & Watkins and Walkers, "so that they consider the ethical issues which I have highlighted". Probably with a very strongly-worded covering letter, too.
Walkers told RollOnFriday that it "notes the statements made in the ruling by Jack J, but would emphasise that [IsZo] made clear that it made no allegation of misconduct by any of the law firms involved in the case"
The firm also took issue with the judge's criticisms. "At no time during the proceedings, or subsequently, did the Judge seek to discuss or clarify any of these matters with the lawyers involved prior to the ruling being issued", it said.
"While we have carefully considered the Judge's comments, we do not believe that they accurately reflect what occurred on this occasion, nor do they reflect the commercial practices at Walkers and the firm's core values".
It said it could not comment further as Nam Tai’s appeal had recently been heard.
Latham and Kirkland did not respond to requests for comment.