Case No: 2005 0353
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION (COMMERCIAL COURT)
Hon Mr Justice David Steel
Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
LORD JUSTICE WARD
and
LORD JUSTICE LONGMORE
Between :
KUWAIT AIRWAYS CORPORATION | Claimant/ Respondent |
- and - | |
IRAQI AIRWAYS COMPANY | Defendant/ Appellant |
(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
JOE SMOUHA Esq QC, SAM WORDSWORTH Esq and NATHAN PILLOW Esq
(instructed by Howard Kennedy, W1A 2AW) for the Claimant/Respondent
ROBERT HILDYARD Esq QC and STEPHEN NATHAN Esq QC
(instructed by Teacher Stern Selby, WC1R 3JH) for the Defendant/Appellant
Judgment
Lord Justice Longmore:
Introduction
This appeal arises in relation to a judgment of David Steel J dated 16th February 2005 ordering the defendant appellant Iraqi Airways Company (“IAC”) to permit inspection by the claimant/respondent Kuwait Airways Corporation (“KAC”) of certain documents disclosed by IAC in a list served on 28th January 2005 but in respect of which litigation privilege was claimed. KAC applied for inspection of the documents on the basis that they were generated as part of a fraud on the court in earlier actions between the parties, that fraud being, apparently, an issue in the present proceedings; KAC do not seek inspection of any documents prepared in contemplation of or generated in this specific action, which is the fourth action (and the second action based on IAC’s perjury in previous actions) commenced by KAC in relation to the wrongful interference with its ten commercial aircraft and spare parts by IAC subsequent to the invasion by Iraq of Kuwait on 2nd August 1990.
The appeal came on in a great hurry through no fault of the respondents because the trial was due to begin (and has begun) on 7th March 2005. Oral application for permission to appeal was made and permission was granted on 25th February and the only day the court could initially fix for a hearing was Wednesday 2nd March when time for oral argument had to be partitioned between the parties. In the event some limited further argument took place on Thursday 3rd March; on Friday 4th March we announced that the appeal would be dismissed for reasons that would be given later. These are those reasons. We are satisfied that all the relevant considerations were placed before us.
In the first of these four actions, the so-called Main Aircraft Action (1991 Folio No 69) KAC claimed damages for IAC’s wrongful acts in and after August 1990 in respect of ten of KAC’s commercial aircraft. These aircraft had been at Kuwait International Airport on 2nd August 1990 when Iraq invaded Kuwait. They were flown to Iraq and remained in IAC’s possession from then until early 1991. They are referred to in the KAC/IAC litigation as the Iran Six and the Mosul Four because six of the aircraft were evacuated by IAC to Iran in early 1991 (eventually being returned to KAC), whilst four of the aircraft were destroyed by the Coalition Forces at Mosul, in northern Iraq, in early 1991.
Between 1992 and 1995 the courts dealt with jurisdictional issues in the Main Aircraft action. In particular, IAC contended that it was entitled to state (sometimes known as sovereign) immunity. The effect of the House of Lords decision of 1995 ([1995] 1 WLR 1147) was to limit KAC’s claims to claims that IAC wrongfully interfered with KAC’s aircraft only after 17th September 1990. The significance of this date was that Iraq’s Revolutionary Command Council Resolution 369 (“RCC 369”) then came into force, purporting to effect the legal transfer of ownership of KAC’s aircraft from KAC to IAC. The factual basis of this decision was that on the evidence IAC had not before then incorporated KAC’s aircraft into its own fleet.
In late 1997, Mance J tried the issues of liability, confined (as a result of the House of Lords’ 1995 order) to IAC’s acts after 17th September 1990. Mance J held in a judgment dated 29th July 1998 that IAC had wrongfully interfered with KAC’s ten aircraft ([1999] CLC 31). Because the claim was for the tort of wrongful interference of goods, under English law (as it then was) the “double actionability” rule applied so that KAC had to establish that its claim was actionable under the law of the place of commission of the tort as well as under English law. Accordingly Mance J had to consider the Iraqi law of “usurpation”, the relevant wrong under Iraqi law in relation to interference with goods. He found that there had been a usurpation as a matter of Iraqi law but also held that a ‘but for’ test was to be applied where there had been physical loss or damage to the usurped goods (as was the case for the Mosul Four, which had all been destroyed in early 1991). One question which therefore arose was whether the Mosul Four would have been destroyed if they had not been “usurped” by IAC.
A subsequent trial conducted by Aikens J concerned questions of causation under English and (applying Mance J’s findings) Iraqi law. He gave judgment on 5th April 2000 in favour of KAC in relation to the Iran Six but dismissed their claim in relation to the Mosul Four aircraft ([2000] 2 All ER (Comm) 360). He found that KAC failed to satisfy the ‘but for’ test as a matter of Iraqi law in relation to the Mosul Four aircraft. Aikens J (who was subsequently upheld on this issue by the Court of Appeal and the House of Lords [2002] 2 AC 883 at 1066) found that the Mosul Four aircraft would have been destroyed even if they had not been “usurped” or “converted” by IAC after 17th September 1990, and that causation was therefore not established as a matter of Iraqi law. That aspect apart, KAC might have succeeded.
In essence, Aikens J found on the basis of IAC’s witness evidence and documentation that at the material times (i) the treatment and movement of KAC’s aircraft was being directed by the Iraqi government, and (ii) this would have been the case even if there had been no usurpation by IAC. It followed that KAC’s claim that the Mosul Four would have been treated differently had IAC not usurped them, and would not have been at Mosul and destroyed there, failed. The facts as to how KAC’s aircraft had been treated in Iraq in 1990-1991 were, of course, solely within IAC’s knowledge.
As indicated above, KAC’s claims in respect of the Iran Six ultimately succeeded before the House of Lords (for reasons which are not material to this appeal) and, following further trials of quantum issues KAC obtained judgments totalling approximately $150m including interest.
In the second action (the “Spares Action”) KAC claimed in respect of several million spare parts which it alleged IAC had taken from Kuwait International Airport. This action was tried by Cresswell J in June to September 2004 and judgment was given in November 2004. Shortly before trial IAC admitted liability and at trial IAC accepted that its liability would not be less than $148m including interest; that sum was ordered to be paid by way of interim payment (it has not been paid). Cresswell J found that IAC had deliberately concealed relevant documents and advanced a defence known to be false (namely that it had returned such parts as it had taken) until liability was finally admitted in April 2004. The final judgment added a further $266m to the interim payment. Again nothing has been paid.
Accordingly over the 13 years and 5 trials in the Main Aircraft Action and Spares Action, KAC eventually succeeded in relation to the Iran Six so far as aircraft were concerned and in relation to its spare parts. The current outstanding action involves a reconsideration of the basis on which the Mosul Four claim failed.
Subsequent to the Aikens J trial, KAC, on the basis of newly disclosed documents, commenced an action (the so called Perjury I action) seeking to remove the restriction imposed by the House of Lords on the claims it could bring; this was an action to set aside the ruling that IAC’s acts before 17th September 1990 were non-justiciable. The basis of this action was forgery, fraud and perjury on the part of IAC. This was established by the unappealed judgment of David Steel J dated 24th January 2003 ([2003] 1 Lloyd’s Rep 448) in that action. He found that IAC had advanced false evidence and forged documents to seek to persuade the English court that it had state immunity (in which endeavour it had been partially successful) but that on the true facts it was not immune from the jurisdiction of the court in relation to the period 9th August to 16th September 1990. He found that the true facts were that IAC had in fact incorporated into its own fleet and wrongfully interfered with KAC’s aircraft prior to 17th September 1990 and the passing of RCC 369 (the date from which Mance J found wrongful interference). He awarded damages (essentially the wasted costs element of the jurisdiction phase) and costs totalling some £1 million, none of which has been paid.
Freed from the immunity restriction that had governed the whole of the Aircraft Action, KAC has now commenced this action, the so-called Perjury II action, with a view to establishing that IAC had, by perjured evidence, induced Aikens J (and accordingly the Court of Appeal and the House of Lords) to proceed on a false premise so far as control of KAC’s aircraft was concerned. KAC contends that it can now be seen (indeed it is, KAC says, evident even from the matters found by David Steel J) that IAC did indeed control the movement and treatment of KAC’s aircraft and that the aircraft would have been moved or treated differently if IAC had not usurped them, and KAC would thus succeed in respect of the causation test for the Mosul Four.
IAC however contends that even though falsity of its evidence is admitted in part, and even though its acts prior to 17th September 1990 were more extensive than admitted in the jurisdiction phase of the case, nevertheless the aircraft were in fact still controlled by the Government and would still have been moved around in the same way, with the result that the Mosul Four would have ended up at Mosul. Accordingly IAC contends that even if Aikens J had had the true facts, he would have reached the same conclusion.
The application for discovery and inspection
The principle invoked by KAC and upheld by the judge is known to lawyers as the “fraud exception” to the ambit of legal professional privilege and can be summarised by saying that if a person consults a solicitor in the furtherance of a criminal purpose then, whether or not the solicitor knowingly assists in the furtherance of such purpose, the communications between the client (or his agent) and the solicitor do not attract legal professional privilege. IAC submit that, if litigation is contemplated or has begun, such communications will attract the class of legal professional privilege known as litigation privilege and that the fraud exception does not apply to that form of privilege. Before addressing that important point it is useful, however, to set out in a little more detail the criminal purpose allegedly being furthered in the communications between IAC and their legal advisers.
This was to commit perjury and thus mislead the courts resolving first the issue of state immunity and secondly the question whether IAC were liable for wrongful interference (as a matter of English law) or usurpation (as a matter of Iraqi law) of the four Mosul aircraft. IAC’s evidence persuaded the House of Lords that their own conduct before 17th September 1990 was part and parcel of the sovereign acts of the Iraqi government, that until that time they (IAC) had done no more to the aircraft than routine maintenance and that they had not before that date taken steps to incorporate the aircraft into their own fleet. It is further said by KAC that IAC’s evidence also persuaded Mance J and Aikens J to hold that the decision to take the aircraft to Mosul and let them remain there (where they were eventually destroyed by enemy action) would have been taken in any event, even if IAC’s usurpation had not occurred.
The main lies relied on by KAC can be summarised as follows:-
that IAC did not incorporate KAC’s aircraft until after RCC 369 took effect on 17th September 1990. In the Perjury 1 action David Steel J held, however, that the process of incorporating the aircraft into IAC’s fleet began on 9th August and continued up to, as well as beyond, 17th September 1990 in as much as IAC began the process of changing the aircraft livery, re-registering them, moving them and employing maintenance personnel, paras. 104 and 151 of the judgment; this conclusion of the judge included a conclusion that no less than three particular letters relevant to IAC’s case were forgeries in the sense that they were not genuinely written on the date on which they purported to be written but later inventions, paras. 110-135;
That the Iraqi Minister of Transport orally instructed IAC towards the end of August 1990 to use some of KAC’s aircraft on the Baghdad to Kuwait route. In fact there was only one relevant instruction viz. a Presidential instruction to repair Kuwait aircraft and to fly KAC’s aircraft between Kuwait airports and Iraqi airports and that was on 7th August (there was no later instruction by the Ministry of Transport), paras. 75 and 103 of the judgment.
that, in elaboration of the second lie above, the Iraqi Minister of Transport, on or about 20th August 1990, instructed IAC to use KAC’s Airbus A310s on the Baghdad to Kuwait route. In fact the only relevant instruction was the Presidential instruction of 7th August referred to above which made no specific reference to A310s. These Airbuses in fact survived and were part of the Iran 6;
that, in general, the movement and location of KAC aircraft was controlled by the government of Iraq whereas, according to David Steel J in Perjury 1, as from 9th August IAC’s process of absorption had already begun.
David Steel J concluded that both Mr Saffi, the director-general and chairman of the board of IAC and Mr Abbo, the director of quality control, had given perjured evidence, that that evidence went to the heart of the House of Lords’ conclusion that IAC were entitled to claim state immunity up to 17th September 1990, that the judgment of the House of Lords was accordingly a judgment which had been obtained by fraud and that that judgment should be set aside insofar as state immunity had been accorded to the activities of IAC from 9th August onwards.
It is in these circumstances that KAC submit that no privilege can be accorded to communications between IAC (or their agents) and their solicitors at the time of the trials before Mance J and Aikens J because they were documents that came into existence for the furtherance of the criminal purpose of deceiving those courts by forgery and perjury. Still less, of course, can privilege be claimed for IAC internal memoranda or communications with third parties such as their own Iraqi lawyers.
The Submissions
Mr Hildyard QC for IAC submitted that David Steel J’s order went further than any previous order of the courts denying the status of privilege. He accepted the principle (known as the “fraud exception” established in R v Cox and Railton (1884) 14 QBD 153) that there was no privilege in the content of legal advice (or documentation relating thereto) obtained in the furtherance of criminal or fraudulent conduct but submitted:-
the principle applied only to advice sought outside the context of actual or contemplated litigation;
a client who, after he has consulted a solicitor in anticipation of or in connection with litigation, put into effect a scheme for deceiving the court by telling lies in that litigation, was still instructing the solicitor as part of that solicitor’s professional services and did not for that reason forgo privilege in documentation and advice brought into existence for the purpose of that litigation;
it was only if the solicitor participated in the fraudulent scheme that privilege would not be afforded to the relevant documents;
such authority as said there was no privilege even if the solicitor was acting innocently and merely as a conduit for the client’s fraud went too far and was inconsistent with (a) the careful enunciations of the common law principle in R v Snaresbrook Crown Court, ex parte DPP [1988] QB 532 and R v Central Criminal Court, ex parte Francis [1989] AC 346 and (b) the absolute nature of the inviolability of litigation privilege as set out in R v Derby Magistrates Court, ex parte B [1996] AC 487.
Mr Smouha QC for KAC submitted:
it was not correct to talk of penetrating or overriding the privilege; the true position was that if a person consulted a solicitor to further a fraudulent or criminal purpose and put forward a case he knew to be false, the advice and documents brought into existence were never privileged at all;
the Cox and Railton principle applied as much to negate litigation privilege as legal advice privilege; legal advice privilege had only been recognised as a separate part of legal professional privilege since 1833 and the judges in Cox and Railton could not have intended that their ruling should only apply to the new and comparatively restricted branch of legal professional privilege rather than across the accepted classes of legal privilege;
the rationale of litigation privilege was to be found in the interests of the administration of justice; the ascertainment of truth was the highest form of justice; perjury and deception of the court could not be countenanced and it was at least as important (if not more important) that litigation privilege should not be used to conceal such conduct as that legal advice privilege should not be so used;
it was illogical to accept that, if a solicitor assisted in the client’s fraud, there would be no litigation privilege but there would be such privilege if he was an innocent conduit; Cox and Railton proceeded on the basis that the solicitor’s participation in the fraud was irrelevant; it was sufficient if the client deceived the solicitor;
authorities at first instance which upheld the absence of litigation privilege were correctly decided.
The Law
There are, as is well-known, two classes of legal professional privilege, legal advice privilege and litigation privilege. But each class of privilege is in principle inviolate. As Lord Taylor CJ said in R v Derby Magistrates’ Court, ex parte B [1996] 1 AC 487 at 506 c-d:-
“The principle which runs through all . . . . [the] cases which were cited, is that a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests.”
That was a case in which a defendant charged with murder wanted to rely on the fact that his stepson had earlier confessed to the killing, although he had subsequently been acquitted by a jury. The defendant wanted to enquire into what had passed between his stepson and the stepson’s solicitor before the confession had been retracted but it was held that the stepson’s privilege could not be invaded, even at the instance of somebody charged with murder. The House of Lords has, more recently, held that exactly the same principle applies to legal advice privilege in respect of legal advice given when no litigation was contemplated or had begun, see Three Rivers District Council v Bank of England (No 6) [2004] 3 WLR 1274.
To this principle there has always been an acknowledged exception viz. that legal professional privilege (at least of the legal advice kind) does not attach to communications between lawyer and client if the purpose of the client in seeking advice is to further or facilitate crime or fraud. This exception was authoritatively laid down by the Court for Crown Cases Reserved in R v Cox and Railton and is known as “the fraud exception”.
In that case the defendants were charged with conspiracy to defraud a judgment creditor of Railton out of the fruits of a judgment by dishonestly backdating a dissolution of their partnership to a date prior to a bill of sale given by Railton to Cox in respect of his assets. The trial judge permitted the prosecution to call a solicitor to testify that the defendants had sought his advice as to whether anything could be done to prevent property being seized in execution by the judgment creditor and that, when he had told them that Railton could not give a bill of sale to Cox because of the partnership between them, nether Cox nor Railton had made any mention of the partnership having been dissolved; on the contrary, Railton asked whether anyone knew of the partnership, to which the solicitor replied that the only people who knew of it were Cox and Railton and himself and his clerks. Following conviction, the full court held that the defendants’ communication with their solicitor was a step preparatory to the commission of the offence of conspiracy to defraud and that, that being so, no privilege attached to such communication. (I gratefully take the summary of the case from the recent decision of the Criminal Division of this court in R v Gibbins [2004] EWCA Crim 311.)
The court emphasised that the solicitor acted in good faith and said (page 165-6):-
“The question therefore is, whether, if a client applies to a legal adviser for advice intended to facilitate or to guide the client in the commission of a crime or fraud, the legal adviser being ignorant of the purpose for which his advice is wanted, the communication between the two is privileged? We expressed our opinion at the end of the argument that no such privilege existed. If it did, the result would be that a man intending to commit treason or murder might safely take legal advice for the purpose of enabling himself to do so with impunity, and that the solicitor to whom the application was made would not be at liberty to give information against his client for the purpose of frustrating his criminal purpose. Consequences so monstrous reduce to an absurdity any principle or rule in which they are involved.”
The court then referred to what they called the privilege rule (as laid down by Lord Brougham in Greenough v Gaskell (1833) 1 May & K 98) as requiring that lawyers “receive a communication in their professional capacity” or “commit to paper in the course of their employment . . . matters which they know only through their professional relation to the client.” They added that the rationale of the rule (again quoting Lord Brougham) was
“the interests of justice, which cannot be upholden, and the administration of justice, which cannot go on without the aid of men skilled in jurisprudence, in the practice of the courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings.”
The court then said (page 167)-
“This rule has been accepted and acted upon ever since, and we fully recognise its authority, but we think that the present case does not fall either under the reason on which it rests, or within the terms in which it is expressed. The reason on which the rule is said to rest cannot include the case of communications, criminal in themselves, or intended to further any criminal purpose, for the protection of such communications cannot possibly be otherwise than injurious to the interests of justice and to those of the administration of justice. Nor do such communications fall within the terms of the rule. A communication in furtherance of a criminal purpose does not ‘come into the ordinary scope of professional employment’.”
The court was much pressed by the practical difficulty of ascertaining whether a solicitor was being consulted in furtherance of a criminal purpose and by the fact that the privilege would have to be violated in order to see whether it was legitimate to violate it. But the court was unmoved by those considerations saying in the final paragraph of their judgment (175-6):-
“The only thing which we feel authorised to say upon this matter is, that in each particular case the Court must determine upon the facts actually given in evidence or proposed to be given in evidence, whether it seems probable that the accused person may have consulted his legal adviser, not after the commission of the crime for the legitimate purpose of being defended, but before the commission of the crime for the purpose of being guided or helped in committing it.”
Mr Hildyard relied on this passage in support of the proposition that the ‘fraud exception’ (as I shall continue to call it) could only apply to legal advice privilege and not to the privilege that attaches once litigation is contemplated or begun. It is certainly true to say that the passage contemplates an “antecedent transaction” before litigation does begin. But neither this passage nor the earlier parts of the judgment contemplate in terms that the fraud exception only applies to that class of legal professional privilege known as legal advice privilege. Indeed it is not very clear whether Cox and Railton itself was a case of legal advice privilege or litigation privilege. The solicitor whom Cox and Railton consulted (well before the criminal proceedings were contemplated) does not appear to have been the solicitor representing Railton in the civil proceedings. But since execution on the civil judgment was still pending, it was certainly in the context of the civil litigation that the solicitor was being consulted and, if privilege had attached, it would more naturally be categorised as litigation privilege than legal advice privilege.
Cox and Railton was, of course, a criminal case but it has always been recognised that the fraud exception applies as much to civil cases, see eg O’Rourke v Darbishire [1920] AC 581. It is, however, chiefly in criminal cases that the problem identified in the final paragraph of Cox and Railton has been addressed. Even if a criminal offence has already occurred and a possible or actual defendant to a criminal charge consults a solicitor and tells that solicitor a false story, that will (or may) be in furtherance of a criminal purpose viz. to commit perjury or (if two people together tell a false story) a conspiracy to pervert the course of justice. If there is convincing evidence that that is the defendant’s intention, are his communications with his solicitor privileged? It is what Mr Hildyard called “this conundrum” (which can occur in civil cases as much as in criminal cases) that led to his submission that the fraud exception can only apply to legal advice privilege and not in cases where litigation is contemplated (let alone actually begun). He relied in particular on two cases which considered the meaning of “special procedure material” under the Police and Criminal Evidence Act 1984, to which the police are entitled to have access although it is in possession of a person who has acquired it in the course of his trade or profession under an obligation of confidence. The definition of such material excludes items subject to legal privilege but it is statutorily enacted in section 10(2):-
“items held with the intention of furthering a criminal purpose are not items subject to legal privilege.”
This has been held to state the common law position, particularly with regard to the question whether the intention of furthering a criminal purpose has to be that of the holder himself or can be that of a third party. R v Snaresbrook Crown Court, ex parte DPP [1988] 1 QB 532 held that it had to be the intention of the holder but the House of Lords in R v Central Criminal Court ex parte Francis [1989] AC 346 held, in accordance with the common law that the criminal purpose did not have to be in the mind of the holder (typically a solicitor) but could be in the mind of a third party (typically the solicitor’s client).
In the Snaresbrook case it was alleged that the defendant, who was charged with attempting to pervert the cause of justice by making a false allegation of assault against the police, must have made a false statement in an application for legal aid made by him for the purpose of bringing his civil action for assault. Section 23 of the Legal Aid Act 1974 made it an offence for anyone seeking legal aid knowingly to make a false statement or representation when furnishing any information required from him. In response to a submission for the DPP that the communication with the area office of the Law Society for the purpose of obtaining legal aid was made in furtherance of such a crime. Glidewell LJ said (pages 537-8):-
“Obviously, not infrequently persons allege that accidents have happened in ways other than the ways in which they in fact happened or that they were on the correct side of the road when driving while actually they were on the wrong side of the road and matters of that sort. Again, litigants in civil litigation may not be believed when their cases come to trial but that is not to say that the statements they had made to their solicitors pending the trial, much less the applications which they made if they applied for legal aid, are not subject to legal privilege. The principle to be derived from R v Cox and Railton applies in my view to circumstances which do not cover the ordinary run of cases such as this is” (emphasis supplied).
Glidewell LJ then went on to hold that for the purposes of section 10(2) it was the holder who had to have the criminal purpose, and that the Law Society was the holder and that the Law Society had no intention of furthering a criminal purpose:-
“No intention could be further from its thoughts” (538G).
This latter reasoning was overruled by the House of Lords in the Francis case but Lord Goff of Chieveley went out of his way to approve the first part of Glidewell LJ’s reasoning. He said [1989] AC at page 397:-
“I have to recognise that . . . my conclusion in the present case undermines part of the reasoning of Glidewell LJ [in the Snaresbrook case]. But it does not necessarily undermine the conclusion of the Divisional Court in that case. This is because I am inclined to agree with Glidewell LJ that the common law principle of legal professional privilege cannot be excluded, by the exception established in R v Cox and Railton 14 QBD 153 in cases where a communication is made by a client to his legal adviser regarding the conduct of his case in criminal or civil proceedings, merely because such communication is untrue and would, if acted upon, lead to the commission of the crime of perjury in such proceedings” (emphasis supplied).
R (Hallinan Blackburn Gittings & Nott (a firm)) v Crown Court at Middlesex Guildhall [2004] EWHC 2726 (Admin), [2005] 1 WLR 766 provides an example of a case which was not “the ordinary run of case” to use the words of Glidewell LJ and thus on the other side of the line. In this case P, the client of the applicant solicitors’ firm, was arrested and charged with possession of cocaine (with intent to supply) and of a stun gun. The firm had taken a statement from K who claimed she was present at P’s arrest. K’s employers told the police that she was in the office at the time she claimed to have been present at the arrest. E-mails passing between K and M showed that M was also a party to the proposed deception. P, K and M were then charged with conspiracy to pervert the course of justice. The police found a folder at K’s office with correspondence from the firm and an unsigned copy of her witness statement (stating she was present at the arrest and observed officers planting the drugs). The police required the firm to produce K’s witness statement and other material pertaining to K for the purpose of P’s trial; the firm refused to do so claiming privilege and the police applied to the Crown Court where Judge Fabyan Evans held that there were reasonable grounds for believing K was party to a conspiracy to pervert the course of justice and that the material was held “with the intention of furthering a criminal purpose”. P’s trial on the drugs and firearms offences was adjourned pending judicial review proceedings of the judge’s decision. Rose LJ said (page 771E):-
“Where . . . there is evidence of specific agreement to pervert the course of justice, which is freestanding and independent, in the sense that it does not require any judgment to be reached in relation to the issues to be tried, the court may well be in a position to evaluate whether what has occurred falls within or outwith the protection of legal professional privilege as explained in R v Cox and Railton 14 QBD 153.”
He held that the judge was entitled to decide that there was an intention to further a continuing purpose of perverting the course of justice and the Divisional Court dismissed the application for judicial review.
This authority shows that the mere fact that litigation has begun does not prevent the application of the fraud exception to legal professional privilege. But it also shows that the exception may not apply if what is in issue is merely an issue in the proceedings eg a denial of having committed a crime or (as discussed in the Hallinan case) an assertion of an alibi or telling a lie to a solicitor about the side of the road on which one is driving. The fraud exception is more likely to apply if the evidence of criminality is “free-standing and independent”.
With this introduction I can turn to counsel’s submissions.
Does the fraud exception apply to litigation privilege as well as legal advice privilege?
The answer has to be that it does. One can take two separate examples. First the case of an inquiry made to a solicitor in furtherance of a criminal purpose before any proceedings are contemplated eg a conspiracy to deprive a widow of her savings or a company of its assets. No privilege attaches to that inquiry at the time that legal advice is sought. It may be correct to say that the fraudsters do not contemplate litigation but litigation does unsurprisingly take place. In the course of the litigation, the conspiracy has to continue and may well, indeed, be “improved” by the concealment of evidence that does exist or the invention of evidence that does not exist. That is all in furtherance of the conspiracy that constitutes the antecedent transaction. It would be little short of absurd to say that the fraud exception applies until litigation is contemplated but thereafter it does not apply. Furthering the same criminal purpose after litigation begins (or is contemplated) cannot attract privilege any more than the original criminal purpose did. This is shown by civil fraud cases such as Dubai Bank v Galadein (No 6) (unreported) where there was an undoubted antecedent fraud but the fraud exception continued to apply to prevent privilege being used to “stifle” that antecedent fraud, see page 23 of the transcript with which we have been provided.
Secondly, take a criminal purpose which only came into existence after litigation has begun. On the authority of Snaresbrook and Francis merely giving to a solicitor an untrue statement about issues in the proceedings will not forfeit privilege. But a criminal conspiracy, particularly if it is separate from the actual issues in the proceedings albeit (inevitably) related to them, will be a self-standing criminal purpose outside the issues in the proceedings and privilege will not attach; that is shown by the Hallinan case.
These three cases are criminal cases. But the principle can also be seen at work in a civil case decided at first instance. In Dubai Aluminium Co Ltd v Al Alawi [1999] 1 WLR 1964 the claimants brought proceedings against their former sales manager for accepting bribes and secret commission from outsiders. In support of their claim the claimants had obtained a search and seizure order and a worldwide freezing injunction, apparently using their agents to impersonate the defendant in order to discover information about his Swiss bank accounts. This was in breach both of Swiss law and an offence under section 5(6) of the Data Protection Act 1984. The defendant applied to discharge the order and the freezing injunction and also applied for disclosure of reports and associated documents relating to the investigation of his affairs by the claimants’ agents. The claimants said the documents were privileged but this claim was refused by Rix J (as he then was) because there was a “strong prima facie case of criminal or fraudulent conduct” by the claimants’ investigative agents. Rix J was told by counsel that no earlier case had decided that criminal conduct, which occurred after the litigation had started, deprived advice, given in relation to that conduct, of the character of legal privilege. He then said (1969E-1970A)
“But it seems to me that criminal or fraudulent conduct for the purpose of acquiring evidence in or for litigation cannot properly escape the consequence that any documents generated by or reporting on such conduct and which are relevant to the issues in the case are discoverable and fall outside the legitimate area of legal professional privilege . . .
Ultimately, it seems to me that criminal or fraudulent conduct undertaken for the purpose of litigation falls on the same side of the line as advising on or setting up criminal or fraudulent transactions yet to be undertaken, as distinct from the entirely legitimate professional business of advising and assisting clients on their past conduct, however iniquitous”
This is an authority directly contrary to Mr Hildyard’s submission that once litigation privilege has commenced, the fraud exception no longer applies. He submitted that the case had gone too far and was wrongly decided. He pointed out that Rix J appeared to have thought he should balance the interest of maintaining legal privilege as against the need for the court to obtain the truth which was contrary to R v Derby Magistrates Court, ex parte B in which Lord Taylor said there was no question of balancing one interest against the other since legal professional privilege must always win; the balancing act had been “performed once and for all in the 16th century”. Mr Hildyard also pointed out that Rix J derived some comfort for his extension of the previous law from the fact that the documents sought would have been disclosable in the hands of the defendant in any event. I do not think that either of these considerations shows that Rix J was wrong. He did not purport to perform a balancing exercise; he merely observed that there were conflicting interests; he followed the principles stated in Cox and Railton and, in my judgment, he was correct to do so since it would be illogical to say that the fraud exception can never apply once the litigation has begun. The fact that the relevant documents were, in theory, disclosable by the defendant as well as by the claimant cannot make any difference to the principle of the matter. I would respectfully approve Rix J’s decision.
In fact Rix J was not ploughing quite such a novel furrow as counsel before him suggested. In Chandler v Church (1987) 177 NLJ 451 a similar proposition, about the fraud exception applying to fraud in litigation which had been begun, had been put to Hoffmann J. He initially found the proposition a startling one but, in due course, he accepted, as Jacob J put it in (the antecedent transaction case) Omar’s Trustees v Omar (2000) BCC 434,
“that in principle the existence or absence of privilege is not affected by whether the fraud concerns an earlier transaction or the conduct of the proceedings themselves”.
Hoffmann J did not in fact order disclosure in the case before him because he considered that disclosure at an interlocutory stage based upon prima facie evidence of fraud in the conduct of the proceedings carried a far greater risk of injustice to the defendant, if he should turn out to have been innocent, than disclosure of advice concerning an earlier non-contentious transaction.
These two case (together with the Hallinan case) show that the fraud exception can in principle apply even when litigation has begun with the result that privilege will not attach to documents which further the fraud or the criminal purpose. They also show that courts will be cautious about ordering disclosure or inspection of such documents. That caution has two aspects
(1) it may be unfair to a defendant to make such an order if all that is shown on the evidence is a prima facie case which may turn out on full investigation to be incorrect;
(2) it may be unfair in what Glidewell LJ in Snaresbrook called the ordinary run of cases (such as cross-allegations of assault or drivers falsely saying they were driving on the correct side of the road) to order disclosure and inspection merely because communications with a party’s solicitors “are untrue and would, if acted upon, lead to the commission of the crime of perjury” (per Lord Goff of Chieveley in Francis).
These two reasons for caution are, of course, somewhat interdependent. If all one has is disputed versions of events, it will be difficult to say that there is even a prima facie case of fraud. This will be particularly so, if the disputed version of events is the very same issue that is to be tried in the proceedings. If, however, the evidence of crime or fraud is free-standing and independent and particularly if its evaluation “does not require any judgment to be reached in relation to the issues to be tried” (per Rose LJ in Hallinan) it may be perfectly possible, even on a prima facie case basis, to decide whether the fraud exception applies.
It is significant that in Chandler v Church where there was only prima facie evidence of fraud and the fraud was alleged in relation to the issues that had to be tried, Hoffmann J refused to order disclosure. By contrast, in Dubai Aluminium v Al-Alawi where the alleged fraud did relate to issues to be tried on the application to discharge the search and seizure order and the freezing injunction, Rix J (following Barclays Bank v Eustice [1995] 1 WLR 1238, 1249) thought that before disclosure was ordered there should be a strong prima facie case of criminal or fraudulent conduct; he held that, on the facts, there was (1968D). He therefore ordered disclosure.
The present case
In the present case there is more even than a “strong prima facie case”. It has actually been established in the Perjury I trial that in the earlier proceedings there was forgery and perjury by important witnesses and that there was a conspiracy to deceive the English court which successfully brought about a decision that IAC were entitled to claim state immunity for all their pre-17th September 1990 conduct. That successful deception must, very arguably, mean that the subsequent trials before Mance J and Aikens J were conducted on a false basis. Although the result of the Perjury I trial was “only” to set aside the decision of the House of Lords on state immunity and the final judgment on liability in the main action in respect of the Mosul Four aircraft is presently binding, it is difficult to imagine that there will be much contest in relation to the allegation that the judgments were, indeed, induced by fraud. IAC’s defence to the allegation is not so much that the judgments were not fraudulently procured, but that Aikens J would have come to the same conclusion even if he had not been deceived. In these circumstances it seems to me that the fraud exception is established and no privilege can exist in communications between IAC and their previous English solicitors (let alone IAC’s internal documentation) in relation to the tactics of and the evidence given in the main action or in the Perjury I action where the fraud was established. There is in this case, therefore, no need for any caution to be exercised in respect of the standard of proof of the fraud which is required before inspection can be ordered. Nor is there any question of IAC being able to rely on the doctrine “once privileged always privileged” since the documents were never privileged in the first place.
Mr Hildyard did rely on the judgment of Rose LJ in Hallinan to say that disclosure and inspection should not be ordered since the evidence of fraud was not “free standing and independent in the sense that it does not require any judgment to be reached in relation to the issues to be tried”. Here, he said, the fraud was indeed one of the issues to be tried. I do not consider that Rose LJ was intending to lay down any precondition (for the purpose of reliance on the fraud exception) that the fraud should not relate to the issues to be tried. He was merely pointing out that it is easier to evaluate whether facts justifying the fraud exception have come into existence if the fraud does not relate to the very issue which is to be tried which, in the case before the Divisional Court, it did not. In any event, as I have already indicated, the question whether the judgment of Aikens J was brought about by fraud is hardly a real issue in Perjury II. The real issue is whether Aikens J would have come to the same conclusion in any event. The present case is far from the ordinary run of cases envisaged by Glidewell LJ and is much more than a mere case where, in the words of Lord Goff, a client gives wrong information to his solicitor which “if acted upon would lead to the commission of perjury”. Here there was a widespread conspiracy to deceive the English court which was acted upon and has been proved to have led not only to perjury but to forgery and the perversion of justice on a remarkable and almost unprecedented scale.
If the fraud exception cannot be relied on where there has been a final decision of the court that an earlier decision of the court has been procured by fraud, perjury and a conspiracy to pervert the course of justice, it would be difficult to think of any circumstances where it could be relied on once litigation was contemplated or begun. Once it is established (as I would hold) that the fraud exception can, in law, apply in such circumstances, it would be a travesty if it did not apply in the present case. Mr Hildyard argued that even if there was no privilege in relation to documents coming into existence for the purpose of the main action, there should still be privilege for the documents coming into existence for the purpose of the Perjury I action. But I can see no justification for that distinction since the fraud and perjury continued in Perjury I in an effort to ensure that the original forgery, perjury and fraud did not come to light.
I would therefore summarise the position thus:-
(1) the fraud exception can apply where there is a claim to litigation privilege as much as where there is a claim to legal advice privilege;
(2) nevertheless it can only be used in cases in which the issue of fraud is one of the issues in the action where there is a strong (I would myself use the words “very strong”) prima facie case of fraud as there was in Dubai Aluminium v Al-Alawi and there was not in Chandler v Church;
(3) where the issue of fraud is not one of the issues in the action, a prima facie case of fraud may be enough as in Hallinan.
Conclusion
These are my reasons for concurring in Ward LJ’s announcement on Friday 4th March that the judge’s order would be upheld and the appeal would be dismissed.
Lord Justice Ward:
I agree.