Berezovsky v Hine & Ors

This is an appeal which has been brought with the permission of the Judge, Mann J, against his decision that certain documents, for which the appellant, Boris Berezovsky, claims privilege, have to be disclosed to the respondents. More accurately, as the Judge pointed out, he decided that the respondents should not be restrained from using the documents in connection with the pursuit of their case in proceedings brought against them by Mr Berezovsky.

The appeal was argued, very well on both sides, on 30 September, when we reserved judgment. Because the appeal needed to be determined with some expedition, we gave our decision that the appeal would be allowed on 4 October, stating that our reasons would follow in a few days. These are our reasons for allowing Mr Berezovsky’s appeal.

The full background to this appeal is very complex, but, fortunately, the relevant facts can be relatively briefly set out. The respondents have been referred to throughout these proceedings as “the Family Defendants”, and I will adhere to that term. They are the surviving family, and principal beneficiaries of the estate, of the late Arkadi “Badri” Patarkatsishvili, who died on 12 February 2008.

Mr Berezovsky is a Russian, and Mr Patarkatsishvili is a Georgina. They built up very large investments in Russia during the end of the last century. Mr Berezovsky says that he was forced to flee from Russia in 2000 as a result of a threat of political persecution, and he has been living in the United Kingdom since October 2001.Mr Beresovsky also says that Mr Patarkatsishvili was forced to flee Russia for similar reasons in 2001, and that he came to the United Kingdom in 2006, where he lived until his death in February 2008.

In December 2008, some ten months after Mr Patarkatsishvili’s death, Mr Berezovsky brought proceedings in the Chancery Division (“the main Chancery action”) against the Family Defendants and various other individuals and entities who, he claims, in their capacity as successors to Mr Patarkatsishvili, own assets (“the JV assets”) in which he has an interest. In that action, Mr Berezovsky claims that he and Mr Patarkatsishvili made an oral agreement in Russia in 1995 that all commercial investments made by either of them would be shared between them equally. This has been referred to as “the joint venture agreement”, which, in a judgment given on 14 May 2010, the Judge described as “some form of overriding business super-partnership”.

As an alternative to this “overriding business super-partnership”, Mr Berezovsky asserts in the main Chancery action a number of individual agreements, pursuant to which he says he acquired an interest in various assets. One such agreement is said to have been made at the Dorchester Hotel in March 2000 (“the Dorchester Hotel meeting”), at which Mr Berezovsky claims that he and Mr Patarkatsishvili obtained a 25% interest in a Russian aluminium company known as “Rusal”. Mr Berezovsky says that he is entitled to trace into the assets acquired with the proceeds of sale of that interest, and, to the extent he is unable to recover those assets, he seeks damages from Mr Patarkatsishvili’s estate for failing properly to secure them.

In another action brought in the Chancery Division against the Family Defendants, and against Vasily Anisimov and a number of entities controlled by him, Mr Berezovsky claims an interest in a stake held by Mr Anisimov in a company known as Metalloinvest, a Russian ore and mining company, on the basis that it represents monies deriving from the sale of a 25% interest in Rusal in July 2004. Mr Berezovsky claims to have acquired an interest in those monies in a number of ways, including by reason of the bilateral joint venture and as a result of the alleged agreement at the Dorchester Hotel meeting.

The Family Defendants either do not admit or deny Mr Berezovsky’s claims in these two actions (“the Chancery actions”) for various reasons which it is not necessary to describe for present purposes.

Meanwhile, before Mr Patarkatsishvili’s sudden death, Mr Berezovsky had begun an action in the Commercial Court in 2007. In that action (“the Commercial Court action”), Mr Berezovsky raises various claims against Roman Abramovich, including claims in relation to Rusal. Many of his claims in the Commercial Court action in relation to Rusal are based on the assertion that Mr Abramovich agreed to hold an interest in trust for Mr Berezovsky as a result of what was said at the Dorchester Hotel meeting.

That issue and a number of other issues in the Commercial Court action overlap with the similar issues arising in the Chancery actions. Consequently, by an order dated 16 August 2010, made by Mann J and Gloster J sitting together in the Chancery Division and the Commercial Court respectively, it was directed that a number of such overlapping issues (“the overlap issues”) be tried as preliminary issues in the Chancery actions, at the same time as the trial of, and by the same Judge who is to decide, the Commercial Court action.

The overlap issues directed to be tried as preliminary issues in the Chancery actions by the Judge hearing the Commercial Court action are, so far as relevant, as follows:

The order relating to the hearing of the overlap issues also provided that documents disclosed in the Chancery actions which are of relevance to the overlap issues must also be disclosed in the Commercial Court action.

The trial of the Commercial Court action and the determination of the overlap issues started on 3 October 2011. The first phase of the subsequent trial of the Chancery actions is due to start in October 2012.

Irrespective of any issue as to the factual existence or legal nature of any understanding or agreement made between them, the relationship between Mr Patarkatsishvili and Mr Berezovsky appears to have been friendly and mutually co-operative right up to Mr Patarkatsishvili’s death. In particular, Mr Berezovsky’s case in the Commercial Court action appears to have been wholly or mainly supported by Mr Patarkatsishvili. While this state of affairs seems to have continued for a brief period after Mr Patarkatsishvili’s sudden death, the Family Defendants began to deny that Mr Berezovsky had any interest in the JV assets. It was, at least in part, as a result of the Family Defendants taking this position that the Chancery actions were started.

There have been two recent hearings before Mann J in the Chancery Division relating to the extent of Mr Berezovsky’s disclosure obligations for the purpose of the determination of the overlap issues, and they resulted in judgments on 6 July and 6 September 2011. There has been no appeal following the first of those judgments, and this appeal only applies to two of the documents covered by the second judgment. The primary document is a draft witness statement prepared in late 2007 or January 2008 by Cadwaladers, solicitors then acting for Mr Berezovsky in the Commercial Court action, for the purpose of that action.

At that time, another firm of solicitors, Ghersons, were acting for Mr Berezovsky in relation to his tax position and to potential challenges to his asylum claim (although it had been granted). Ghersons were also acting at that time for Mr Patarkatsishvili in connection with his asylum claim (which had not been granted).

On 21 January 2008, Cadwaladers sent to Mr Gherson and Mr Micklethwaite at Ghersons copies of draft witness statements which they had prepared for Mr Berezovsky and for Mr Patarkatsishvili (“the draft statements”) in the Commercial Court action. Mr Gherson was acting for Mr Patarkatsishvili as well as for Mr Berezovsky; Mr Micklethwaite was acting for Mr Berezovsky, and not for Mr Patarkatsishvili. The draft statements were sent by way of attachments to an email (“the first email”), which described its “subject” as “Berezovsky witness statements: Privileged and Confidential”. We have not seen the substantive text of the first email, as it is either irrelevant or privileged – or both.

A week later on 28 January 2008, Mr Micklethwaite forwarded the first email (with the attached draft statements) to three other solicitors in Ghersons, who were all acting for Mr Patarkatsishvili. This forwarding email (“the second email”) had the same “subject” description, and a very brief text: “Have you seen these?” On 30 January 2008, one of the three solicitors sent an email (“the third email”) forwarding this second email to a fourth Ghersons solicitor acting for Mr Patarkatsishvili. This third email stated that Mr Micklethwaite “thought [the draft statements] would be useful for [Mr Patarkatsishvili’s asylum claim]”.

As the Judge said, there was very limited additional evidence, in the form of witness statements, as to the purpose, circumstances, or contemporary statements surrounding the sending of the draft statements in these emails. Unsurprisingly, bearing in mind their close and friendly relationship, Mr Berezovsky was very supportive of Mr Patarkatsishvili’s asylum claim. This reinforces the natural assumption that, as the Judge found, one of the purposes for sending the draft statements to the lawyers acting for Mr Patarkatsishvili was “to assist [him] in his asylum application”. A second purpose, as the Judge held, was “to avoid inconsistency between what might be said in [the] asylum application and what might be said in the [Commercial Court action]”.

According to the parties’ submissions, the issue before the Judge on the 6 September was whether the draft statements were disclosable by Mr Berezovsky to the Family Defendants in the Chancery actions, and whether they could therefore be deployed by the Family Defendants for the purpose of assisting their case against Mr Berezovsky in relation to the determination of the overlap issues.

Although the case was argued as involving an issue of disclosure, the Judge rightly said that no question of disclosure arises. First, even privileged documents have to be disclosed: so long as they remain privileged, however, they are immune from inspection, and may not be used in proceedings. Further and in any event, no question of inspection arises in the present case, as copies of the documents in question remain with the Family Defendants, because they (or more accurately the administrators of Mr Patarkatsishvili’s estate) stand in the shoes of Mr Patarkatsishvili, and copies of the draft statements remain with Ghersons, to whom they were sent, and who received them as attachments to the second email, as his solicitors.

The true question to be determined is, as the Judge said, whether the draft statements may be deployed by the Family Defendants in the Chancery actions, and therefore in the trial of the overlap issues, which are to be determined in the course of the trial of the Commercial Court action, which has now started on 3 October 2011.

The Judge held that, although the draft statements were initially undoubtedly privileged and that the privilege was that of Mr Berezovsky alone, the circumstances in which they were transmitted to Mr Patarkatsishvili’s solicitors by the second email was not such as to preserve Mr Berezovsky’s privilege to the extent of enabling him to prevent their being deployed by Mr Patarkatsishvili in defending proceedings brought by Mr Berezovsky, although he accepted that Mr Patarkatsishvili “was not free to make whatever use of the documents he wanted”. Particularly as (i) there was no express limitation on the use to which the draft statements could be put, (ii) the parties were on very friendly terms at the time, and (iii) the remitting of the draft statements was partly for the benefit of Mr Berezovsky, the Judge considered that it was inappropriate to conclude that Mr Berezovsky had impliedly imposed, or that Mr Patarkatsishvili had impliedly accepted that, should they fall out, the draft statements could not be deployed by Mr Patarkatsishvili to defend himself against a claim by Mr Berezovsky.

There was no significant dispute as to the basic principles applicable in this case.

First, Mr Berezovsky clearly enjoyed privilege in relation to the draft statements, given that they were drafts of witness statements which had been prepared by his solicitors in relation to the Commercial Court action, which he had brought against Mr Abramovich.

Secondly, the sending of the draft statements with the first email did not encroach on that privilege: it was sent by Cadwaladers, solicitors acting for Mr Berezovsky in the Commercial Court action, to two solicitors at Ghersons, both of whom were acting for Mr Berezovsky in connection with other legal issues. The fact that, one of those two solicitors, Mr Gherson, was also acting for Mr Patarkatsishvili is nothing to the point in that connection, as the draft statements wereplainly sent by Cadwaladers to Mr Gherson in his capacity as solicitor for Mr Berezovsky.

Thirdly, as the Judge also said, the sending of the draft statements by Mr Micklethwaite, a solicitor acting for Mr Berezovsky, to other lawyers at Ghersons, as solicitors acting for Mr Patarkatsishvili, through the second email, did involve a waiver of privilege on behalf of Mr Berezovsky: its effect was, and was intended to be, to permit Mr Patarkatsishvili and those advising him to see and use the contents of the draft statements in connection with Mr Patarkatsishvili’s asylum claim.

Fourthly, “[i]t does not follow that privilege is waived generally because a privileged document has been disclosed for a limited purpose only: see British Coal Corporation v Dennis Rye (No 2) [1988] 1 WLR 113 and Bourns Inc v Raychem Corporation [1999] 3 All ER 154” – per Lord Millett giving the judgment of the Privy Council in B v Auckland District Law Society [2003] UKPC 38, [2003] 2 AC 736, para 68. As Lord Millett went on to say, it “must often be in the interests of the administration of justice that a partial or limited waiver of privilege should be made by a party who would not contemplate anything which might cause the privilege to be lost”.

Fifthly, where privilege is waived, the question whether the waiver was limited, and, if so, the parameters of the limitation, must be determined by reference to all the circumstances of the alleged waiver, and, in particular, what was expressly or impliedly communicated between the person sending, and the person receiving, the documents in question, and what they must or ought reasonably have understood – cf. per Hoffmann LJ in Brown v Guardian Royal Exchange plc [1994] 2Lloyd’s Rep 325, 328, as discussed by Aikens J in Winterthur Swiss Insurance Company v AG (Manchester) Ltd (in liquidation) [2006] EWHC 839 Comm, para 74.

Sixthly, as the Judge found, and as is common ground, the waiver effected by the sending of the draft proofs with the second email did not operate as a blanket waiver of privilege. Mr Berezovsky cannot have intended, or have been understood by Mr Patarkatsishvili (or Mr Patarkatsishvili’s solicitors) to have intended, that Mr Patarkatsishvili could make whatever use of the draft statements that he wanted. To take an extreme example, it cannot conceivably have been envisaged that Mr Patarkatsishvili could show, or send copies of, the draft statements to Mr Abramovich.

Finally, the Family Defendants are in precisely the same position as Mr Patarkatsishvili would be if he was still alive and adopting the position in the Chancery actions which the Family Defendants are adopting.

Accordingly, the issue is as follows. Given the terms of the emails, the purpose for which the draft statements were sent to Mr Patarkatsishvili’s solicitors, and all the surrounding circumstances, what are the limits on the use which were expressly or impliedly imposed, or which ought reasonably have been understood to have been imposed, on Mr Patarkatsishvili so far as the use of the draft statements was concerned, and, in particular can the draft statements be deployed by the Family Defendants in connection with the pursuit of their case in the overlap issues.

For the Family Defendants, Mr Henderson argued that Mann J’s decision was one with which an appellate court should be slow to interfere, because it raised a question of mixed fact and law, and was decided by a judge who had been dealing with the Chancery actions for some two years. I agree that this court should, in general, be very slow to interfere with any first instance determination in so far as it is a finding of fact based on oral evidence, the exercise of a discretion, or a case management decision. Although it is true that the parties’ intention and understanding at the time of the second email can be said to be derived from inferences drawn from all the primary facts, this is not a case where the Judge heard oral evidence or where there is a dispute as to the primary facts, and there is no suggestion that the Judge thought that he was benefiting from any particular insights that he had gained from his past two years’ involvement in the Chancery actions. While I agree that this court should pay regard to the views of Mann J, in his clear and considered judgment, the ultimate question for us is whether he was right in his conclusion as summarised in para 23 above.

As the Judge said, the draft statements were sent to Mr Patarkatsishvili for the purposes of (i) assisting Mr Patarkatsishvili with his asylum claim, and in particular with the preparation of his evidence in that claim, and (ii) ensuring that there was no conflict between the evidence of Mr Patarkatsishvili in the asylum claim and the evidence of Mr Patarkatsishvili and Mr Berezovsky in the Commercial Court action. In my view, the draft statements were sent on the basis that their use for any other purpose was prohibited, unless it was a purpose to which Mr Berezovsky assented, or, arguably (and it is unnecessary to decide), unless it was a purpose to which he objected, but, despite his objection, which could not damage him in any way, or a purpose which could damage him, but would not involve the contents of the draft statements being revealed to anyone other than Mr Berezovsky and Mr Patarkatsishvili’s successors, and their advisers.

I reach this conclusion on the basis of a combination of factors.

First, the sensitivity of the draft witness statements must have been obvious to both parties: the Commercial Court action was (and still is) hard fought litigation, in which very large sums were at stake. Mr Patarkatsishvili’s lawyers would have appreciated that Mr Berezovsky would have been very anxious to minimise any risk of the contents of the draft statements being disseminated to any other parties, given that they were still in draft, and that any changes before they were finalised might be used by Mr Abramovich to Mr Berezovsky’s disadvantage. The very fact that they were still drafts, and that they were being sent to Mr Patarkatsishvili in connection with other litigation to ensure that no conflict arose between the evidence in the two sets of proceedings would have highlighted both the possibility of the drafts being amended (to reflect what was to be said in Mr Patarkatsishvili’s asylum claim) and the risk of embarrassment if inconsistencies in evidence (including the draft statements and the final versions) were to find their way into the hands of the Home Secretary in the asylum claim, or the defendant in the Commercial Court action, Mr Abramovich.

Secondly, Mr Berezovsky would have expected Mr Patarkatsishvili to be very sympathetic to any protection, in the form of confidentiality and the like, which he wished to maintain in respect of the draft statements. They had had a long and successful commercial relationship (and they may also have been personal friends); Mr Patarkatsishvili was supporting Mr Berezovsky in the Commercial Court action, and Mr Berezovsky was supporting Mr Patarkatsishvili’s asylum claim. Accordingly, the absence of any spelling out of the limited extent of any waiver is not an indication that Mr Berezovsky was at all relaxed about the subsequent use of the draft statements, or that Mr Patarkatsishvili would have expected him to be relaxed.

Thirdly, the waiver was effected not merely between solicitors within the same firm, Ghersons, but, on Mr Berezovsky’s side, by Mr Micklethwaite, who was not actually acting for him in the litigation in respect of which the draft statements had been prepared. Mr Micklethwaite, when sending the second email, would have been particularly cautious about the extent to which the attachments should be used, given their privileged and sensitive nature, and the fact that he was not involved in the litigation to which they related. Given that Mr Patarkatsishvili, through those advising him at Ghersons, must have appreciated that Mr Micklethwaite owed Mr Berezovsky a duty to protect his interests, and that Mr Micklethwaite was not acting in the Commercial Court action, they ought to have realised that any intended waiver of privilege must have been intended to be very limited.

Fourthly, the heading of the first and second email, “Privileged and Confidential” is not without significance. The intention of the sender of each email was plainly to ensure that the privilege which the attachments enjoyed was maintained. Of course, the second email inevitably resulted in the privilege being lost to an extent, so that that intention must have been qualified, but it seems to me that the heading serves to emphasise that that the extent of that loss should be kept to a minimum. That minimum is reasonably plain from the third email (supported by the findings of the Judge), namely that Mr Patarkatsishvili and his advisers were to use the draft statements to assist them in preparing for his asylum claim. The purpose was thus to ensure that anything in the draft statements which assisted that claim would be included in the evidence in the asylum claim, and that that evidence should not conflict with the contents of the statements.

Fifthly, while it is true that Mr Berezovsky had an interest in ensuring that the evidence in Mr Patarkatsishvili’s asylum claim did not conflict with the evidence in the Commercial Court action, his provision of the draft statements gave him no control over the contents of any evidence given in that claim. All that the provision of the draft witness statements ensured was that Mr Patarkatsishvili and his lawyers could take advantage of the contents of those statements when preparing the evidence in support of the asylum claim. The principal beneficiary of the provision of the documents was therefore Mr Patarkatsishvili, as the third email recorded. Any benefit to Mr Berezovsky would have been effectively incidental and dependent on Mr Patarkatsishvili and his lawyers.

Sixthly, given the Judge’s finding, accepted by both parties, that any waiver of privilege by Mr Berezovsky was qualified, I consider that it is difficult to identify satisfactorily the precise limits of that waiver if it is not limited as described in para 34 above. The Judge was unpersuaded that the parties could have intended that Mr Patarkatsishvili could not deploy the draft statements in any proceedings brought against him by Mr Berezovsky – presumably irrespective of the seriousness of the consequences. That is a rather vague analysis: for instance, would Mr Patarkatsishvili’s right to deploy the statements depend on who had brought those proceedings, the nature of the allegations in those proceedings, whether other parties (and in particular Mr Abramovich) are parties to those proceedings?

Further, as Mr Gillis QC, for Mr Berezovsky, argues, it seems inconceivable that the parties can possibly have envisaged that the draft statements could be deployed by Mr Patarkatsishvili in proceedings in which Mr Abramovich was a party, and in particular the very proceedings on which the privilege was based and for which it was particularly essential. Yet that is what may very well happen if the Judge’s order stands. (“May very well” because the Family Defendants’ legal advisers have not seen Mr Berezovsky’s draft statement, and therefore do not know whether they wish to deploy it in connection with the forthcoming trial of the overlap issues, and if so how). If the draft statements are so deployed, Mr Abramovich will very probably see them during the hearing of the very proceedings for which they were prepared, and for which any privilege is particularly important to Mr Berezovsky.

The possibility of Mr Patarkatsishvili deploying the draft statements against Mr Berezovsky was not in the parties’ minds at the time: they were staunch allies, and appear to have been for many years. While that is a point which in one sense cuts both ways, it does highlight the fact that there would have been possible uses to which Mr Patarkatsishvili might wish to put the draft statements to which neither party would have put his mind. On the facts of this case, I think that that supports the notion that Mr Berezovsky would have intended a very limited waiver, and that Mr Patarkatsishvili would have appreciated that.

During the hearing, the possibility of Mr Berezovsky and Mr Patarkatsishvili having common interest privilege in the draft statements was raised. The nature of common interest privilege was discussed by Aikens J in Winterthur [2006] EWHC 839 Comm, paras 76-81, where a number of relevant authorities are mentioned. It may well be that it applies here, but I agree with counsel that, on analysis, it is unnecessary to decide the point. If it does not, then it is irrelevant. If common interest privilege does apply to a document, then there is no reason why the common interest should not be subject to terms as to which one of the parties can use the document (particularly where those terms are for the benefit of the party who originally had, and chose to share, the documents and who enjoys, as it were, the primary privilege, and binds the party who, at the time of the creation of the common interest privilege, had little, if any, interest in any subsequent use of the document).

It is true that Bridge LJ in Cia Barca de Panama SA v George Wimpey & Co Ltd [1980] 1 Lloyd’s Rep 598, 615, said that if “A and B have a common interest in litigation against C and if at that point there is no dispute between A and B then if subsequently A and B fall out and litigate between themselves and the litigation against C is relevant to the disputes between A and B then in the litigation between A and B neither A nor B can claim legal professional privilege for documents which came into existence in relation to the earlier litigation against C.” However, that was a general observation, and was plainly not intended to be a complete statement of the law of common interest privilege. In any event, it was concerned with a case where the documents come into existence in connection with a case in which A and B are, at the time, both involved. Here the documents were produced in connection with a case in which only Mr Berezovsky was involved at the time, and were supplied to Mr Patarkatsishvili because he was involved in a different case.

If we had decided that the draft witness statements were in principle capable of being deployed by the Family Defendants at the trial of the overlap issues, the next step would have been for their advisers to decide if and how they wished to deploy them. At that point, if those advisers had decided to use the statements in the course of the forthcoming trial, a further issue may have arisen. That issue would have been whether there was an absolute right in the Family Defendants to deploy the statements as they honestly and reasonably wished, or whether it was open to the court to carry out a balancing exercise, which would have involved effectively considering the benefit to the Family Defendants of deploying the statements against the disadvantage to Mr Berezovsky if they could do so, and deciding, in all the circumstances, where the interests of justice lay.

The questions whether, if Mann J’s decision had stood, the Family Defendants would have had an absolute right to use the draft statements at trial, or whether such a use would have been subject to the court’s control, and, if the latter, how such control should be exercised, may raise interesting issues, but they do not, and will not, arise in connection with the draft witness statements.

In the event, for the reasons given above, I would allow Mr Berezovsky’s appeal, and order that the Family Defendants cannot use or deploy the draft witness statements at the trial of the overlap issues.

After we had provided this judgment in draft to the parties, the Family Defendants proposed a form of order which, while (in accordance with our decision) prohibits the Family Defendants from using or deploying the draft statements in the trial of the overlap issues, includes a provision to the effect that nothing in the order should prevent the Family Defendants and their solicitors from using the draft statements at the trial of the Chancery actions “(apart from the trial of the overlap issues)”.

Such a provision should not be included in the order. Nothing in this judgment is intended to imply that the Family Defendnats do (or do not) have such a right: as stated in para 34, we have left open the questions whether the draft statements could be used by the Family Defendants for a purpose to which Mr Berezovsky objected, but, despite his objection, which could not damage him in any way, or for a purpose which could damage him, but would not involve the contents of the draft statements being revealed to anyone other than Mr Berezovsky and Mr Patarkatsishvili’s successors and their respective advisers.  If the Family Defendants wish to use the documents for the purpose of the Chancery actions (other than the overlap issues) they must make an application to the court for a determination as to whether they have the right to do so, and the matter will be considered and decided in the circumstances then prevailing.

I agree.

I also agree.