Kensington International Ltd.v Republic of the Congo

The Claimant (“Kensington”) applies for orders requiring the four Third Parties (“VS”, “VB”, together “the companies”, “Mr. Chautard” and “Mr. Lambroza”) to provide information and disclose documents which, it alleges, will assist it in enforcing its judgments against the Defendant (“the Congo”). The Third Parties resist the application essentially on the sole ground that they wish to claim the privilege against self-incrimination.

Kensington is a judgment creditor of the Congo under four judgments of this Court. The amount presently outstanding is said to be some US$92 million. It is Kensington’s case that although the Congo has the financial resources to pay its debts, it has sought to evade its obligations by complex, varied and dishonest schemes, all as now recorded in a number of decisions of this Court.

The Vitol Group (“Vitol” or “the Group”) is a major oil trading group, with, on the uncontradicted evidence before me, a close and long-established relationship with the Congo. VB and VS are, put colloquially, English companies; they are companies incorporated according to the law of England and Wales. They provide, respectively, broking (or trading) and financial, advisory, legal, claims and shipping services to the Group. It is admitted that, at some time (the period is not common ground), both VB and VS have been involved with Vitol’s oil trading with the Congo.

Mr. Chautard is a French national. He is an employee of VB. On any view, he has been involved in Vitol’s oil trading with the Congo. In a witness statement made on behalf of VB and VS in previous proceedings, he was described as “the representative of [VB] principally concerned with Congolese business”.

Mr. Lambroza is the Chief Financial Officer of the Group and an employee of VS. On any view, he too has been involved in Vitol’s Congolese oil trading. On the material before me, he became a United Kingdom national on the 11^th October, 2004.

The information and documents sought by Kensington concern payments allegedly made by or on behalf of “Vitol Entities” (as defined in the draft order) to senior officials of the Congo or companies said to be controlled by them (“Vitol Payees” as defined in the draft order). As set out in Schedule A to the draft order, Kensington seeks the following:

“1.

In relation to each payment made by any of the Vitol Entities to any of the Vitol Payees between 1 January 2002 and …January 2007:

(a)

the date of payment

(b)

the amount of payment and how it was calculated

(c)

the identity and address of the payer

(d)

the identity and address of the payee

(e)

identity and address of any of the banks or other financial institutions involved in receiving the payment

(f)

the consideration for which payment was made

2.

In relation to each payment made by any of the Vitol Entities to any of the Vitol Payees between 1 January 2002 and …January 2007:

(a)

any documents evidencing the making or receipt of the payment

(b)

any documents containing or evidencing a request for or instruction to make the payment

(c)the contract(s) by which any of the Vitol Parties or any entity or person on whose behalf any of the Vitol Parties is acting or has acted agreed to make such payment

(d)

any documents evidencing or containing the consideration for which the payment was made

(e)

any documents evidencing how the amount of the payment was calculated ”

In seeking such relief, Kensington invokes the well-established Norwich Pharmacal jurisdiction: see Norwich Pharmacal v Customs & Excise Commissioners [1974] AC 133 and s.37(1) of the Supreme Court Act 1981. But Kensington does not simply say that the Third Parties innocently facilitated or became mixed up in wrongdoing. The flavour of Kensington’s case against the Third Parties may instead be seen from the 1^st Witness Statement of Mr. Schwarzkopf, made on its behalf on the 15^th January, 2007. Building on Kensington’s discovery of substantial sums in Hong Kong bank accounts of various individuals said to be closely involved in the Congo’s oil sales and the Congo’s scandalous failure to honour the four judgments of this Court, Mr. Schwarzkopf said this:

“8.

The information obtained by Kensington reveals that payments into the Hong Kong bank accounts were made by international oil traders who have long maintained a close and profitable relationship with Congo and officials of the Sassou-Nguesso regime, and who have long assisted Congo in its dishonest efforts to evade its creditors (including Kensington). These oil traders include the Vitol Group (‘Vitol’), whose main operating companies include the London-based Vitol Services and Vitol Broking. The only credible explanation for these payments are that either they were made to assist Congo in hiding its assets or they were made as corrupt kickbacks to Congolese officials in return for valuable business.

9.

….Vitol’s operating companies, and/or their principal executives involved in dealings with Congo (Messrs Lambroza and Chautard), must therefore possess information and documents showing what other payments have been made, and to whom and in what jurisdictions those payments have been made…..Mr. Lambroza, Mr. Chautard and the companies Vitol Services and Vitol Broking have all become so mixed up in the wrongdoing by which Congo has dishonestly evaded its creditors and concealed its assets, that they should be required under Norwich Pharmacal principles to provide the information and documents requested by Kensington.

12.

……Congo has deliberately and dishonestly attempted to evade enforcement of the Judgments using a variety of devices with the knowing assistance of counterparties in oil trading and finance, including in particular the Vitol Group.

19.

The Vitol Group has a substantial and long-established relationship with Congo. Kensington has determined that from 2002 until the present, Vitol purchased at least 65 cargoes of Congo’s oil worth nearly US$3 billion. Messrs Lambroza and Chautard have both been central to Vitol’s relationship with the Congo and the Sassou-Nguesso regime since its inception…

23.

There is mounting evidence….of the Vitol Group’s knowing collusion with Congo in seeking to evade enforcement of the Judgments.

74 ….there appear to be only two credible alternative explanations for the payments by Peakville and Vitol SA into the Long Beach account. Either these constitute monies paid to and held by Congo for its own convenience, to be hidden from creditors….; or, put candidly, they are corrupt kickbacks or rake-offs in return for the placing of valuable business with Vitol…..

81(c) Vitol Broking, Vitol Services, Gilles Chautard and Sam Lambroza are very likely indeed to have been involved in the scheme by which Peakville made the payments to Long Beach between June and October 2005 and in arrangements made for similar payments which must have been made to Congo or its officials at other times. I say this in view of the crucial role played by each of the respondents to this application in Vitol’s purchases of Congo’s oil, their central importance to Vitol’s relationship with the Congo and the depth of their involvement in the Congo’s dishonest judgment-proofing schemes as set out above.”

Faced with such accusations, an obvious response of a reputable trader might well involve an indignant root and branch factual refutation of the allegations in question, perhaps coupled with an expressed willingness to assist the judgment creditor so far as it was able to do so. That, however, is not the stance adopted by the Third Parties. To the contrary, while resolutely making no admissions to any of the allegations made by Mr. Schwarzkopf, the entire thrust of the Third Parties’case is that those allegations could, if proved, amount to criminal conduct under the laws of this country. They go on to assert the privilege against self-incrimination pursuant to s.14 of the Civil Evidence Act 1968, which provides as follows:

“ (1) The right of a person in any legal proceedings other than criminal proceedings to refuse to answer any question or produce any document or thing if to do so would tend to expose that person to proceedings for an offence or for the recovery of a penalty –

(a)

shall apply only as regards criminal offences under the law of any part of the United Kingdom and penalties provided for by such law;

and

(b)

shall include a like right to refuse to answer any question or produce any document or thing if to do so would tend to expose the husband or wife of that person to proceedings for any such criminal offence or for the recovery of any such penalty. ”

Accordingly, if well-founded, however unattractive the point may be, the Third Parties are entitled to maintain their claim to this privilege. Moreover, a claim for this privilege is not evidence and does not give rise to an inference, still less any admission, of guilt.

Before turning to the rival cases in more detail, it is necessary to say something, however briefly, as to the procedural history.

In the events which happened, the application was heard on two separate days. At the commencement of the first hearing, the Third Parties applied for the application itself to be heard in private. As it seemed to me, there was no justification for this contention and I refused the application. The claim to privilege, if made out, would not be defeated by the fact that the application and any judgment would not be private; any embarrassment attached to the making of the application could not conceivably justify a departure from the usual rule that court proceedings are public.

Furthermore, it emerged at the first hearing that the Third Parties’ claim for privilege was a “blanket” claim. No distinction was made either as to their separate positions or as to the categories of documents of which disclosure was sought. At that stage, as became apparent, the Third Parties had not in fact considered separately the particular categories of documents of which disclosure was sought or any of the underlying material; their stance was that it was sufficient simply to consider the allegations made against them to make good the claim for privilege.

Against this background, I adjourned the hearing and made a disclosure order (“the 2^nd February order”) against each of the Third Parties, substantially in terms of the draft order and subject only to their right, if so advised, to claim the privilege against self-incrimination.

Various affidavits then followed, sworn on behalf of each of the Third Parties, in which it was said that “the categories of documents and information set out in the Schedule to the Order” (i.e., the 2^nd February order) had been considered. Somewhat unfortunately, when Kensington’s solicitors asked the Third Parties’ solicitors whether this formulation meant that the underlying material had been collated and examined, the answer received was that:

“…our clients have done what they are required by the Order to do. Absent any further Court Order they are not prepared to go any further than this.”

On the face of it, this was a less than satisfactory response. However, at the restored hearing, I was assured by leading counsel for the Third Parties that the letter and spirit of the 2^nd February order had been complied with and that the continued assertion of the privilege was now based on a consideration of the underlying material. That material had only not been set out at length, because to have done so would have itself defeated the claim for privilege. I am of course happy to accept that assurance and indeed it was not challenged by leading counsel for Kensington.

It is next convenient to turn to the rival cases and in so doing also to introduce the principal issues and the legal framework.

For the Third Parties, Mr. Gruder QC submitted that the allegations made by Kensington against the Third Parties – in essence, bribery of individuals who were responsible for the sale of the Congo’s oil - could, if proved, amount to criminal conduct under the laws of this country. The documents and information sought by Kensington could, if produced, have the tendency to expose the Third Parties to criminal charges; hence the claim to privilege.

The Third Parties express apprehension as to the risk of exposure to criminal charges in respect of the following identified offences (“the corruption offences”):

The ambit of the corruption offences have been extended to apply extra-territorially by virtue of the provisions of the Anti-Terrorism, Crime and Security Act 2001 (“the 2001 Act”); s.109 of the 2001 Act provides as follows:

“ (1) This section applies if –

(a)

a national of the United Kingdom or a body incorporated under the law of any part of the United Kingdom does anything in a country or territory outside the United Kingdom, and

(b)

the act would, if done in the United Kingdom, constitute a corruption offence (as defined below)

(2)

In such a case –

(a)

the act constitutes the offence concerned, and

(b)

proceedings for the offence may be taken in the United Kingdom.

(3)

These are corruption offences –

(a)

any common law offence of bribery;

(b)

the offences under section 1 of the Public Bodies Corrupt Practices Act 1889 …. (corruption in office);

(c)

the first two offences under section 1 of the Prevention of Corruption Act 1906 …(bribes obtained by or given to agents).”

S.1 of the Prevention of Corruption Act 1906 (“the 1906 Act”), provides as follows:

“….If any person corruptly gives or agrees to give or offers any gift or consideration to any agent as an inducement or reward for doing or forbearing to do, or for having after the passing of this Act done or forborne to do, any act in relation to his principal’s affairs or business, or for showing or forbearing to show favour or disfavour to any person in relation to his principal’s affairs or business…..he shall be guilty of a [crime]…”

As foreshadowed, this offence now has extra-territorial ambit. S.1(4) of the 1906 Act, inserted by s.108(2) of the 2001 Act, provides as follows:

“For the purposes of this Act it is immaterial if –

(a)

the principal’s affairs or business have no connection with the United Kingdom and are conducted in a country or territory outside the United Kingdom;

(b)

the agent’s function have no connection with the United Kingdom and are carried out in a country or territory outside the United Kingdom.”

S.1(2) of the Public Bodies Corrupt Practices Act 1889 (“the 1889 Act”) provides as follows:

“ Every person who shall by himself or by or in conjunction with any other person corruptly give, promise, or offer any gift, loan, fee, reward, or advantage whatsoever to any person, whether for the benefit of that person or of another person, as an inducement to or reward for or otherwise on account of any member, officer, or servant of any public body as in this Act defined, doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed, in which such public body as aforesaid is concerned, shall be guilty of a [crime].”

S.7 of the 1889 Act, as amended by the 2001 Act, is in similar terms to s.1(4) of the 1906 Act.

So far as concerns the common law offence of bribery, s.108(1) of the 2001 Act provides as follows:

“For the purposes of any common law offence of bribery it is immaterial if the functions of the person who receives or is offered a reward have no connection with the United Kingdom and are carried out in a country or territory outside the United Kingdom.”

In the light of the allegations as to the payment of “kickbacks”, in some instances to those who hold public office in the Congo, the Third Parties submit that the claim to privilege is made out in respect of each of the offences set out above. A sufficient risk of exposure to charges or prosecution has been established. As both VS and VB are English companies, they are caught by the extra-territorial extensions of the corruption offences. So too, it is said, is Mr. Lambroza, at least from the time he became a UK national. In any event, as to both Mr. Lambroza and Mr. Chautard, the Third Parties submitted that orders should not be made against them to produce information or documents which might incriminate VB and VS, thereby defeating the companies’ claim to privilege, so to speak, via the backdoor.

For Kensington, Mr. Nash QC (who appeared at the restored hearing but not previously), advanced the following submissions. First, the Third Parties had failed to show that there were reasonable grounds to apprehend danger to each of them if they disclosed the information or documents set out in Schedule A to the 2^nd February order. Mr. Nash underlined that the actus reus of the offences in question involved the giving of a bribe or the promise or agreement to give a bribe. Realistically, there was no suggestion of payments being made from within the United Kingdom or by UK companies. But, insofar as the relevant acts were done outside the jurisdiction by a non-UK national or corporation, no criminal offence will have been committed; there could accordingly be no question of any of the Third Parties incurring criminal liability as “secondary parties”. The involvement of the Third Parties in payments made by non-UK members of the Vitol Group could not by itself give rise to a reasonable apprehension of prosecution or exposure to criminal charges. In any event, there were various permutations to be taken into account; for example, production by Mr. Chautard (not a UK national) of documents or information relating to a payment within Schedule A to the 2^nd February order, by a non-UK Vitol Group company, could not justify a claim to privilege.

Secondly, there was no or no proper basis in law or principle for the contention that Messrs. Chautard and Lambroza were or ought to be entitled to refuse to provide the information and documents sought on the grounds that they might incriminate VB and VS. The privilege could only be claimed by the person likely to be incriminated (save for any question, here irrelevant, as to spouses). In any event, the claim to privilege advanced on this basis was too widely drawn; it assumed that both Mr. Chautard and Mr. Lambroza had acted throughout in their capacity as employees of VB and VS. That was not right; the evidence suggested that they had acted on behalf of other non-UK companies in the Vitol Group in connection with the Congo; both had a “roving role” within the Group.

Thirdly, as raised for the first time by Mr. Nash at the restored hearing, even if the Third Parties were otherwise correct, s.13 of the Fraud Act 2006 (“the Fraud Act”) had abrogated the privilege against self-incrimination in respect of the identified offences relied upon by the Third Parties.

S.13 of the Fraud Act provides as follows:

“ 13 Evidence

(1)

A person is not to be excused from –

(a)

answering any question put to him in proceedings relating to property, or

(b)

complying with any order made in proceedings relating to property,

on the ground that doing so may incriminate him ….of an offence under this Act or a related offence.

(2)

But, in proceedings for an offence under this Act or a related offence, a statement or admission made by the person in –

(a)

answering such a question, or

(b)

complying with such an order,

is not admissible in evidence against him …..

(3)

“Proceedings relating to property” means any proceedings for –

(a)

the recovery or administration of any property,

(b)

the execution of a trust,

(c)

an account of any property or dealings with property,

and “property” means money or other property whether real or personal (including things in action and other intangible property).

(4)

“Related offence” means –

(a)

conspiracy to defraud;

(b)

any other offence involving any form of fraudulent conduct or purpose. ”

For completeness, ss. 2 – 4 of the Fraud Act create offences providing for different ways of committing the offence of “fraud”. It is unnecessary to set out s.2 (fraud by false representation). Ss. 3 and 4 provide as follows:

“ 3 Fraud by failing to disclose information

A person is in breach of this section if he –

(a)

dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and

(b)

intends, by failing to disclose the information –

(i)

to make a gain for himself or another, or

(ii)

to cause loss to another or to expose another to a risk of loss

4 Fraud by abuse of position

(1)

A person is in breach of this section if he –

(a)

occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person,

(b)

dishonestly abuses that position, and

(c)

intends, by means of the abuse of that position –

(i)

to make a gain for himself or another, or

(ii)

to cause loss to another or to expose another to a risk of loss…. ”

Mr. Nash submitted that s.13 had been drawn in deliberately broad terms. The offences relied on by the Third Parties in their claim to privilege were “related offences” within sub-sections (1) and (4)(b). They all involved a form of fraudulent conduct or purpose. Most, if not all, cases of bribery would involve the commission of the offence of conspiracy to defraud or offences under ss. 3 and/or 4. Furthermore, the proceedings were “related to property” within s.13(3); the disclosure sought was ancillary to ongoing or prospective proceedings for the recovery of judgment debts; alternatively, even if characterised as proceedings for the disclosure of information and documents about payments, then they were proceedings for an account of dealings with property. Finally, as to the question of retrospectivity, the Fraud Act had come into force on the 15^th January, 2007; however, s.13 related to evidence and therefore applied to all proceedings thereafter.

For his part, Mr. Gruder submitted that all these arguments were misconceived:

From this summary of the rival cases, the principal issues emerge as follows:

I was referred to a number of authorities in regard to this Issue. To my mind, the relevant test is well settled and, with very little by way of amplification, can be taken from the following passage in the judgment of Staughton LJ in Sociedade Nacional v Lundqvist [1991] 2 QB 310 (“Sonangol”), at pp. 324-5:

“ The substance of the test is …that there must be grounds to apprehend danger to the witness, and those grounds must be reasonable, rather than fanciful. Other points that emerge from the cases are these: (i) the affidavit claiming privilege is not conclusive: see Reg v Boyes, 1 B & S 311….Khan v Khan [1982] 1 WLR 513; (ii) the deponent is not bound to go into detail, if to do so would itself deprive him of protection….(iii) ‘if the fact of the witness being in danger be once made to appear, great latitude should be allowed to him in judging for himself of the effect of any particular question:’ see Reg v Boyes, 1 B & S 311, 330…. (iv) the privilege is not available where the witness is already at risk, and the risk would not be increased if he were required to answer…. (v) ‘if it is one step having a tendency to criminate him, he is not to be compelled to answer’ (see Paxton v Douglas (1809) 16 Ves. Jun. 239, 242) and ‘as it is one link in the chain of proof’: Paxton v Douglas…227. That last point recurs in other cases.... and may be important. I am inclined to think that it refers to any fact which a prosecutor would wish to prove in order to establish the guilt of the witness on a criminal charge…..”

It seems clear that the relevant risk does not need to be put as high as one of conviction: see (v) in the passage above. As elaborated upon by Beldam LJ in Sonangol itself, at p.335:

“If therefore the question to be decided was whether the first and fourth defendants would be in peril of being convicted of an offence under English law, I would have considerable hesitation in deciding that they were. The question, however, is whether on the appropriate view of the facts the first and fourth defendants have established that in complying with the order of the court they would tend to expose themselves to prosecution…. ”

So too, in Den Norske Bank v Antonatos [1999] QB 271, Waller LJ, after reviewing the authorities (at pp. 285 et seq), said this (at p.289):

“Thus, it is not simply the risk of prosecution. A witness is entitled to claim the privilege in relation to any piece of information or evidence on which the prosecution might wish to rely in establishing guilt. And, as it seems to me, it also applies to any piece of information or evidence on which the prosecution would wish to rely in making its decision whether to prosecute or not. ”

Applying the law to the facts, I put out of my mind the unattractiveness of the application. By their nature, such applications are bound to be unattractive. If, however, the privilege against self-incrimination in civil proceedings is part of our law – as it clearly is - then effect must be given to it. So too, I put out of my mind the procedural and presentational hiccups bedevilling the early stages of the claim to privilege, to which reference has already been made. That must all be by the by now that the matter has been clarified.

While the assertions of the Third Parties claiming privilege are not conclusive, Mr. Gruder has satisfied me that there are reasonable grounds for apprehending the existence of the relevant risk should they be compelled to disclose the generality of the information and documents sought in Schedule A to the 2^nd February order. At the periphery, the position may be different – a matter to which I return presently. As already underlined, the risk is not that of conviction but rather, that of prosecution, or the decision whether or not to prosecute, in respect of the identified corruption offences. Given the nature of Kensington’s allegations against the Third Parties contained in Mr. Schwarzkopf’s Witness Statement and the assurance given by Mr. Gruder as to consideration of the underlying material, I could not begin to say that the relevant risk to the Third Parties from disclosure in accordance with the order is fanciful only. It is not irrelevant that conduct of the sort complained of by Kensington is of some topical interest.

Notwithstanding the force of Mr. Nash’s arguments as to the true actus reus and the difficulties of establishing secondary liability in respect of acts performed outside the jurisdiction by a non-UK national or corporation, there remains ample scope for the operation of real, relevant risk to the Third Parties. In this regard it is necessary to keep well in mind the allegations as to the roles and importance of VS, VB, Mr. Chautard and Mr. Lambroza in connection with Vitol’s Congolese oil trading. As Mr. Gruder put it in argument, if an English company provided the “brains” for bribery of a foreign official, utilising a foreign company as a “cat’s paw”, it could not be said that no relevant risk attached to the English company. The legislation as to the identified offences, including their extra-territorial ambit, could not be so simply circumvented.

It follows that subject only to the questions to be considered under Issue (III), concerning the Fraud Act, each of the Third Parties is entitled to assert a claim to privilege against self-incrimination in respect of the generality of disclosure sought in Schedule A to the 2^nd February order.

As foreshadowed, the position at the periphery is less clear. As it seems to me, there are at least three categories of information or documents which, if they exist, may be known to, or may be within the possession, custody or control of, the Third Parties, as the case may be and which would not give rise to a reasonable apprehension of relevant risk to the Third Parties. These categories are as follows:

To my mind, the roving role of Messrs. Chautard and Lambroza within the Vitol Group and the variety of non-UK entities within the Vitol Group with some involvement in Congolese oil business, amply justify the conclusion that such information or documents may exist. At all events, I am not satisfied that the last word has yet been said as to these categories of documents, notwithstanding the continued assertion of privilege to which I have in the main acceded. It follows that an order should in any event be made as to the production of such information and documents if they exist. If it is to be said that no such information or documents exist, then any statement to this effect should be made by way of affidavit. The order for the production of information and documents in respect of these peripheral categories should not prejudice the position of the Third Parties as to the generality of disclosure sought in Schedule A to the 2^nd February order (where I have upheld the claim to privilege, subject only to Issue (III) below). But should it be thought necessary, protection of the Third Parties’ privilege with regard to the generality of disclosure sought can be dealt with by an appropriate form of order, whether building on the draft “proviso” sent to me by Junior Counsel for Kensington on the 26^th February, 2007, or otherwise.

This is an Issue of no little interest and upon which there is no binding authority. In circumstances, however, where the personal entitlement of Messrs. Chautard and Lambroza to claim the privilege against self-incrimination is, for practical purposes, co-extensive with that of VS and VB, this Issue is necessarily academic. I shall therefore confine myself to recording, briefly, the outline of this debate and such provisional views which I have formed; in my judgment, however, it would not be appropriate to express a concluded view on an Issue of this nature in a case where it is of academic interest only.

The starting point here is the acceptance in English Law that a company is entitled to claim the privilege against self-incrimination: Triplex Safety Glass v Lancegaye Safety Glass [1939] 2 KB 395.

Against that background, Mr. Gruder submitted that no order should be made against Messrs. Chautard and Lambroza personally, on the ground that if VS and VB could not be ordered to produce information and documents “directly” then such information and documents should not be obtained “indirectly” or via “the backdoor” from directors, servants or agents – so undermining the company’s privilege. In this regard, he relied upon the submission advanced by Mr. Rokison QC, counsel for the appellants in In re Westinghouse Uranium Contract [1978] AC 547 and its not unfavourable reception by at least some of their Lordships. Lord Fraser of Tullybelton recorded the argument in the following terms (at pp. 651-2):

“An interesting submission was made by Mr. Rokison on a question that would have arisen if your Lordships had held that the witnesses have no privilege but that the RTZ companies have privilege. In such an event the privilege of the companies could be rendered useless if its directors and officers could be compelled to give evidence incriminating the company. Mr. Rokison submitted that the privilege of a company, which would allow it to refuse to answer written interrogatories by the hand of its proper officer, should apply also to oral evidence by its directors and officers if such evidence might tend to incriminate the company. The submission is unsupported by authority but it has much logical force and if it had been relevant to do so I would have wished to consider it more carefully.”

Lord Wilberforce (at p.617) observed that this point raised “novel and interesting contentions” which were unnecessary and, therefore, inappropriate to decide in that case. Viscount Dilhorne (at p.632) likewise expressed no opinion on this “interesting argument” save to observe:

“…that it renders a company’s privilege of little value if it can be got round in that way.”

It should be noted that Mr. Gruder’s submission enjoys support from textbooks in this area: see, Hollander, Documentary Evidence (9^th ed.) at para. 17-16; Phipson on Evidence (16^th ed.), at para. 24-50 and Matthews and Malek, Disclosure (2000), at para. 9.101. These writers all support – in principle – a claim to privilege advanced by such directors, servants or agents on the ground that otherwise the company’s privilege would be defeated. While recognising that the privilege against self-incrimination is a privilege only for the benefit of the party concerned and not for others, Matthews and Malek say this (ibid):

“ Just as the employees are agents for knowing the information, and thus not true third parties, so too they should be their employer’s agents for the purpose of claiming privilege.”

Mr. Nash’s fundamental submission was that directors, servants and agents cannot and should not be permitted to invoke the privilege on the ground that it would incriminate the company; any such contention was contrary to the long-established principle that the privilege could only be claimed by the person who was likely to be incriminated: see, The King of the Two Sicilies v Willcox (1859) 1 Sim (NS) 301, where Lord Cranworth V-C said this at p.329:

“The privilege is confined to penal consequences likely to be occasioned to the party himself….but there is no privilege against disclosing matter within the knowledge of the party, merely because it might subject other persons to punishment.”

Further, in Westinghouse (supra) itself, Lord Diplock’s reaction (at pp. 637-8) to Mr. Rokison’s submission was strongly adverse:

“It was submitted that since the companies were entitled to withhold the documents from production, they had a privilege in English law to require their officers and servants to refuse to answer questions that might lead to the disclosure of the contents of the documents or provide evidence that would tend to expose the companies to a penalty. At common law, as declared in section 14(1) of the Civil Evidence Act 1968, the privilege against self-incrimination was restricted to the incrimination of the person claiming it and not anyone else. There is no trace in the decided cases that it is of wider application; no textbook old or modern suggests the contrary. It is not for your Lordships to manufacture for the purposes of this instant case a new privilege hitherto unknown to the law. ”

Still further, it has since been held that companies are not entitled to claim the privilege on the ground that disclosure risked incriminating office-holders or controlling shareholders: Sonangol, esp. at p.336 (Beldam LJ) and Tate Access Inc. v Boswell [1991] Ch 512, at pp. 531-2 (Sir Nicolas Browne-Wilkinson V-C, as he then was). In both these decisions, the reasoning of Lord Diplock in Westinghouse (supra) was relied upon.

Finally, Mr. Nash acknowledged:

As already indicated, I do not think it appropriate to express a concluded view on this interesting but (in this case) academic Issue. However, on the assumption that Messrs. Chautard and Lambroza did not enjoy a personal privilege against self-incrimination, my provisional inclination would have been one of reluctance to accede to a claim for privilege by them to guard against the risk of incriminating VS and VB. The reasons for this reluctance, both general and particular, are these. First, I am, with respect, attracted to the reasoning of Lord Diplock in Westinghouse (supra). At the very least, to find in favour of Mr. Gruder’s submission on this Issue would involve an extended application of the privilege against self-incrimination. Secondly, as discussed further when considering Issue (III) (below), the privilege in this area does impact on the effectiveness of civil remedies designed to redress fraud. With such considerations in mind, any extension of the privilege would require cogent justification. Thirdly, the position of one-man companies or of alter egos of companies may well be different; but that is not this case. Fourthly, on the facts, the identity between Messrs. Chautard and Lambroza on the one hand and VS and VB on the other is not so complete as to incline me to favour any such claim; on the material before me, they had wider roles than simply as employees or officers of VS and VB. In the event, for the reasons already given, this Issue is academic; without more ado, I turn to the Fraud Act.

(1) Introduction: In Sonangol (supra), Sir Nicolas Browne-Wilkinson V-C (as he then was) drew attention to the ramifications of the decision in that case, namely, that many defendants in fraud actions would be able to claim privilege. As he there put it (at p.338):

“…the clearer the fraud alleged, the stronger will be the claim to privilege against self-incrimination.”

He underlined (ibid) that in many cases of fraud, proof of the fraud and discovery of the assets against which judgment can be enforced “fundamentally depends” on the court’s ability to compel disclosure. In his view, s.31 of the Theft Act 1968 had:

“…shown the way to protect both the rights of the defendant in relation to subsequent criminal prosecution and the rights of the plaintiff in pursuing his remedies under the civil law. The privilege against incrimination is removed but the statements and documents obtained in the civil proceedings are not admissible in subsequent criminal proceedings.”

However, as he and others observed, the difficulty with s.31 was that it only applied to offences under the Theft Act and so not (for example) to conspiracy to defraud. Sir Nicolas went on to say this:

“I express the hope that Parliament will consider, as a matter of urgency, extending the provisions of section 31 of the Theft Act so as to remove the privilege against incrimination in relation to all civil claims relating to property (including claims for damages) but on the terms that the statements made in documents disclosed are not admissible in any criminal proceedings, including conspiracy to defraud whether under statute or at common law. If that is not done, I fear that the effectiveness of civil remedies to redress fraud will be seriously impaired.” (Italics added)

Perhaps, with respect, no passage better encapsulates the issues in this context. Certainly the sentiments expressed by Sir Nicolas Browne-Wilkinson V-C were approvingly and powerfully echoed by Waller LJ in Den Norske Bank v Antonatos (supra) at p.284 – a case itself concerned with (alleged) bribes and corruption.

To my mind, there can be no doubting the desirability of an outcome whereby s.13 removes the privilege against self-incrimination in a variety of cases, including corruption offences but renders inadmissible in subsequent criminal proceedings information and documents disclosed in civil proceedings. The question in this case, however, is whether the drafting of s.13 of the Fraud Act achieves here the objective illuminated by Sir Nicolas Browne-Wilkinson V-C and others.

In approaching this matter, I of course keep well in mind that a provision depriving a person of “such a fundamental right” as the right to claim privilege against self-incrimination is to be strictly construed: see, Beldam LJ, in Sonangol, at p.337. In one sense, that question can be disposed of swiftly. The language of s.13 of the Fraud Act is such as to admit of no doubt that it does remove the privilege of self-incrimination. As Mr. Gruder properly recognised, this is not a case such as R (Morgan Grenfell v Special Commissioners of Income Tax) [2002] 3 All ER 1. Nonetheless, when determining the question of how far s.13 goes, it is right to proceed with caution and, as Mr. Gruder submitted, to give the Third Parties the “benefit of the doubt” – if doubt there be.

(2) “Proceedings relating to property”: It will be recollected that it is a necessary, if not sufficient, condition for the application of s.13 of the Fraud Act that the proceedings in question are “proceedings relating to property”, as that expression is defined: s.13(1) and (3). Mr. Nash submits that they are; Mr. Gruder that they are not.

I accept that if the proceedings for Norwich Pharmacal relief are considered in isolation, then they are not “proceedings relating to property”. They are proceedings for the obtaining of information or documents. I am not persuaded that it would be right to strain s.13(3)(c) so as to treat proceedings for Norwich Pharmacal relief as “proceedings for …an account of …dealings with property”. So far at least, I prefer Mr. Gruder’s submissions.

But the question next arises as to whether it is right to view the proceedings for Norwich Pharmacal relief in isolation. No doubt for some purposes it is correct to do so; for my part, however, I cannot think that it is right to do so in this context. These Norwich Pharmacal proceedings are ancillary to the ongoing and prospective proceedings in this jurisdiction and elsewhere for the enforcement of the unsatisfied judgments of this court and the recovery of judgment debts. Having regard to the purpose of s.13 (and its predecessor, s.31 of the Theft Act 1968) the inquiry as to the nature of the proceedings must focus on the underlying proceedings or, at the least, must take into account the ancillary nature of the Norwich Pharmacal proceedings. It would be artificial and a triumph of form over substance to consider the Norwich Pharmacal proceedings in isolation; no one brings such proceedings in a vacuum. Were it otherwise:

Having regard then to the underlying proceedings between Kensington and the Congo and the ancillary nature of these Norwich Pharmacal proceedings, are these “proceedings relating to property”? The answer depends on the true construction of s.13(3) of the Fraud Act and, in particular, s.13(3)(a) – proceedings for “the recovery of …any property”. Expressed naturally, these or the underlying proceedings to which they are ancillary, are proceedings for the recovery of debt or damages. So far as the proceedings are for the recovery of a debt, as a “thing in action”, debt comes within the definition of property contained in s.13(3). So far as the proceedings are for the recovery of damages, “property” is likewise defined in s.13(3) as including money. Mr. Gruder resists such a conclusion by seeking to confine the wording “recovery of …any property” to proceedings in which a party seeks to “recover that which has been appropriated from him by fraud”. For my part, I see nothing in the statutory language which requires or justifies reading this restriction into the Act. Mr. Gruder goes on to submit that if he is wrong about this, then “almost all civil proceedings” would be proceedings relating to property, in that nearly all claims in contract and tort are claims in debt or for damages. It is unnecessary to express a view on a “floodgates” submission of this nature; it will of course also be appreciated that the Fraud Act will not be applicable unless the next and cumulative condition as to the offence is satisfied (see below). But to the extent that Mr. Gruder’s submission is well-founded, that strikes me as a desirable rather than an undesirable conclusion in policy terms; see the observations of Sir Nicolas Browne-Wilkinson V-C, in Sonangol (supra), at p.338, cited above – and, not least, the words I have there italicised.

I therefore conclude, without any real doubt, that Kensington has surmounted the first hurdle; properly considered, these are “proceedings relating to property”. I turn to the second hurdle.

(3) “Related offence”: The next and cumulative condition for the applicability of s.13 of the Fraud Act focuses on the offence and leads to a consideration of the area where s.13 goes beyond s.31 of the Theft Act 1968. For s.13 to apply, the offence must be an offence “under this Act” or “a related offence” (s.13(1)). Here, the identified offences relied upon by the Third Parties for their claim to privilege are not offences under the Fraud Act; s.13 can only therefore apply if the identified offences come within the definition of “a related offence”. In turn, a “related offence” is either “conspiracy to defraud” or “any other offence involving any form of fraudulent conduct or purpose” (s.13(4)). Conspiracy to defraud has not been advanced as an identified offence, relied upon by the Third Parties. It follows, that for Kensington to overcome this hurdle to the applicability of s.13, the identified offences must constitute offences “involving any form of fraudulent conduct or purpose”.

Mr. Gruder correctly submitted that, at least with regard to the offences under the 1906 and 1889 Acts, authority demonstrated that dishonesty was not an essential ingredient of the corruption offences: R v Smith [1960] 2 QB 423; R v Williams [1998] EWCA 1508. These offences could be proved by showing that the accused had conducted himself “corruptly”; it was unnecessary for the prosecution to prove that he had behaved “dishonestly”. The fact that dishonesty was not an essential ingredient of these offences, told against their constituting offences involving fraudulent conduct or purpose. Moreover and by contrast, dishonesty was an essential ingredient of the offences under the Fraud Act (ss. 2 – 4). These are certainly relevant considerations, to be carefully weighed.

To my mind, however, they are decisively outweighed by other considerations suggesting that the corruption offences do indeed involve fraudulent conduct or purpose.

So far as concerns bribery, the authorities point one way. In Panama and South Pacific Telegraph Company v India Rubber (1875) LR X 515, at p.526, James LJ said this:

“ …I take it to be clear that any surreptitious dealing between one principal and the agent of the other principal is a fraud on such other principal….”

For his part, Mellish LJ (at pp. 530 – 532) repeatedly referred to the conduct in question as “fraudulent conduct”.

A little over a hundred years later, the observations of Lord Diplock, in Mahesan v Malaysia Housing Society [1979] AC 374, esp. at pp. 380 and 383, are to the same effect; they make it plain that bribery is considered by the courts to be a fraud by both the briber and the agent on the principal. As the headnote expresses the matter (at p.374):

“…at common law a principal could recover from his bribed agent either the amount of the bribe as money had and received or, alternatively, compensation for the actual loss sustained through entry into the transaction in respect of which the bribe was given as damages for fraud…” (Italics added)

In Petrotrade v Smith [2000] 1 Lloyd’s Rep. 486, at p. 490, David Steel J succinctly observed that a claim based on bribery was a “special form of fraud”.

Further, it is striking, if no doubt by itself not in any way conclusive, that Halsbury’s Laws, Vol. 11(1) (4^th ed., 2006 Reissue), at pp. 276 – 295, deals with the offences under the 1889 and 1906 Acts under the heading “Fraud”. The same section includes (amongst other matters) the Fraud Bill (as the Fraud Act then was) and the various deception offences under the 1968 and 1978 Theft Acts now replaced by the general offence of “fraud” under s.1 of the Fraud Act.

Still further, realistically and to put it no higher, many cases of bribery, by their nature, are likely to involve the commission of the offence of conspiracy to defraud or offences under ss. 3 or 4 of the Fraud Act (set out above). The overlap is considerable. See too, paras. 18 and 20 of the Explanatory Notes, prepared by the Home Office, which, though not forming part of the Fraud Act, accompany and are to be read in conjunction with, the Act; clearly these Notes contemplate offences under ss. 3 and 4 in the context of the relationship between agent and principal. In the circumstances, it would be curious in the extreme if the corruption offences identified by the Third Parties were to be regarded as not involving “any form of fraudulent conduct or purpose”.

Finally here, Mr. Gruder prayed in aid the legislative history and the absence of any reference to the corruption offences. Further, he relies on the fact that in the Law Commission Report on Fraud (Law Com No 276) of July 2002, a variety of offences were referred to (at para. 2.26) which “could be described as frauds” but which were not within the proposed scope of their Bill. In this paragraph, the Law Commission referred to (1) forgery and counterfeiting offences and other documentary frauds such as false accounting; (2) tax evasion offences; (3) fraudulent trading; (4) insider dealing; (5) misleading market practices and (6) the intellectual property offences. Nothing was said as to the corruption offences. So too, in the Standing Committee proceedings on the Bill, there was no reference to the corruption offences. The conclusion, said Mr. Gruder, was that the corruption offences were outwith the contemplation of the legislature and outside the scope of the legislation; they did not come within the true meaning of “related offence”.

Once again, Mr. Gruder is right as far as it goes; there was no specific reference to the corruption offences in the legislative history. In my judgment, however, it does not at all follow that they fall outside the scope of the true meaning of “related offence” under s.13.

First, I am prepared to proceed on the assumption (without in any way deciding) that it is appropriate to have regard to the matters of legislative history to which Mr. Gruder referred. But even doing so, I am not persuaded that there is to be derived from that history any sufficiently clear guidance as to the meaning of “related offence” or the true scope of those words. To begin with, the fact that the corruption offences were not included in the list of offences with which the Law Commission was not concerned, cannot, as it seems to me, take the matter any or appreciably further. Moreover, it is to be recollected that the draft Bill with which the Law Commission was concerned, was significantly different from the Act in its final form. Strikingly, it proposed the abolition of the offence of conspiracy to defraud (cl. 9), so that, inevitably, cl. 8, the then equivalent of what is now s.13, was in very different terms.

Secondly, as Mr. Nash retorted, it is not at all apparent that dishonesty is an essential ingredient of all the offences listed in para. 2.26 of the Law Commission Report; yet the Law Commission referred to them all as offences which “could be described as frauds”. To such extent at least and insofar as the Law Commission’s thinking is of relevance, Mr. Gruder’s submission that dishonesty was a unifying or essential feature in “any form of fraudulent conduct or purpose” is weakened.

Thirdly, the reason for the inclusion of the particular offences found in para. 2.26 of the Law Commission’s Report emerges from para. 2.27. They are all “specialist branches” of fraud with which others were dealing and with which the Law Commission Report was not concerned. By contrast, although the corruption offences constitute a “special form” of fraud (Petrotrade, supra), there is a considerable overlap, as already suggested, with the general fraud offences. There could be no question of leaving the corruption offences to be dealt with by other reports or specialist consultations.

Fourthly, as the Standing Committee proceedings made clear, the Solicitor-General was anxious not to tie the law to a specific list of offences. So far as relevant, his stated intention was to cover any form of fraudulent purpose or conduct.

I am accordingly unable to accept that anything in the legislative history to which I was referred and so far as it is permissible to have recourse to it, tells against the corruption offences coming within the definition of “related offence” in s.13 of the Fraud Act.

For my part, for the reasons given, I am amply satisfied that the corruption offences do involve a “form of fraudulent purpose or conduct” and therefore come within the definition of “related offence” in s.13 of the Fraud Act. That is a conclusion I am happy to reach, as it accords with the sentiments expressed by Sir Nicolas Browne-Wilkinson V-C and others, in seeking to address the mischief in this area of the law.

For completeness, as I have no real doubt as to the satisfaction of the two cumulative conditions dealt with so far governing the applicability of s.13 (viz., those relating to the proceedings and to the offence(s)), there is no tension between giving effect to the purpose of s.13 and the need to construe such provisions strictly. But any residual concerns, if such there had been, would be allayed because of the underlying fairness of the scheme of s.13 (see below).

(4) Retrospectivity: Having reached this point, the remaining question was whether s.13 of the Fraud Act, which came into force on the 15^th January, 2007, applied to all proceedings thereafter, notwithstanding that the (alleged) payments had been made before. Mr. Nash submitted that it did; Mr. Gruder that it did not, as, if it did, it would retrospectively remove the entitlement to claim the privilege. For the reasons which follow, I prefer the submissions of Mr. Nash.

First, so far as such classification remains appropriate, s.13 is an evidential provision. Procedural changes in the law are expected to improve matters for all concerned; it is therefore presumed that they apply to pending as well as future proceedings. So too with enactments relating to evidence; they are equated to procedural enactments and are presumed to apply as from the moment of enactment to proceedings currently before the courts: Bennion, Statutory Interpretation (4^th ed., 2002), at pp. 269 – 271. Put another way, such enactments look forward to the conduct of any proceedings taking place after the coming into force of the section in question: R v Cruttenden [1991] 2 QB 66, at pp. 75-77. If this be right, then the words “in proceedings” contained in s.13, mean all proceedings after the coming into force of the section and encompass the present proceedings. For my part, provided that the characterisation of provisions in a statute as substantive, procedural or evidential is not approached mechanistically, I am much attracted to this approach and to the conclusion to which it leads. But matters do not rest there.

Secondly, insofar as the relevant inquiry is as to the unfairness of reading s.13 retrospectively rather than as to the proper characterisation of the section as substantive, procedural or evidential (see, L’Office Cherifien v Yamashita Ltd. [1994] 1 AC 486), I am satisfied that there is no realistic question of unfairness here. Not only would it be fanciful to suppose that the Third Parties had conducted themselves by reference to the law as to the privilege against self-incrimination prior to the coming into force of the Fraud Act but it is also right to have regard to the reality of the statutory bargain contained in s.13. Although the privilege is removed (s.13(1)), the material thus obtained is not admissible in criminal proceedings (s.13(2)) – and the immunity in s.13(2) is co-extensive with the removal of the privilege in s.13(1). On this basis as well, I readily conclude that s.13 applies to the present proceedings.

Thirdly, with respect to Mr. Gruder’s argument to the contrary, I can see nothing unworkable or absurd in treating s.13 as having retrospective effect, even though the Fraud Act as a whole does not.

So, to my mind, there is no difficulty in the section applying to all proceedings after its coming into force even though there would necessarily be no exposure to an “offence under this Act” in respect of things done before the 15^th January, 2007. I can see no good reason, whether as a matter of construction or common sense, why the provisions of s.13 should not at once apply to offences coming within the meaning of “related offence”.

Perhaps the high point of the argument constructed by Mr. Gruder was to be found in the provisions of Schedules 1 and 2 to the Fraud Act. Para. 1 of Schedule 1 abolishes various deception offences found in the Theft Act 1968, as part of the scheme of the Act, introducing a general offence of “fraud” (ss. 1 – 4). By way of example, one of the offences thus abolished is s.15 of the Theft Act 1968 (obtaining property by deception). However, Schedule 2 to the Fraud Act, headed “Transitional Provisions and Savings”, provides in para. 3 as follows:

“(1)

Paragraph 1 of Schedule 1 does not affect any liability, investigation, legal proceeding or penalty for or in respect of any offence partly committed before the commencement of that paragraph.”

Building on this foundation, Mr. Gruder submitted that where paragraph 3 of Schedule 2 applied, the relevant offence would be (for example) s.15 of the Theft Act (rather than one of the varieties of “fraud” found in the Fraud Act) and the relevant evidential provision would be s.31 of the Theft Act rather than s.13 of the Fraud Act.

I am, with respect, unable to accept the view that such transitional provisions either give rise to difficulty in respect of the issues I have to decide or that they point to restricting the operation of s.13 of the Fraud Act to underlying events occurring after its coming into force. One answer to Mr. Gruder’s submission was that given by Mr. Nash; where para. 3 of Schedule 2 applies, the prosecution would continue under the “old” law (s.15 of the Theft Act) but questions of privilege would fall to be determined under the “new” law (s.13 of the Fraud Act). I am inclined to agree and cannot see any practical difficulty occasioned by this solution. The offences in question under the Theft Act would plainly come within the definition of “related offence” in s.13 of the Fraud Act. Moreover, to the extent that s.13 goes further than s.31 in removing the privilege in respect of “related offences”, it has no bearing on offences under the Theft Act, in respect of which s.31 has long since removed the privilege on the terms there set out. If, however, any unexpected difficulty was encountered, there would be no lacuna as s.31 of the Theft Act is not, as I understand it, one of the sections of that Act repealed by the Fraud Act. In any event, I confess that I do not find in these arguments any telling pointers as to the true temporal ambit of s.13.

In my judgment, therefore, s.13 of the Fraud Act does apply to the current proceedings, with the consequences which follow.

(5) A postscript as to s.328 POCA: Late in the day, Mr. Gruder flagged the possibility that the matters alleged by Mr. Schwarzkopf against the Third Parties also constituted offences under s.328 of the Proceeds of Crime Act 2002 (money laundering), a section in force since the 24^th February, 2003. To my mind, this is speculative and whatever view is taken of the relationship between this section and s.13 of the Fraud Act, it should not be allowed to become the tail wagging the dog in these proceedings.

In summary:

I shall be grateful for the assistance of counsel in drawing up the order and as to all questions of costs.