Stiedl v Enyo Law LLP & Ors

This application, filed on 25 July 2011, is made by Bjorn Stiedl, one of the defendants in proceedings (the “main proceedings”) brought by 555 of the subscribers to Innovator and Gentech Techonology Systems against InnovatorOne PLC (In Liquidation) (“Innovator”) and others. The first defendant is Enyo Law LLP (“Enyo”), the solicitors acting for the claimants in the main proceedings. Enyo was formed in October 2010 by solicitors previously at Addleshaw Goddard LLP (“Addleshaw’s”) who, while at Addleshaw’s had acted for the claimants since 2006. Addleshaw’s is the second defendant.

Mr Stiedl seeks an injunction restraining the first and/or second defendants from acting for the claimants in the main proceedings, and from making use of privileged documents which came into their possession in an electronic form. Originally, an injunction was also sought to restrain the claimants in the main proceedings, but that is not now pursued because the claimants to the main proceedings have undertaken not to use the documents.

I have been assisted by the written and oral submissions of Mr Stiedl, who appeared by way of videolink from Denmark, and those of Mr Jamie Smith who, pursuant to an order by Walker J on 13 September 2011, was appointed as special counsel by Enyo. The basis of Mr Smith’s appointment is similar to that on which special advocates are appointed in public law proceedings. He undertook not to communicate the content of the documents in respect of which privilege has been claimed and which were identified as relevant and prima facie privileged in an independent review by Mr Hugo Page QC and Ms Fiona Dewar to any person other than Mr Steidl without the court’s permission. In order to appraise Enyo with the gist of Mr Stiedl’s submissions, but not the contents of the documents, on 10 October I gave Mr Smith permission to disclose the identity numbers of the documents and certain parts of Mr Stiedl’s submissions made pursuant to Walker J’s order (see [24]).

The hearing was on 13 October. The trial of the main proceedings was listed for Monday 17 October. There was therefore an urgent need to decide whether Enyo is free to continue to act on behalf of the claimants in the main action and I proposed to give judgment at noon on 14 October. Mr Stiedl was, however, not available to participate in a hearing by videolink on 14 October. I emailed my judgment to him and to Mr Smith shortly before the hearing, authorised Mr Smith to inform Enyo of the outcome, and in view of the nature of the issue (see [3] and [35]) invited Mr Steidl and Mr Smith to make submissions as to whether any part of the judgment should not be made public. Mr Steidl made no submissions, but I have made changes in the light of those made by Mr Smith. I have therefore only been able to hand down the approved judgment today.

The evidence in support of the application consists of two statements of Mr Stiedl, dated 8 August and 5 September 2011. The evidence in response consists of a statement of Charles Morris, an associate at Enyo, dated 23 August, and, pursuant to the Order of Walker J, confirmed in an affidavit dated 23 September 2011; the 17^th witness statement and first and second affidavits of Mr Michael Green, the partner at Enyo with responsibility for the conduct of the main action and formerly the partner with responsibility for the litigation at Addleshaw’s, respectively dated 30 January, 23 September and 12 October 2011, the statement of Mrs Daniella Smith, an associate at Addleshaw’s, dated 24 August 2011, and an affidavit sworn by Mr Marcus McConnell, an associate at Enyo, on 23 September 2011.

The independent review of the documents by Mr Page QC and Ms Dewar was conducted pursuant to an order made on 23 March 2010 by Hamblen J. The background to this application is summarised in [19] to [46] of Hamblen J’s judgment on 1 February 2011 dismissing an application by the claimant that the claims against him be struck out inter alia because the claimants and/or their solicitors have seen privileged documents: [2011] EWHC 119 (Comm).

Before turning to the circumstances which have given rise to this application, I briefly summarise the claims in the main proceedings. Proceedings were issued in January 2009. The “brief details” of the claim in the sample claim form in the material before me run to 12 pages. The claims by the 555 claimants relate to sums allegedly lost by them as a result of investments in one or more of 19 Innovator Schemes promoted by Innovator and others. In the majority of the schemes the investment vehicle was a limited liability partnership; in three schemes it was a general partnership. The schemes were intended to enable the participants to claim 100% tax relief in year one on amounts invested in the relevant partnership which would acquire and exploit technology rights. The technology was stated to be information communication technology for the purposes of the relevant legislation. The acquisition of the technology rights was to be funded by a 20% equity participation by the investors. The remaining 80% was to be by way of loans to the individual partnerships by commercial banks.

The claimants allege inter alia that the investors were never made partners in any of the schemes, that the partnerships were sham vehicles for a fraud directed by Mr Stiedl, who had been convicted of fraud, and was (see paragraph 3(e)) its controlling mind and driving force. The others included Mr Paul Carter, formerly Managing Director of Innovator, Mr David Gates, who promoted two of the schemes, and the firm of Collyer-Bristow and two of its former partners. There are claims (see paragraph 4) for breaches of contract, duties of care in tort, fiduciary and equitable duties, and statutory duties under the Financial Services and Markets Act 2000. The equitable claims include ones for dishonest assistance.

Innovator went into liquidation on 24 May 2007. Its managing director, Paul Carter, was obliged to provide the liquidators, Harris Lipman LLP, with the company’s books and records, and did so. On 23 May 2007 a firm called “The Support Force” supplied the liquidators with an external hard drive and copied data files containing 180,000 documents from Innovator’s server onto it. In April 2009, the liquidators supplied this hard drive to Addleshaw’s, the solicitors then acting for the claimants in the main action. They did so on the basis that the documents belonged to Innovator and Innovator alone, and that the hard drive was a copy of the company’s main server. This was confirmed by the liquidators in an email dated 16 July 2009 from Stephen Caldecott, an investigation manager at Harris Lipman, to Michael Green, then a partner at Addleshaw’s. Addleshaw’s passed the hard drive to Deloitte, which was in charge of the electronic document management system concerning the main proceedings. By June 2009, Deloitte had made a copy of the hard drive.

Towards the end of June 2009, Mr Stiedl was contacted by Byrne and Co, solicitors representing another defendant. He was told that some 3,000 of his personal documents were contained in disclosure made to Byrne and Co by Addleshaw Goddard. I interpose that at that stage there had in fact been no formal disclosure by Addleshaw’s. On 2 July Byrne and Co wrote to Addleshaw’s stating that the copy of the “data stick” they had been provided with by the liquidator appeared to contain documents which had been obtained from a laptop belonging to Mr Stiedl, or an electronic copy of that laptop, and that some of the documents were privileged and/or confidential. There is no evidence before me as to how documents on Mr Stiedl’s laptop got onto Innovator’s server. During the hearing Mr Stiedl, responding to a question by me, suggested this may have happened because, when at Innovator’s offices, he used a docking station to link to the internet and email services, and the material on his computer may have been automatically backed up onto Innovator’s server.

On 6 July, Mr Stiedl wrote to the liquidators and Addleshaw’s. He stated that the documents the liquidator had provided to Addleshaw’s included documents belonging to him, which were confidential and/or privileged, asked for their return, who had read the material or been informed of its content, and what copies of it had been made. Addleshaw’s reply stated that it was difficult to see how the documents provided by the liquidators were anything other than documents owned by Innovator. However, they identified eleven directories referring to Mr Stiedl or his personal assistant, Lone Christiansen, and undertook not to carry out any further review of the documents within those directories without first giving Mr Stiedl 72 hours notice. In an email dated 13 August, Mr Stield asked that the data be put on DVD discs and “could be forwarded with normal post to his private address in Paris”.

Mr Green replied by email on the next day, 14 August. His email stated that, given the quantity of data involved, they would deliver an external hard drive, and:-

In his first affidavit (paragraphs 14 – 16) Mr Green stated that, when Mr Stiedl did not respond by 2 September or ask for an extension of time, it was decided to subject the documents in the eleven directories to a Tier 1 review. His reasons were: (a) the timetable was tight; (b) there were a large number of documents (over 11,000) in the directories; (c) without Mr Stiedl identifying particular documents which he claimed were privileged or confidential pursuant to the opportunity given to him it was not possible to ring-fence documents; and (d) Mr Stiedl failed to ask for further time to review the documents. Mr Green considered that time and funding pressures meant that it would be “disproportionately costly and waste too much time” to hire additional solicitors and paralegals.

The Tier 1 review process is summarised in the evidence of Messrs Green and Morris. It involves eliminating documents considered completely unrelated or irrelevant to the schemes with which the litigation is concerned, does not involve any interrogation “to any extent the substantive content of any document”, and involves a superficial consideration by the reviewer of the face of the document in order to assess whether it bore any relevance to the schemes. The reviewer would then electronically tag it with either a relevant or non-relevant coding. Mr Morris stated that he estimated that approximately 25% of the Tier 1 review did not even involve viewing the documents because many were excluded on the basis of attributes such as the fact that they were “gif” file types, or other document file types which contained no information of any substance. Daniella Smith’s evidence is that she often reviewed up to 2,000 documents a day, and Mr McConnell’s evidence is that he had no recollection of the contents of documents reviewed. I will return to their evidence as to the documents they reviewed which have been identified as privileged.

In a letter dated 16 September, Mr Stiedl asserted that 3,160 of the 180,000 documents stored on the hard drive were “private and privileged”. He listed the documents under surnames with reference to the person’s role and the number of files in the folder under that name that he considered were privileged. He did not explain what the documents were or why they were said to be privileged.

Addleshaw’s replied in a letter dated 1 October. The firm explained that the Tier 1 review had commenced on 2 September, and asked Mr Stiedl to explain how it was that documents which he claimed belonged to him were on Innovator’s IT system, and to identify the documents over which he claimed privilege and the basis of that claim. It was also stated that the disputed documents would be placed in an electronic ring-fence to ensure that the claimants could not access them.

There was further correspondence between Mr Stiedl, Addleshaw’s, and the court. On 22 October Andrew Smith J indicated that Mr Stiedl should make an application in respect of the disputed documents. In a letter dated 27 October to Andrew Smith J, Mr Stiedl stated inter alia that the English proceedings were in breach of natural justice and Article 6 of the European Convention, and “that it is impossible for me to make any application in the present proceedings”. After setting out his reasons for this, the letter concluded by stating that he awaited the court’s view as to how the matter could be dealt with “as I cannot take out any application notice”.

The ring-fencing procedure was completed by 29 October 2009. Subsequently, the claimants applied for a review of the disputed documents for relevance and privilege by independent reviewers. On 23 March 2010, Hamblen J directed such a review. The reviewers were to consider the relevance of the documents to the issues raised by the claims in the main action, and whether any potentially relevant documents are privileged. They were ordered to prepare lists of those documents that are potentially relevant, those potentially relevant documents which the reviewers considered not to be subject to privilege, and those which the reviewer considers to be subject to privilege. They were also ordered to provide short summary reasons for their conclusions.

In their first report, dated 12 July 2010, Hugo Page QC and Fiona Dewar identified 385 documents which they considered to be relevant according to a broad test of relevance. They stated that 71 of these were both relevant and prima facie privileged. That review was based on the names of individuals and entities connected or possibly connected to Mr Stiedl or the main proceedings. The claimants considered that test of relevance was too wide because of this, and noted that some of the documents identified pre-dated the establishment of the schemes that are subject to the litigation. Accordingly, on 7 September 2010, Hamblen J ordered a further review. A supplementary report, dated 4 November 2010, adopting a narrower test of relevance closer to that in CPR 31.6 for standard disclosure, identified 25 documents as both prima facie privileged and relevant. It also dealt with Mr Stiedl’s complaint that the relevant and privileged documents listed in the first report did not take account of documents in foreign languages and identified two such documents as privileged and relevant.

In an application dated 5 August 2010, between the first and second reports, Mr Stiedl applied to strike out the claims against him. He did so on three main grounds. He contended that the Particulars of Claim are inadequately pleaded; that the claimants and/or their solicitors have seen privileged documents; and that he is a litigant in person and cannot attend court in England. I have stated that Hamblen J dismissed the application on 1 February 2011.

In relation to the privilege point, Hamblen J stated ([42]) that he saw force in the argument that, since the documents came from Innovator’s servers and were provided on the basis that they were Innovator’s property, it was difficult to see how Mr Stiedl could maintain privilege in them. But he also stated that he was reluctant to determine the issue without a fuller explanation of the factual circumstances in which the liquidator came to acquire Mr Stiedl’s prima facie privileged documents. He accepted the argument that there was no basis for striking out the claim on the basis of use of prima facie privileged documents and at that stage Mr Steidl had not applied for Enyo or Addleshaw’s to be disqualified from acting in the main action.

Hamblen J gave a clear indication that such an application was necessary and would have to be heard before a different judge with the claimants likely to require representation by a different legal team. Notwithstanding that, this application was made on 25 July, almost six months after Hamblen J’s judgment. Mr Stiedl stated the delay was caused because until May he did not realise that he could not institute this application in the main proceedings. That may have explained the delay after late October when Andrew Smith J indicated that an application about the documents should be made. But it does not explain the time between 1 February and mid June when Mr Steidl first sought to lodge this application. Mr Steidl stated that some of that delay arose because when he first applied in June he sent the wrong fee and did not learn the application was not accepted for some 5 weeks because it was returned by the court to an old address in Paris. In fact Enyo informed him by email on 15 June that the fee sent was insufficient, and that the application would be returned. But, undoubtedly some of the delay may have been the result of the third matter relied on by Mr Steidl, that he is in prison in Denmark with certain constraints on what he is able to do.

I also observe that the reason for delay in listing this hearing, may not be the fault of only one party. My impression from the correspondence between Mr Steidl and Enyo and the positions taken by Enyo (for example on service, witness statements and evidence) is that, but for the stance taken by the firm on a number of matters, it would have been possible to list the hearing before now.

The application came before Walker J on 21 September. He ordered that Enyo be authorised to appoint a special counsel who could see the 71 documents provided he undertook that he would not, without the court’s permission, communicate to any person other than Mr Stiedl and the court the content of any of those documents. His Lordship also required Mr Stiedl to list the 71 documents which he alleged give rise to real prejudice as a result of its nature or content if Enyo continued to act in the main proceedings, and how and why he says real prejudice is so likely to be caused to him.

Mr Stiedl seeks an order that Enyo and Addleshaw’s be restrained from acting for the claimants in the main proceedings for the following reasons. First, the contents of his personal computer have been downloaded onto an external hard drive which the liquidator provided to the claimants’ solicitors. Secondly, the solicitors have conducted a Tier 1 review of the documents, including confidential and privileged documents. The reviewers, in deciding whether a document was relevant or irrelevant and so marking it, would, he argued, look at whether there was significant information in the document, that is they would read the document and communicate any matters of import to senior members of the team. He submitted that, since a significant number of documents held and examined were assessed as relevant and prima facie privileged by the independent assessors, there would be considerable potential damage to his case. He also submitted that the independent reviewers stated that there would be such damage, but it is clear that the reviewers confined themselves to identifying relevance and prima facie privilege.

Mr Stiedl relied on the decisions of Blackburne J in Ablitt v Mills & Reeve 24 October 1995, and the Court of Appeal in Koch v Richards Butler [2002] EWCA Civ 1280. He submitted that, while he did not know what use had been made of the information in the documents reviewed, the solicitors may have shared it with the claimants in the main action, with counsel, or may simply be unable to put matters which they have read out of their mind when conducting the case. In Albitt’s case solicitors who, on their client’s instructions, reviewed privileged information sent to them in error by counsel for the other party, were restrained from continuing to act. Mr Steidl relied on Blackburne J’s statement in that case that “it offends elementary notions of fairness and justice” if, by knowingly taking advantage of the mistaken delivery of privileged papers, a party to litigation, “although not itself told what those papers contain, can continue to have the services in the action of those who on its instructions have read all the papers and who, as a result, have a very accurate perception of just how those who act for the plaintiff view the merits of the plaintiff’s claim and of the steps, tactically and otherwise, which they are advising the plaintiff to take in pursuit of his claim”. He also relied on the statement of Sir Thomas Bingham MR in Ridehalgh v Horsefield [1994] Ch 205 at 224 emphasising the importance of the safeguard afforded by legal professional privilege to parties who “must be free to unburden themselves to their legal advisors without fearing that what they say may provide ammunition for their opponent”.

In his “observations” document, Mr Stiedl stated that when Mr Green, the partner responsible, was preparing the case, it appeared that he was intent on ensuring Mr Stiedl’s name and his previous convictions could be used as general prejudice to colour the court’s view of the litigation (paragraph 8), and Mr Green and Enyo would find it useful as a means of putting pressure on Mr Stiedl and the other defendants. Mr Stiedl referred to the test in Koch v Richards Butler, that once a former a client establishes that a firm of solicitors possesses confidential information, the court should intervene by granting an injunction restraining them from acting unless it is satisfied that there was no risk of disclosure, for example by structural arrangements within the firm.He argued that the size of Enyo, with six partners, three managing associates, and seven other associates, and the number of them involved in the main proceedings who had acted in the cases involving him meant that a Chinese wall would not be possible, adequate or practical (paragraphs 18 – 19 and 24). He argued (paragraph 26) that he ran a serious risk of prejudice because “it is quite clear that in such a small, tightly-knit firm, a significant proportion of the firm have been involved in litigation against myself” and (paragraph 28) that the conditional fee arrangements in place in the main action and the success fee mean there is “a large additional incentive to Enyo to succeed” and also “they have great control over the proceedings and what is filed”.

Mr Stiedl invited the court to reject the evidence of Mr Green that time constraints required that the Tier 1 review start in September 2009 because of the way the solicitors had acted after he raised his claim to privilege in July.

With regard to prejudice, Mr Stiedl submitted that there was prejudice to him because of the serious nature of the allegations in the main proceedings and the fact that the documents reviewed of which he complains show how he structured his affairs. It is common ground that the litigation is complex and he submitted that it is not much of a step to say that any information about structures he used, when combined with the fraud of which he had been convicted, may assist in submitting that he acted in pursuit of a fraud. He also submitted that knowledge of the documents would have influenced the way the pleadings in the main case were drafted and would help to put what he described as a “spin” on other evidence. He maintained that, if Enyo cannot act for the claimants in the main proceedings, there will be no prejudice to them, save delay, if the trial has to be adjourned because of this. This, he said was because the claimants’ cases were brought on the basis of conditional fee agreements financed by an insurance policy so they will have incurred no costs.

In paragraph 6 of Mr Green’s second affidavit, he stated that it appears that Mr Steidl has not complied with paragraph 3(a) of Walker J’s order. This is not the case, and is no doubt stated because I only authorised Mr Smith to disclose parts of Mr Steidl’s “observations” document to Enyo. In that document Mr Stiedl identifies 49 documents as demonstrating the real prejudice that will be caused to him if Enyo continues to act. He lists the documents and gives a brief reason in respect of each of them for his claim that disclosure gives rise to a risk of prejudice. His document does thus seek to comply with paragraph 3(a) of Walker J’s order.

On behalf of Enyo, Mr Smith submitted that, on the authorities, two situations must be distinguished. The first consists of cases in which a solicitor has acted for a person in the past and is in possession of that person’s confidential or privileged information, but is now acting for a person in dispute with the former client. The second consists of cases in which the confidential or privileged information of a person comes into the hands of a solicitor who has not previously acted for that person. He submitted that while the confidence or privilege will be protected in both situations, the way in which this will generally be done (“the starting point”) differs in the two situations. In the second situation, the normal relief is to restrain the solicitor from using the privileged information and only where there are exceptional circumstances to prohibit the solicitor’s firm from continuing to act.

As to the circumstances of the present case, Mr Smith’s starting point was to consider the position if, contrary to his submission, the documents on which Mr Stiedl relies were in fact read in detail and those in the firm recall the content. The logical starting point, however, is to consider whether, in the circumstances of this case, that is in fact so. As to that, Mr Smith submitted that the evidence demonstrated that the documents to which Mr Stiedl objects were subject only to a cursory review by junior fee-earners, and were not analysed or considered in detail, so that the claimants have obtained no benefit and their solicitors have no relevant information derived from the documents that can be used to Mr Stiedl’s disadvantage in the main proceedings.

The evidence of Messrs Morris, Green, and McConnell, and Mrs Smith, and the explanation of the nature of a Tier 1 review, shows, he submitted, that all that was involved at that stage was eliminating documents considered completely unrelated or irrelevant to the Innovator and Gentech schemes. The review did not interrogate to any substantive extent the contents of any document, and only involved a superficial consideration of the face of a document in order to assess whether it bore any relevance to the schemes. It was carried out by junior solicitors and paralegals, only some of whom are currently employed at Enyo as part of the team that continues to act for the claimants to the main action.

Of the 25 documents identified as relevant and privileged by the supplemental report, 24 were reviewed by Mrs Smith, who does not work for Enyo but is still with Addleshaw’s. She has given evidence that she has no recollection of the documents she reviewed or of passing the contents of those documents to others. Mr McConnell, who is employed by Enyo, reviewed one of the 25 documents identified as relevant and privileged. His evidence is that he cannot remember its contents and has not been able to locate any email record that its contents were passed to others. Mr Morris’s evidence is that searches within Enyo have revealed that there are no written notes or other communications between those carrying out the Tier 1 review and other fee earners in respect of the 25 documents. Mr Green’s evidence is that neither he nor any other member of his team provided guidance as to the basis on which the documents were to be reviewed and that he did not tell those reviewing the documents to look out for bank accounts and financial information regarding Mr Stiedl. His evidence is that, since the Tier 1 reviewers had acquired a general awareness of the issues arising, the would have expected them to identify such documents as potentially relevant without any express directions.

I turn to the position if the documents on which Mr Stiedl relies were in fact read in detail and that those in Enyo recall of their contents. Mr Smith’s submission that, even on this assumption, no real prejudice will result to Mr Stiedl in relation to his defence in the main proceedings, requires consideration of the contents of the documents. To avoid the need for “open” and “closed” versions of this judgment, I identify points by reference to the paragraphs in Annex 2 to Mr Smith’s main closed submissions as special counsel. Since that document and his closed submissions have not been disclosed to Enyo, the claimants, or the trial judge, referring to the paragraph numbers will not identify the matters dealt with and (see [4]) gave the parties the opportunity to make submissions as to whether any part of the judgment should be withheld from the version made public.

The third limb of Mr Smith’s submissions is that there is no justification for the draconian relief sought. It would be wholly disproportionate and unnecessary and, so close to the trial, would cause considerable prejudice and injustice to the claimants in the main action, prejudice and injustice which outweighs any possible prejudice that might be caused to Mr Stiedl if Enyo continues to act in the main proceedings. Mr Smith relied on the circumstances in which Enyo came to perform the Tier 1 review, the fact that Mr Stiedl did not respond in time or ask for an extension of time, that notwithstanding the clear indication in Hamblen J’s February judgment that Mr Stiedl had to make this application, he did not do so for almost six months.

Mr Smith’s written submissions also placed considerable weight on the fact that Mr Stiedl’s claim to privilege is far from clear because there has been no evidence as to the circumstances in which his personal laptop came to be in the possession of Innovator, its managing director, or the liquidator, or (prior to Mr Stiedl’s response to a question from me), no explanation of these matters. The evidence is that the documents were provided to the liquidator on the basis that they were Innovator’s documents held on Innovator’s server. The inference is that Mr Stiedl’s documents had been put or kept by Mr Stiedl on Innovator’s system. The liquidator’s email of 16 July 2009 provides a straightforward explanation of the position. Mr Smith submitted that, if Mr Stiedl simply kept documents on Innovator’s computer system, or otherwise provided them to Innovator, then any confidence and privilege which might have existed in them was effectively waived or lost. While accepting that, I am not in a position to make conclusive findings as to whether privilege was lost. Mr Smith submitted that this factor can be weighed in the balance as far as equitable discretion is concerned.

The starting point is to identify the legal principles. Mr Stiedl’s written submissions relied on his rights under the European Convention of Human Rights. Issues concerning disclosure and privilege may raise questions under both Article 6 and Article 8. It is clear (see S v Switzerland [1992] 14 EHRR 670) that fair trial rights may require communications with lawyers to be protected, and that confidential communications between lawyers and clients fall within the protection of private life, home and correspondence accorded by Article 8. However, although the right to a fair trial is not qualified in Article 6, what constitutes fairness has to be assessed by a balancing of interests, and its constituent elements cannot be the subject of a single fixed rule, but depend on the circumstances of the particular case. So, for example, in R v A (Rape Shield) [2002] 1 AC 45 restrictions on the right to cross-examine may be justified in sexual cases and not incompatible with Article 6, because of the need to protect complainants. In that case Lord Steyn observed (at [38]) that, while the right to a fair trial was absolute in the sense that a conviction obtained in breach of it could not stand, in determining what the concept of a fair trial entails, account could be taken of the familiar triangulation of the interests of the accused, the victim, and society. In the present context, as well as S v Switzerland , see Niemietz v Germany [1993] 16 EHRR 97. The approach of the Strasbourg jurisprudence does not require a binary approach, but permits the balancing exercise that is inherent in domestic law when the court is considering whether to grant equitable injunctive relief.

I turn to domestic law. I accept Mr Smith’s submission that a distinction is to be made between two classes of case. The first class consists of cases in which there has been a previous relationship of solicitor and client in which confidential or privileged information is acquired by the solicitor and that solicitor now acts or wishes to act for another person who is in dispute with the former client. The second class consists of cases where, without any such previous relationship, a solicitor becomes possessed of confidential or privileged information belonging to the other party to the dispute. The distinction operates at the level of remedy: see Re a firm of solicitors [1995] 3 All E.R. 482 at 492. In that case, Lightman J stated that in a “previous relationship” case, in the ordinary course a court will grant an injunction restraining the solicitor acting, as it did in the earlier case with the same name; Re a firm a solicitors [1992] 1 QB 959. In cases where there has been no previous solicitor-client relationship, however, “in the ordinary course the court will merely grant an injunction restraining the solicitor making use of that information”, as it did in English and American Insurance Co Ltd v Herbert Smith [1998] FSR 232 and Goddard v Nationwide Building Society [1987] QB 670.

It is to be observed that this point was not in fact decided in English and American Insurance Co Ltd v Herbert Smith because the claimants did not seek an injunction prohibiting the solicitor from continuing to act. But the more limited form of relief was stated to be what was normally appropriate in Goddard v Nationwide Building Society, a case in which documents to which legal professional privilege attached were disclosed in error during the proceedings. In Re Schuppan (a bankrupt) [1996] 2 All E.R. 664 at 670, Robert Walker J, as he then was, stated that the distinction made by Lightman J was appropriate in the circumstances of that case, a case in which there was no previous relationship.

Notwithstanding the decision in Ablitt’s case, to which I have referred and on which Mr Steidl relied, Hollander’s Documentary Evidence (10^th ed.) 20-01 and 20-02 states that subsequent authorities have followed the line in Goddard v Nationwide Building Society in cases where there is inspection procured by fraud or obvious mistake. Mr Smith observed that there was no reference in Ablitt’s case to Lightman J’s decision, given some five months earlier, and that, although Blackburne J discussed English and American Insurance Co v Herbert Smith and observed that, notwithstanding the order sought and made, the members of the firm who had read the other side’s papers subsequently ceased to act, the other two cases relied on, David Lee & Co (Lincoln) Ltd v Coward Chance [1991] Ch 259, and Re a firm of solicitors [1992] QB 959, were “previous relationship cases”.

While I accept the distinction as to what the court will do “in the ordinary course” in the two classes of case, Mr Smith’s next submission, that when considering whether to grant injunctive relief an applicant must demonstrate “unusually powerful factors in its favour if the ordinary course is to be departed from” is, in my judgment, more problematic. In the context of the balancing exercise, the court must look at all the relevant circumstances. In Re a firm of solicitors, Lightman J did not consider that the former partner was possessed of relevant confidential information, and so the question of the balancing exercise did not strictly arise. Mr Smith submitted that Blackburne J relied on the decision of the Court of Appeal in the earlier Re a firm of solicitors case, and that of the Vice-Chancellor in the David Lee case only to show the court had jurisdiction to make an order prohibiting the solicitors from acting, not as to what the order would “in the ordinary course” be. He also submitted that, in Albitt’s case, there were unusually powerful factors justifying displacing the ordinary rule. As Hamblen J stated in his strike-out judgment (at [45]) that case “was a case on very different facts [from this]. It involved the deliberate reading by the main case handlers of highly confidential documents that were directly relevant to the issues in the litigation, to the other party’s preparation for that litigation, and to advice given in relation to that litigation”. In Albitt’s case, as a result of reading the privileged documents, the solicitor knew precisely how the other side viewed the merits of the case in question, and there was a real risk that that party’s position would be prejudiced either in the course of the trial, or in negotiations for a settlement.

Although I accept Mr Smith’s submission that Ablitt’s case is not inconsistent with the distinction between previous relationship cases and other cases where a solicitor becomes possessed of confidential or privileged information belonging to a person in dispute with the solicitor’s client, I do not consider that it is authority for the proposition that, only where there are unusually powerful factors, can the form of injunctive relief which is to be given “in the ordinary course” be displaced.

In the light of those principles, I turn to the circumstances of this case. I start with what I consider to be the logical first question, although it was the second stage of Mr Smith’s submissions. That is whether there is a real risk that information in the documents over which Mr Stiedl claims privilege and confidentiality can be used so as to yield an advantage to the claimants in the main proceedings or a disadvantage to Mr Stiedl. On the authorities, “real” risk means more than a fanciful or theoretical risk, but does not mean a “substantial” risk. I accept Mr Smith’s submission that the combined effect of the evidence of Messrs Morris, Green and McConnell, and that of Mrs Smith, is that no substantive information would have been gleaned under a Tier 1 review. No-one who is now at Enyo and who was a member of the team conducting the Tier 1 review could remember the content of any specific document given that they looked at many tens of thousands of documents, and as Daniella Smith stated, a single person would review up to 2,000 documents a day. Mr Stiedl made submissions about 49 of the 71 documents identified in the first stage of the independent review. Of those, only 14 are in the 25 identified in the second phase of the review as both relevant and prima facie privileged.

Focussing on the 25 documents, 24 were reviewed by Daniella Smith, who does not and has not worked for Enyo. Mr McConnell reviewed the 25^th, but his evidence is that he cannot remember its content, and has not been able to locate any email record that its contents were passed on to others in the firm. Moreover, Mr Morris’s evidence is that searches within Enyo have not revealed written notes or other communications between those involved in the Tier 1 review and other fee-earners, and no specific directions were to the Tier 1 reviewers about types of documents.

While, as Lord Bingham stated in Ridehalgh v Horsefield [1994] Ch 205, the safeguards needed if the system is to function fairly and effectively in the interests of litigants are not “entirely straightforward” and usually the cloak of confidence over communications between client and lawyer is removable only with the consent of the client, it is also clear that a realistic approach should be taken. See, albeit in a slightly different context, Tuckey LJ’s statement in Koch Shipping Inc v Richards-Butler [2002] EWCA Civ 1280 at [53] that “each case must depend upon its own facts. But I think there is a danger inherent in the intensity of the adversarial process of courts being persuaded that a risk exists when, if one stands back a little, that risk is no more than fanciful or theoretical. I advocate a robust view with this in mind, so as to ensure that the line is sensibly drawn”. See also Clark LJ in that case at [24(6)], [25], [46] and [48].

Essentially, Mr Stiedl’s argument proceeds on an erroneous analysis of the nature of the process involved in a Tier 1 document review. The purpose of the exercise was to remove completely unrelated documents, and in that context the supposition that documents were substantively considered or analysed is unreal. Secondly, as Hamblen J observed (at [43]) “there is no evidence that significant or indeed any use of the prima facie privileged documents has been made in formulating or putting forwards the claimants’ case in these proceedings, or of any knowing use of such documents. Any knowledge of them would appear to be confined to paralegals and junior fee-earners”. In his closing submissions, Mr Steidl accepted that Mr McConnell, who had looked at thousands of documents, would not remember their contents. But he maintained that Enyo should be prohibited from acting because neither he nor the court knew who else had seen the documents.

Additionally, Mr Stiedl has himself stated that certain information in the material concerning him is irrelevant save in respect of the decision to commence proceedings and in relation to enforcement. The main proceedings were commenced long before the Tier 1 review. The allegations made in Annex 3 to the sample claim form before me, filed on 28 January 2009, raise all the matters now pleaded. They do so in some detail. Those matters could not have been raised in the claim form without those filing it having reasonable grounds for doing so.

I consider that, given the nature of the Tier 1 review and the evidence by those involved in it, this case has some similarity to the 1995 Re a firm of solicitors, decision. In that case Lightman J stated that if any confidential information had ever been communicated to the solicitor in question, there was no real risk that such confidential information would inter alia be recallable, having regard to the lapse of time, the progress of the proceedings, and the highly technical issues involved.

In view of my conclusion on this matter, it is not strictly necessary for me to reach decisions on the question whether the content of the documents is such that no real prejudice will result to Mr Stiedl in relation to his defence, or on the other factors relied on by Mr Smith in support of his submission that prohibiting Enyo from acting would be wholly disproportionate and unnecessary. As, however, I heard full argument on these issues, I will deal with them.

I start with the contents of the documents. I have examined all 49 documents relied on by Mr Stiedl on the assumption that their contents were considered and analysed. Fourteen of the 49 documents are in the 25 identified by the second Page/Dewar review as both relevant and prima facie privileged. Having examined all 49 documents I do not consider that real prejudice will result to Mr Stiedl in relation to his defence if Enyo continues to represent the claimants. I take into account the fact that the claimants have given an undertaking that they will not use the documents in the main proceedings without a further court order, but that is a very minor factor in my conclusion. My reasons are as follows.

First, many documents reveal no material beyond that which Mr Stiedl has voluntarily chosen to disclose, or which is known from other sources, for example the judgments of the Court of Appeal Criminal Division, and in the civil fraud proceedings in the Balfron case: see paragraphs 3.5, 6.3 – 6, 12.2, 12.4, 12.6, 15.2.2, 21.2, 21.4 and 28.2 of Annex 2 to Mr Smith’s closed submissions as special counsel. I give only one example. Three of the 25 documents are drafts of partnership deeds. Copies of those documents have been disclosed in the main proceedings by Collyer Bristow, and Mr Stiedl has been provided with copies of those documents by way of standard disclosure: see Mr Green’s second affidavit, paragraph 23. The fact that Enyo and the claimants know a lot about Mr Stiedl is relevant to the issue of real prejudice. I accept the submission that in respect of material about which they already have knowledge, the fact that there was a further document in the documents included in the Tier 1 review would not lead to such prejudice. A comparison of the documents with documents referred to in the pleading, in particular the claimants’ amended Reply to Mr Steidl’s defence, and documents exhibited to Mr Green’s second affidavit, show that the claimants already had significant knowledge of the specific matters referred to in the documents Mr Stiedl relies on.

Secondly, many of the documents refer to matters in such general terms that it is difficult to see how they could be used to prejudice Mr Stiedl in any material way. This is the position in relation to the documents referred in the following paragraphs of Annex 2 to Mr Smith’s closed submissions: 3.3 – 4, 9.3, 9.6, 12.4.4, 21.3, 21.7, 21.10, 26.5 – 6, 33 and 37. A number, for example 9.2 and 24.4, relate to unrelated disputes. Two of the documents in this category (21.13 and 26.7) are among the 25 identified as relevant and prima facie privileged in the second stage of the independent review.

Thirdly, a number of the documents are not inconsistent with Mr Stiedl’s defence in the main proceedings: see the documents referred to in Annex 2, paragraphs 12.4.1, 24.3 and 26.4 for examples of these. A number of the other documents, for example that referred to in paragraph 21.5 of Annex 2, are ones which it is difficult to see how, if read in context, they could be used prejudicially.

Finally, many of the documents are letters to lawyers which enclose other documents, mostly apparently concerning the partnership agreements. Nearly all those other documents referred to are not in the material contained on the hard drive which has been subjected to the Tier 1 review. Although the copy of a document attached to a privileged letter is privileged, Mr Smith submitted that since many concern the agreements, any privilege attaching to them would be Innovator’s, not Mr Stiedl’s. He submitted that, in the case of the original documents, if relevant, they have been or should have been disclosed.

Of the documents I have reviewed, only two, identified in paragraphs 9.1 – 9.3, and 21.14 of Annex 2 to Mr Smith’s closed submissions, caused me concern. In respect of the document referred to in paragraphs 9.1 – 9.3, I accept Mr Smith’s submission that the conclusion of the independent reviewers that the document was relevant to the main proceedings may have been the consequence of a misunderstanding and that paragraph 4 of the document falls into the category of a reference to a matter in terms of such generality that it is difficult to see any material prejudice to Mr Stiedl for the reason given in paragraph 9.3 of Annex 2. The document referred to in paragraph 21.14 is, however, more problematic if, contrary to my conclusion, despite the nature of the Tier 1 review, solicitors now at Enyo would or might recall information derived from the documents reviewed. But this is one of thousands of documents subjected to the Tier 1 review. To restrain Enyo from continuing to act on the basis of this single document would, in my judgment, be wholly disproportionate. This is a situation in which, adapting the words of Tuckey LJ in Koch’s case, to which I have referred, if one stands back a little, the risk of prejudice from this single document is no more than fanciful or theoretical.

I turn to the balancing exercise. First, the circumstances in which Enyo performed the Tier 1 review on the documents in the 11 ring-fenced directories is very different from the circumstances in which the solicitors in Ablitt’s case reviewed the papers. All the papers seen by the solicitors in Ablitt’s case concerned the issues in the dispute in that case itself. Secondly, while it can be said that Mr Stiedl was given only a short time to review over 3,000 documents, the timetable was set out in Mr Green’s email dated 14 August, replying to an email dated 13 August from Mr Stiedl. Mr Green used the mode of communication which the parties had used, and offered to send the hard drive to Mr Stiedl’s vacation address if that was preferred. There was, however, no response to this email by Mr Stiedl, for example, requesting more time to conduct his own review of the documents.

With regard to the other matters on which Mr Smith made submissions, there was delay between Hamblen J’s judgment on 1 February and mid-June, when Mr Stiedl first tried to file this application, but did so with an inadequate fee. But, having regard to the conduct of Enyo in relation to service and evidence thereafter, I would not have been minded to refuse this application on the ground of delay. Similarly, as Mr Smith realistically recognised, this court is not in a position, on the basis of the evidence before it, to determine whether privilege has been lost in the documents.

For these reasons, Mr Stiedl’s application is dismissed. Enyo may continue to represent the claimants in the main proceedings on the basis that, pending any further order, no use of the documents identified as prima facie privileged be made in those proceedings.