Tchenguiz & Ors v Director of the Serious Fraud Office

This is an application by the first claimant, Mr Robert Tchenguiz (“RT”), for permission to instruct a separate review team including lawyers familiar with the detail of certain discrete proceedings in Guernsey, Investec and another v Glenalla Properties Ltd and others (the “Guernsey proceedings”), in order to identify further documents disclosed by the defendant (the “SFO”) in these proceedings which may be relevant to a pending appeal in the Guernsey proceedings (the “proposed course of action”).

The application is made pursuant to CPR r.31.22 which provides in material part as follows:

“(1)

A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed except where -

(a)

the document has been read to or by the court, or referred to, at a hearing which has been held in public;

(b)

the court gives permission; or

(c)

the party who disclosed the document and the person to whom the document belongs agree.”

The relevant background can be stated shortly. The SFO is a public authority charged with the investigation and prosecution of serious fraud. In the course of the present proceedings, the SFO has given disclosure of documents to RT which it had previously obtained from third parties as part of its original criminal investigation (the “KAU01 investigation”) as well as other documents created by the SFO also as part of the KAU01 investigation containing information from third parties and references relating thereto. That has been a very considerable exercise resulting, as I am told, in the SFO disclosing approximately 45,000 documents to the claimants including RT.

Miss Newman QC on behalf of RT accepts that all these documents are subject to the general prohibition in CPR r.31.22 i.e. that RT is entitled to “use” the documents disclosed only for the purpose of the present proceedings subject to the stated exceptions. However, RT now wishes to instruct his review team to consider (as a first stage) whether any of these documents might be relevant to the Guernsey proceedings.

The intended “review team” would consist of 3 principals (Lord Goldsmith QC, Catherine Newman QC and Paul Richardson) together with 4 associates (2 assisting Paul Richardson and 2 assisting Lord Goldsmith QC). Miss Newman also indicated that these individuals would, if necessary, be prepared to sign specific confidentiality agreements with regard to the proposed course of action. Initially, Mr Saini QC on behalf of the SFO suggested certain criticisms with regard to advice already sought and obtained from Lord Goldsmith QC. However, he subsequently made plain that he made no personal criticism of Lord Goldsmith QC. In my judgment, there is no reason to doubt that, if the proposed course of action is permitted, the review team would act with complete propriety; and I did not understand Mr Saini to suggest otherwise.

It is important to emphasise that RT does not intend, at this stage at least, immediately to use any of these documents in the Guernsey proceedings. (In passing, I should note that there is a separate pending application in this Court for permission to use 22 particular documents in the Guernsey proceedings which is now due to be heard on 21 July 2014.) Rather, as submitted by Miss Newman, the function of the review team will be solely to advise as to whether any particular document or set of documents from the SFO’s disclosure has or could have a significant bearing on the outcome of the Guernsey Appeal. If so, the review team will advise that a CPR r.31.22(1)(c) request for consent or CPR r.31.22(1)(b) application for permission should be made with respect to that document or set of documents and may assist with the preparation of that application. In effect, Miss Newman submitted that the review team will carry out precisely the same work as would be carried out by RT’s existing legal team if RT’s existing legal team included members with the detailed understanding of the Guernsey proceedings, and with the spare capacity, to review documents and prepare CPR r.31.22(1)(b)-(c) applications or requests for these documents. As further explained in RT’s 5^th witness statement, the review team will not read through all 45,000 documents disclosed by the SFO. Rather, the intention is that a ‘first sift’ or sample can be carried out by RT’s existing legal team although it is not practicable to define at this stage precisely which documents will be passed to the review team; the process is likely to be iterative, with review team members identifying relevant lines of enquiry which can be followed up either by the review team acting on its own or in conjunction with RT’s existing legal team.

In effect, the present application is therefore a precursor to a possible further application sometime in the future and, as submitted by Miss Newman, its purpose is therefore somewhat limited i.e. it is to enable RT to put himself in a position to consider and (if so advised) to make an appropriate further application under CPR r.31.22. In truth, it is satellite litigation in anticipation of possible future satellite litigation.

At one stage of Miss Newman’s oral argument, I understood her to suggest that given the limited nature of the proposed course of action, RT did not in fact need any permission to carry out such exercise whether pursuant to CPR r. 31.22 or otherwise. The basis of that suggestion was that, as stated above, the purpose of the proposed course of action was no more than to enable the review team to provide advice and, if necessary, to assist in relation to a possible future application under CPR r.31.22 in these proceedings; that therefore, even though the ultimate object of such possible future application was to obtain permission to use documents in the Guernsey proceedings, the present exercise did not involve the collateral use of documents; that it was therefore not caught by CPR r.31.22 at all; and that it was, in effect, ludicrous to suggest that RT needed permission to put himself in a position to make an application in these proceedings. I see very considerable force in that suggestion; and it may well be right. However, without (I hope) being overformalistic, that is not a point raised by the application notice in the present case. In particular, there is no application for a declaration that the proposed course of action is permissible in any event. On the contrary, the application is formulated and has proceeded on the basis that the proposed course of action is one which falls within CPR r.31.22; and I propose to deal with it on that basis.

It is unnecessary to say much about the Guernsey proceedings. They are described in paragraph 97 of the claimants’ Further Particulars of Fact. As there stated, the parties to the proceedings include certain entities in which RT has an interest as beneficiary; and the issues concern certain intercompany loans between those entities. Trial of the Guernsey proceedings took place in June 2012. LB Sir John Chadwick handed down judgment on 6 December 2013. Appeals are now pending in the Guernsey Court of Appeal. The appeal hearing was due to take place between 23-28 June 2014. In the event, RT successfully applied to intervene to such an adjournment. This adjournment was sought and granted on the basis that there were documents disclosed by the SFO in these proceedings (namely the 22 documents referred to above) which, according to RT would satisfy the Ladd v Marshall [1954] 1 W.L.R. 1489 test for the admission of fresh evidence. For the avoidance of doubt, I should make plain that RT has no general permission to intervene in the appeal. That question has been left over until a future hearing. Further, the Guernsey Court of Appeal laid down a tight procedural timetable to deal with the possible admission of such evidence in advance of the hearing now scheduled in October.

For present purposes, it is sufficient to say that I accept that the outcome of that appeal is likely to have a substantial effect on RT’s rights; and that the proposed course of action may well result in the identification of further documents potentially relevant thereto and to a further application under CPR r.31.22. Indeed, I did not understand Mr Saini to suggest otherwise.

The SFO opposes the application. In summary, Mr Saini submitted thatRT has demonstrated no “cogent and persuasive reasons” amounting to “special circumstances” which could possibly support this Court granting permission for lawyers to review the entirety of the SFO’s disclosure in this action, amounting to over 44,500 documents many of which contain confidential or private information from numerous corporate, individual and governmental third parties for the purpose of the KAU01 investigation, with a view to adducing those documents chosen by RT’s lawyers in the Guernsey proceedings with which the SFO has no connection; that the application seeks to circumvent the statutory procedure, laid down in the Evidence (Proceedings in Other Jurisdictions) Act 1975 and CPR Part 34, by which the Guernsey Courts are able to seek the assistance of the English Courts in obtaining documentary evidence within England; that the approach suggested by RT, in contrast to the proper statutory route, risks injustice and inequality of arms in Guernsey since only the parties aligned with RT in Guernsey will have the advantage of engaging in such a review of the SFO’s documents; and that further and in any event, the burden upon the SFO and its legal team of dealing with such CPR 31.22(1)(b) application or applications, given the need to consult third parties, would be disproportionate and unfair at this stage of the present litigation.

As emphasised by Mr Saini, it is imperative to bear in mind throughout the reasons for the prohibition against the collateral use of documents obtained from another party on disclosure as explained by Lord Keith in Home Office v Harman [1983] 1 AC 280 at 308, cited with approval by Lord Hoffmann in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177 at 207 D-E:

“Discovery constitutes a very serious invasion of the privacy and confidentiality of a litigant's affairs. It forms part of English legal procedure because the public interest in securing that justice is done between parties is considered to outweigh the private and public interest in the maintenance of confidentiality. But the process should not be allowed to place upon the litigant any harsher or more oppressive burden than is strictly required for the purpose of securing that justice is done.”

Further, as Lord Hoffman stressed at p211B-D, the public interest in the maintenance of such confidentiality is particularly strong in the context of criminal investigations:

“Many people give assistance to the police and other investigatory agencies, either voluntarily or under compulsion, without coming within the category of informers whose identity can be concealed on grounds of public interest. They will be moved or obliged to give the information because they or the law consider that the interests of justice so require. They must naturally accept that the interests of justice may in the end require the publication of the information or at any rate its disclosure to the accused for the purposes of enabling him to conduct his defence. But there seems to me no reason why the law should not encourage their assistance by offering them the assurance that, subject to these overriding requirements, their privacy and confidentiality will be respected.”

Mr Saini also drew my attention to the passage in the speech of Lord Hope at pp218H-219D, in particular, at p219D:

“… I do not think that it is possible to overstate the importance, in the public interest, of ensuring that material which is disclosed in criminal proceedings is not used for collateral purposes.”

As submitted by Mr Saini, this strong public interest is reflected in the onerous test which applies when a litigant seeks an order granting permission under CPR 31.22(1)(b) as referred to in Marlwood Commercial Inc v Kozeny [2005] 1 WLR 104 at §43 per Rix LJ i.e. that the burden of proof is therefore on the party who asserts that the prohibition on collateral use should be lifted to “… demonstrate cogent and persuasive reasons why it should be released”, amounting to “special circumstances”; and that, as I observed in my earlier judgment in these proceedings, “… the bar is high”: Tchenguiz v Director of the Serious Fraud Office [2014] EWHC 1315 (Comm) at §18 (the “Criminal Advice Judgment”).

The present application has similarities to the earlier application which was the subject of that last mentioned Judgment. Miss Newman summarised the applicable principles to be drawn from that Judgment as follows:

Miss Newman submitted that the present application is justified by a straightforward application of these principles. In particular:

Even bearing in mind the very strong observations of Lord Keith, Lord Hoffman and Lord Hope as referred to above, I agree that these submissions point strongly in favour of the grant of the limited permission presently sought under CPR r.31.22. As it seems to me, the crucial point is that the proposed course of action does not, at this stage at least, involve the use of any documents in the Guernsey proceedings. At the risk of repetition, it merely involves preliminary steps necessary to enable RT to receive legal advice and, if so advised, to make an appropriate application in these proceedings pursuant to CPR r.31.22.

As already stated, Mr Saini’s submission was that even such proposed course of action is caught by CPR r.31.22; and, as I have said, I proceed on that basis. In essence, Mr Saini submitted that the application should not be acceded to because it fails to demonstrate any “cogent and persuasive reasons” or “special circumstances”. Moreover, he submitted, in effect, that it is fundamentally wrong to describe such proposed course of action as “limited” because (i) it will necessarily involve an “external” review team carrying out a new “trawl” through at least part if not all of the SFO’s disclosure and (ii) the object of such exercise is at least ultimately to use documents for a collateral purpose which is contrary to the public interest as strongly emphasised in Taylor. However, to refuse permission in respect of the proposed course of action at this stage would be to deny RT the opportunity of making an application in these proceedings. As it seems to me, this would be contrary to ordinary principles of justice and fairness and is a cogent and persuasive reason as well as a special circumstance in favour of granting permission – although it is important to emphasise that I say nothing about the likely prospects of success of such possible future application. Ultimately, any such application will (or at least may) have to be considered in due course. I accept that the position might be otherwise if I were able to say now that any such possible future application was doomed to fail in any event; but it seems to me impossible to reach that conclusion at this stage.

I turn then to consider the other specific objections raised by Mr Saini as summarised above.

First, Mr Saini submitted that the Court should not exercise its discretion under CPR r.31.22(1)(b) in a manner which would, in effect, circumvent the statutory procedure, laid down in the Evidence (Proceedings in Other Jurisdictions) Act 1975 (the “1975 Act”) and CPR Part 34, by which the Guernsey Courts are able to seek the assistance of the English courts in obtaining documentary evidence within England. In particular, Mr Saini submitted as follows:

I agree that the existence of the procedure under the Convention and the 1975 Act is potentially a highly relevant consideration to the exercise of the Court’s discretion under CPR r.31.22. However, I do not consider that it is a bar to the exercise of such discretion; and, in truth, Mr Saini made plain that his submission did not go that far. However, I do not consider that this point ultimately assists Mr Saini in the present circumstances. Under the Convention or the 1975 Act, Mr Saini accepted that any relevant request would have to be focussed and targeted. As submitted by Miss Newman, the difficulty in the present case is that such request cannot be made unless and until the proposed course of action is carried out. As it seems to me, there is the further difficulty that if Mr Saini is right in his primary submission, RT would be unable to make any application in Guernsey without (at least arguably) being breach of CPR r.31.22. Indeed, Mr Saini submitted that RT was already in breach of CPR r.31.22 by virtue of what has already occurred in Guernsey and, in particular, the service of RT’s first affidavit in the pending appeal in Guensey dated 22 June 2014 where RT refers to what he describes in general terms as the “disclosure information”. For these brief reasons, I do not consider that this objection assists Mr Saini.

Second, Mr Saini submitted that the proposed course of action will cause obvious unfairness in Guernsey because RT will have the advantage of searching all of the SFO’s disclosure documents, by the happenstance that he is simultaneously in litigation with the SFO in England, whereas none of the other parties in Guernsey will have the same access. In particular, Mr Saini submitted that while the SFO has only limited understanding of the Guernsey litigation and is neutral as to its outcome, as a public authority, it felt compelled to draw attention to this point:

I agree that these considerations may ultimately be relevant – indeed highly relevant – to the question whether this Court will accede to any possible future application on behalf of RT to use any documents in the Guernsey proceedings. However, it seems to me that these objections are, at this stage at least, premature.

Third, Mr Saini submitted that, in exercising its discretion, the Court can and should have regard to the fact that the RT claimants have neglected the present litigation seemingly in favour of prioritising the Guernsey litgation and the applications pursuant to CPR r.31.22; and that there are overwhelming practical objections to the proposed course of action viz:

Mr Saini’s submission that the RT claimants have neglected the present litigation is difficult for me to evaluate properly. However, in broad terms, I fully recognise at least some of the other potential difficulties identified by Mr Saini. So far as possible and consistent with the overriding objective, this Court is always vigilant to seek to avoid satellite litigation and the distractions that this can cause to the importance of focussing on the essential dispute between the parties – particularly (i) in the period leading up to the trial and (ii) in a case of this kind. I also bear well in mind the limited resources available to the Court. In my view, there is very considerable force in Mr Saini’s submissions in this context and I bear them well in mind in the overall exercise of my discretion. However, as it seems to me, the crucial point is (once again) that the proposed course of action is limited in the sense I have described. In this context, Miss Newman submitted that the third parties have already consented to disclosure of the relevant documents in these proceedings and therefore consented to the possibility of further use of those documents in accordance with CPR r.31.22(1)(a)-(c). In my view, this is a non-sequitur or at least an incomplete statement of the position. However, given that the proposed course of action is preparatory to the launch of any application in these proceedings, I do not consider that it would be necessary at this stage for the SFO to consult and to take into account the views of any third parties with regard to such exercise – although I fully accept that if and when any further application is made to use any documents in the Guernsey proceedings, such consultation will – or at least may - be necessary at that stage and that the burden that this will or may impose on the SFO (in terms of time, effort and money) may well be such as to persuade the Court that such application should, in the exercise of the Court’s discretion, be dismissed for that reason alone. However, as it seems to me, that is a possible consideration for some future date. Much will depend on the outcome of the proposed course of action and the scope of any future application under CPR r.31.22.

For all these reasons, it is my conclusion that the Court should, in principle, grant permission to RT to carry out the proposed course of action subject to the review team entering suitable confidentiality agreements and provided that the SFO is properly protected with regard to the reasonable costs which it might have to incur going forward in relation thereto. (I put on one side the costs incurred by the SFO with regard to the present application itself as to which I must still receive further submissions). With the latter in mind, I asked Miss Newman in the course of the hearing whether RT was prepared to undertake to pay the SFO’s costs in that regard. After taking instructions, her answer was: No. That has troubled me greatly because, in principle, the proposed course of action is to be carried out at RT’s request and for his benefit. As such, it seems to me that there can be no reason why the SFO should have to pay such costs and that, on the contrary, RT should pay for such costs on an indemnity basis. However, given (i) the limited nature of the proposed course of action and (ii) the fact that, in my judgment, it is not necessary for the SFO to consult with third parties at this stage, it is difficult, if not impossible, to see what (if any) costs would be incurred by the SFO in relation to the proposed course of action. Be that as it may and absent any undertaking by RT, my tentative view is that the appropriate way of dealing with this problem is either (i) to order that the reasonable costs incurred by the SFO in relation to the proposed course of action be paid by RT or (ii) at the very least, to give the SFO liberty to apply to set aside or to vary the order granting permission for the proposed course of action in the event it finds itself in a position where it will incur any significant costs. I hope that this aspect and a satisfactory form of order can be agreed. However, if this proves impossible, I will, of course, hear further argument. For the avoidance of doubt, my decision in principle is subject to a final resolution of this aspect.