Tchenguiz & Ors v The Serious Fraud Office

On 21 July 2014 I heard an application on behalf of the first claimant (“RT”) for the following orders:

At the outset of the hearing, an application was made on behalf of the HM Procureur for Guernsey (“HMP”) to intervene in this application. That application to intervene was not opposed by RT or the SFO. In the circumstances, I granted the application to intervene.

At the end of the hearing, I informed the parties of my decision viz I would grant the permission sought under paragraphs (i) and (iii) above; but I would decline to grant the permission sought as set out in paragraph (ii) above. This Judgment sets out my reasons for those decisions.

The Guernsey 1 proceedings as referred to in paragraph 1(ii) above are proceedings in the Royal Court of Guernsey. They are described in paragraphs 25 and 26 of the second witness statement of RT and paragraph 97 of the claimants’ Further Particulars of Fact. In summary they relate to certain arrangements described as “intercompany loans”. The trial of the Guernsey 1 proceedings took place during June 2012. Judgment was delivered by Lieutenant Bailiff Sir John Chadwick on 6 December 2013. In particular, he held that the intercompany loans which Investec Trust (Guernsey) Ltd as trustee of the TDAT (“ITGL”) had carried out gave rise to valid loans between ITGL and two other entities referred to as Glenalla and Thorson in the sums of approximate £62.7m and £80.6m respectively; that there was no loan agreed between ITGL and another entity referred to as Oscatello, but instead Oscatello had a valid claim in restitution against ITGL in the sum of approximate £39.4m; that ITGL was personally liable to these companies, rejecting ITGL’s case that it was entitled to limit its liability; and that ITGL was nevertheless entitled to be indemnified from the TDT trust assets for these liabilities. He also rejected the case advanced by Rawlinson & Hunter S.A. (“R&H”) that ITGL should not be entitled to any indemnity because he held that ITGL had not acted unreasonably or grossly negligently.

Appeals have been brought by ITGL and by R&H. The grounds of appeal are lengthy. The Guernsey Court of Appeal hearing was due to take place between 23-28 June 2014. In the event, RT and the minor beneficiaries of the TDT intervened and successfully applied for part of the appeal affecting them to be adjourned until October 2014. This adjournment was sought and granted on the basis that there were a number of documents disclosed by the SFO in these proceedings which, according to the proposed interveners, would satisfy the Ladd v Marshall [1954] 1 WLR 1489 test for the admission of fresh evidence.

The documents in question consist of 22 documents (and possibly others). The nature and content of these Guernsey Documents are described in paragraphs 27-35 of RT’s second witness statement. The Guernsey lawyers representing RT, R&H and the minor beneficiaries have not yet been permitted to see these Guernsey Documents.

Nevertheless, as appears from the second witness statement of RT and as submitted by Miss Catherine Newman QC on behalf of RT, it is said that the Guernsey Documents and the information they contain are relevant to the Guernsey appeal. By agreement of the parties, the Guernsey Documents were provided at this hearing in a “confidential” file. It was agreed that they should be treated as confidential and, by consent, I made an order to that effect. Although most of the present hearing was held in public, in order to preserve confidentiality and by agreement of the parties, certain parts of the hearing took place (with my approval) in private whenever it was necessary to refer in any detail to the contents of the Guernsey Documents. Accordingly, in this Judgment, I will not refer in any detail to the contents of the Guernsey Documents. For present purposes, it is sufficient to say that, as set out in her skeleton argument, Miss Newman submitted that the Guernsey Documents and information that they contain are relevant to the Guernsey appeal in (at least) the following respects:

Miss Newman accepts that the proposed use of these Guernsey Documents is subject to the restriction contained in CPR 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.”

Whether or not the Guernsey Documents (and any other documents for which permission may subsequently be granted by this Court) can be admitted in the Guernsey appeal will – subject to the outcome of this present application – depend on the outcome of a further hearing in Guernsey during the week of 8 September 2014 when the Guernsey Court of Appeal will decide whether the Ladd v Marshall criteria for the admission of fresh evidence on appeal are satisfied.

I have already considered the applicable legal principles in relation to CPR 31.22 in my previous two Judgments in these proceedings, which I shall refer to as the “Criminal Advice Judgment” and the “Review Team Judgment”, which I delivered on 29 April 2014 and 16 July 2014 respectively. I do not propose to repeat what I said in those two Judgments. For present purposes, it is sufficient to set out what Miss Newman submitted were the relevant applicable legal principles in the context of the present applications which were summarised in her skeleton argument as follows:

As to the permission sought in paragraphs (i) and (iii) of the Application Notice, I am satisfied that such permission should be granted, primarily for the reasons given in my earlier Judgments, in particular in the Criminal Advice Judgment.

The permission sought in paragraph (ii) of the Application Notice is of a different kind because it seeks permission not merely to instruct lawyers acting on behalf of RT to consider the legal position but actually to deploy the documents in court proceedings.

As to that application, Miss Newman submitted that the present application was focussed and targeted to the Guernsey Documents and that applying the principles summarised above to the present facts, there were “special circumstances” here justifying the grant of permission under CPR 31.22; and the balance of justice in this case lies strongly in favour of permitting the deployment of the Guernsey Documents in Guernsey. Miss Newman expanded that general submission both in her written skeleton (in particular in paragraphs 13-15) and in her oral submissions. Given that this is a public Judgment I do not propose to set out those points in detail. For present purposes it is sufficient to note her submission that RT’s interests are very seriously affected by the Guernsey 1 proceedings and by the outcome of the appeal in Guernsey. I readily accept that that would appear to be the case.

In opposition to such application, Mr Khawar Qureshi QC on behalf of the HMP raised a threshold point. In particular, he submitted in effect that the Guernsey Documents all relate to steps taken by Guernsey to respond to a request for mutual legal assistance (“MLA”) made by the SFO under s7 of the Crime (International Co-operation) Act 2003 (the “2003 Act”); and that by virtue of s9 of the 2003 Act any “evidence” obtained pursuant to such a request “… may not without the consent of the appropriate overseas authority be used for any purpose other than that specified in the request”. It is common ground that a request for MLA was made by the SFO pursuant to the 2003 Act; that the Guernsey Documents all relate to steps taken by Guernsey in response to such request; and that no such consent has been given. The result, submitted Mr Qureshi, is that the SFO had acted in breach of s9 of the 2003 Act in giving disclosure of these documents (and possibly others) to the claimants in these proceedings without first obtaining the consent of the Guernsey authorities; and that in any event there is an absolute statutory bar to the grant of permission by the Court for such “evidence” to be used in the Guernsey 1 proceedings as now sought by RT.

This was disputed by Mr Pushpinder Saini QC on behalf of the SFO. In particular, Mr Saini submitted that the documents only contain information passing between the SFO and the Guernsey authorities; that such information does not constitute “evidence” within the meaning of s9 of the 2003 Act; and that therefore the documents fall outwith the statutory prohibition. (On this point Miss Newman joined arms with Mr Saini). Mr Qureshi disputed that such information was not “evidence”. In particular, Mr Qureshi submitted that the word “evidence” in s9 of the 2003 Act is to be given a wide meaning and, in effect, includes any “material” which comes into existence in response to a relevant request; and that the Guernsey Documents fall into this category. In support of that submission Mr Qureshi referred me in particular to certain passages in the Judgment of the Court of Appeal in Gohil v Gohil [2013] Fam 276 at paragraphs 9 and 17-19, and Omar v Foreign Secretary [2014] QB 112 at paragraph 12 per Maurice Kay LJ.

It is right to say that the information contained in the documents does not consist of any statements from third parties and it is not “evidence” in that sense. However, the documents do contain details of the interaction of the SFO and the Guernsey authorities as well as the expression of certain views of the SFO and the Guernsey authorities with regard to their investigations. As such, my tentative view is that there is at the very least an argument that the information contained in the Guernsey Documents is properly to be characterised as “evidence” falling within s9 of the 2003 Act. Certainly, the whole purpose of this part of RT’s application is to seek to introduce these documents as fresh “evidence” in the Guernsey Court of Appeal. However, in the event it is unnecessary for me to determine this issue. For present purposes, I am content to proceed on the assumption that Mr Saini and Miss Newman are correct viz that these documents (and the information contained therein) are not “evidence” and are not therefore subject to the absolute statutory bar in s9 of the 2003 Act.

I turn then to consider the question of discretion which arises in the context of CPR 31.22. Again, I do not propose to repeat what I have said in my earlier Judgments. For present purposes, it is sufficient to highlight the main points advanced by Mr Saini which he submitted pointed strongly against the grant of permission and which he summarised in his skeleton argument as follows:

These submissions were hotly disputed by Miss Newman. In particular, she emphasised the importance of RT being able to seek to use these documents in the Guernsey appeal. If he were not permitted to do so, there was, she submitted, a real risk of injustice to RT which was itself a most powerful factor in favour of granting permission. In that context, Miss Newman referred me to the decision of Laddie J in Cobra Golf v RATA [1996] FSR 819 in particular at pp830-832 where the judge reviewed the earlier authorities which emphasised the importance of preserving the undertaking of confidentiality but not “blindly”; stated that “In the end the interests of justice must prevail and that will sometimes mean that the documents must be released for collateral use”; referred to Riddick v Thames Board Mills Ltd [1977] QB 881 where Lord Denning emphasised the “public interest in discovering the truth”; and summarised the matters and considerations likely to be relevant in the exercise of the Court’s discretion. Further, Miss Newman submitted that the fact that the Guernsey Documents were generated by the SFO in the course of a criminal investigation was of no particular significance in the circumstances of the present case and that ultimately this was no more than one of the factors that the Court had to bear in mind in the context of the balancing exercise contemplated by CPR 31.22 just as in any other case. In this context, Miss Newman drew my attention to the passage in the judgment of Lord Taylor in ex parte Coventry Newspapers Ltd [1993] 1 QB 278 at p292F where he stated as follows:

“Nor can we believe that were we to allow this application, potential future witnesses would be deterred from co-operating in investigations yet to come or the police feel inhibited from giving future reassurance a to the consequences of such co-operation in the self-same terms as at present. That reassurance, be it noted, expressly admits of exceptions. What better case for an exception that this? And it is, moreover, a different case from those in which disclosure of this class of document is generally sought. The documents here are proposed for use not as a sword but as a shield: this is hardly a floodgate situation.”

Miss Newman did not accept any wider and compelling public interest in preventing collateral use of information relating to the process by which MLA is rendered by one state to another in criminal matters at least in the circumstances of the present case. Although she accepted that it might have been possible to make an application under the 1975 Act, the existence of such a procedure did not constitute a bar to an application under CPR 31.22; and in any event, there were practical difficulties in way of any such application. As to any suggested “unfairness”, Miss Newman submitted that the opposing parties in Guernsey would know full well whether or not the documents that had been identified by RT were, or were not, the “full picture” and that therefore there was no relevant “unfairness”.

Finally, Miss Newman submitted that the fact that there were further possible applications in the pipeline as a result of the exercise currently being carried out by RT’s “Review Team” pursuant to my Review Team Judgment is of no particular relevance to the present application which should, in effect, be considered on its own merits. She emphasised the general point that whatever strength there might be in any of the points raised by Mr Saini, these had to be balanced against the obvious injustice to RT if he were not permitted to use these documents in Guernsey.

As to these powerful rival submissions, my observations and conclusions are as follows.

First, I reject Mr Saini’s submission that this application is “premature”. Regardless of whatever other similar applications may be in the pipeline, it seems to me that Miss Newman is right in saying that I can and should deal with this application on its merits.

Second, it is important to bear in mind the observations expressed in the previous authorities as referred to above. Any application pursuant to CPR 31.22 requires a balancing exercise i.e. an exercise which balances the interests of the party who has disclosed the documents in the current proceedings with the interests of the other party receiving those documents to use them for some collateral purpose.

Third, as set out in the authorities referred to in paragraphs 2 and 12-15 of my Review Team Judgment, there can equally be no doubt that it is for the party seeking permission under CPR 31.22 to show “cogent and persuasive reasons” amounting to “special circumstances” so as to persuade the Court to grant the requisite permission.

Fourth, I fully recognise RT’s interest in seeking to deploy these documents in the Guernsey appeal; and I bear very much in mind that RT’s desire to seek to use these documents goes beyond his own private interests because there is a very strong public interest in discovering the truth. As stated by Laddie J in Cobra in paragraph 11(d)-(e) of his summary of the relevant considerations at [1996] FSR 819, 831, prima facie it is not in the interests of justice to hinder a party from advancing a good claim or defence in other proceedings.

Fifth, in carrying out the balancing exercise, I fully recognise the potential relevance of the Guernsey Documents to the Guernsey appeal and the fact that RT’s interests are very seriously affected by the Guernsey proceedings and, in particular, the outcome of such appeal. However, much more difficult is the proper assessment of the likely probative value of the Guernsey Documents if they were to be admitted in the Guernsey appeal which is, in my judgment, a relevant consideration. For example, if it could be said that the documents were “crucial” or “decisive” to the Guernsey appeal, the case for permitting collateral use would obviously be stronger than might otherwise be the case although I should make plain that even in such circumstances, it would not necessarily follow that permission should be granted.

The difficulty here is that the Judgment of LB Sir John Chadwick is lengthy and detailed, the facts relevant to the Guernsey appeal are complex and it is not easy for this Court properly to evaluate the likely significance of these documents. In these circumstances, I was initially much attracted by Miss Newman’s submission that it is in the interests of justice that the Guernsey Court of Appeal should be permitted to take the decision as to whether, and if so how and with what accompanying protections, the 22 Guernsey Documents should be deployed. In particular, Miss Newman submitted that the Guernsey Court of Appeal is perfectly capable of protecting the interests of HMP and the integrity and efficacy of the Guernsey-UK treaties and arrangements for Mutual Legal Assistance. Thus, Miss Newman submitted that if the Guernsey Court of Appeal decides that the Ladd v Marshall test is satisfied for some or all of the documents, then it is plainly in the interests of justice that permission should be given for those documents to be released to the Guernsey Court for that purpose; that if, on the contrary, the Guernsey Court of Appeal decides that the Ladd v Marshall test is not satisfied so that the documents should not be admitted on appeal, then the prejudice to the SFO or to any other party (e.g. parties to the Guernsey Appeal) will be minimal, since the Guernsey Court of Appeal has the power to hold the Ladd v Marshall hearing in private; and that the parties to the Guernsey Appeal will be adequately compensated by an order for costs in the event of any prejudice being suffered in circumstances where the documents are not admitted. For the same reasons, Miss Newman submitted that the Guernsey Court of Appeal is no worse placed, and is in fact considerably better placed, than this Court to balance the parties’ respective interests in determining the extent of any redactions which cannot be agreed between the parties.

Attractive as such proposal might seem, I do not consider that it is the appropriate course of action for at least two reasons. First, it seems to me that it is for this Court to exercise the discretion which arises under CPR 31.22 as best it can. Second, independent of Miss Newman’s submissions, there is evidence before this Court as to the likely significance of the Guernsey Documents in the Guernsey appeal. In particular, there is the evidence of RT himself that “… this evidence may well have been decisive on certain disputed issues in the Guernsey 1 proceedings and that the result of the Guernsey 1 proceedings would or might well have been different if LB Sir John Chadwick had had this evidence before him at trial …” Even taking such evidence at face value, it is somewhat tentative. A slightly different view was expressed by Lord Goldsmith QC who was instructed by RT specifically to review and consider the significance of the Guernsey Documents. The views of Lord Goldsmith are set out in a Letter of Advice dated 20 June 2014 which was produced as an exhibit to RT’s second witness statement in the context of the pending Guernsey appeal. The conclusion expressed by Lord Goldsmith was: “At the very lowest, the recently provided documentation could very well have filled the evidential gap that the judge perceived and as such may have led him to reach a different conclusion.” In my view, that conclusion falls far short of suggesting that the Guernsey Documents are “crucial” or “decisive”.

Sixth, contrary to Miss Newman’s submission, my view is that it is a very weighty consideration that the Guernsey Documents contain information relating to a criminal investigation carried out by the SFO. As I have already noted, it is fair to say that the information contained in those documents does not consist of direct evidence of any particular witness. To that extent, I accept Miss Newman’s submission that the observations of, for example, Lord Hoffmann in Taylor v Director of the SFO [1999] 2 AC 177 at p211B-D which I referred to in my Review Team Judgment are perhaps not directly in point. However, the documents certainly contain information as to the methodology employed by the SFO and the interaction between the SFO and the Guernsey authorities. As such, it seems to me that there is a very strong public interest against permitting the use of such documents for collateral purposes.

Seventh, the public interest referred to in the previous paragraph is, in my view, further fortified by the fact that the documents relate not merely to the steps taken by the SFO itself but to the interaction and co-operation between the SFO and the relevant Guernsey authorities pursuant to a specific request by the SFO for MLA. In my judgment, to permit documents of this kind to be used for a collateral purpose (including the use of the documents in the Guernsey proceedings) potentially jeopardises the willingness of foreign states to co-operate in respect of similar criminal investigations in the future.

Eighth, I was initially impressed by Mr Saini’s argument with reference to the 1975 Act. However, it seems to me that Miss Newman is probably right in her submission that there were (and are) real practical difficulties in the particular circumstances of the present case in pursuing an application under the 1975 Act. Be that as it may, it seems to me that there is at least some force in Mr Saini’s submission that there is potential unfairness to the parties opposing RT in Guernsey if permission were now granted to RT to use the Guernsey Documents in the Guernsey 1 proceedings. I recognise that any potential unfairness is lessened by the fact that the opposing parties in Guernsey are perhaps likely to know what further contact there may have been between the SFO or the Guernsey authorities and the individuals concerned. But it is impossible to say whether or not this is indeed the case; and, in any event, whatever those opposing parties may know, it does not follow that they will necessarily have the “full picture” of the investigations being carried out by the SFO or the Guernsey authorities at that time.

Given everything I have said, it is perhaps obvious that the balancing exercise in the present case is not clear-cut. The court is faced with a tension between, on the one hand, the strong public interest of confidentiality in the documents in question and, on the other hand, the private interests of RT and the associated public interest in discovering the truth. However, for the reasons stated above and in the exercise of my discretion, I am not persuaded that permission should be granted to enable RT to use the Guernsey Documents as sought in paragraph (ii) of the Application Notice.

I recognise that at least certain of the matters which I have identified and which point against the grant of permission might be assuaged at least in part if it were possible to reduce further the number of documents which RT seeks to deploy in the Guernsey 1 proceedings and/or to redact the documents so as to exclude certain of the information contained in the documents which is objectionable to the SFO and the Guernsey authorities. (That is why I said at the conclusion of the hearing on 21 July that one of the reasons why I would decline to grant the permission sought in paragraph (ii) of the Application Notice was because it was “too broad”.) In that context I should mention that prior to the hearing HMP indicated that the Guernsey authorities would have no objection themselves to the present application if agreement could be reached on certain redactions. With that object in mind, HMP provided to RT’s solicitors copies of the Guernsey Documents with proposed redactions. However, my understanding is that such exercise was rejected by RT’s solicitors; and, in any event, the SFO were also not prepared to agree to such an exercise.

In the course of argument, I raised the possibility of the parties seeking to agree wording to reflect the main thrust of what Miss Newman submitted was to be derived from the documents although I fully recognise that this “gisting” exercise may well have very considerable practical difficulties and not provide the solution. I do not know whether this proposed exercise will bear fruit.

In any event, it is for the reasons stated above that I consider that the present application for the order set out in paragraph 2 of the Application Notice should be dismissed.