Tchenguiz & Ors v Director of the Serious Fraud Office

This is an application originally made on behalf of Mr Robert Tchenguiz (“RT”) for permission under CPR 31.22(1)(b) to make collateral use of some 57 documents disclosed to him by the Serious Fraud Office (“SFO”) in these proceedings, by seeking to adduce those documents in a pending appeal by Rawlinson & Hunter Trustees S.A. (“R&H”) in certain other proceedings in Guernsey (the “Guernsey proceedings”). That appeal is, I am told, now due to be heard in mid-February 2015. RT had originally made this application alone, but he was refused permission by the Guernsey Court of Appeal to intervene in such pending appeal by a Judgment of that Court dated 10 September 2014. As a result, R&H made an application to be joined to this application so as to stand in RT’s place which the SFO did not oppose and which I accordingly granted.

This application under CPR 31.22(1)(b) has some similarity to a previous application which I determined earlier this year in respect of 22 other documents. My Judgment is reported at [2014] EWHC 2597 (Comm); and was recently upheld by the Court of Appeal: see [2014] EWCA Civ 1409. The background to the present application (which I do not propose to repeat) is set out in those Judgments. For present purposes, I would refer, in particular, to the law as stated in the Judgment of Jackson LJ at [55]-[66] and the summary of the general principles with regard to the balancing exercise at [66].

However, although the present application has some similarity to the previous application, Miss Newman QC on behalf of R&H emphasised (rightly) that there are certain important differences between them; and that the balancing exercise to be performed must, of course, be carried out by reference to the particular documents which are the subject of the present application. In particular, it is important to note that, unlike the previous application, the vast majority of the 57 documents have not been generated as a result of the interaction between the SFO and any foreign authority concerning a criminal investigation. That is, I accept, an important difference. Notwithstanding, as appears from the authorities cited by Jackson LJ (in particular, the passage from the speech of Lord Hope in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177 cited by Jackson LJ at [58]) and as summarised by Jackson LJ at [66(iv)], there is a strong public interest in preserving the integrity of criminal investigations and protecting those who provide information to prosecuting authorities from any wider dissemination of that information other than in the resultant prosecution.

At the outset, I should say that, in my view, the balancing exercise which I am required to perform under CPR Part 31.22 has been somewhat hampered in the present case. In particular, it is important to note that the 57 “documents” extend in total to over 500 pages. These include some (but very few) documents provided to the SFO; some emails/correspondence between the SFO and third parties; and, more importantly, a large number of detailed internal notes prepared by the SFO recording discussions with third parties (in particular, representatives of Grant Thornton) over an extended period in the course of the criminal investigation as well as the SFO’s internal assessments, from time to time, of such investigation and its recommendations about future action. (I should mention that at the request of the SFO and with the agreement of R&H, I ordered that the detailed content of such material should remain “confidential” and certain parts of the hearing were therefore held “in private”. For this reason, I do not propose to refer in detail to the contents of such material in this public Judgment.)

In considering this material and the necessary balancing exercise, it seems to me absolutely essential to understand what are said to be (i) the specific propositions of fact which are allegedly to be derived from the documents in question; and (ii) the relevance – or at least the potential relevance – of such alleged propositions of fact to the proposed pending appeal in Guernsey. Until recently, it seems to me that R&H (and previously RT) had failed to grapple properly with these two aspects which are, in my view, fundamental to a proper determination of the application. As appears from the correspondence between the parties in the lead up to the hearing of the present application, it would seem that those acting for RT/R&H sought to criticise the SFO for “lack of engagement” on its part and, in particular, for failing to agree to a meeting and to come forward with concrete proposals (e.g. some form of “gisting exercise”) by way of possible compromise as to the potential use of these documents – criticism which was repeated with some vigour in Miss Newman’s skeleton argument on this hearing and in her oral submissions.

Whilst I should emphasise that this Court is always at pains to encourage parties to litigation to co-operate fully, in my view, such criticism was and remains unfounded. Under CPR Part 31.22, the burden lies firmly on the applicant ultimately to demonstrate “cogent reasons” to permit the collateral use of documents. It is fair to say that the first witness statement of Ms Martin dated 11 August 2014 served in support of the application contains quotes and snippets from the 57 documents. However, as it seems to me, until very shortly before this hearing, RT/R&H had simply failed to distil and to explain properly to the SFO the specific information and factual propositions which they were seeking to derive from the many hundreds of pages of which the 57 documents comprised.

It is true that, after some months of correspondence and following the service of the second witness statement of Mr Emson on behalf of the SFO on 20 November 2014 which sought to highlight the shortcomings of the application as referred to above, this “gap” was filled (at least in part) by a letter from RT’s/R&H’s’ solicitors dated 3 December 2014 (i.e. very shortly before this hearing) which set out some 19 propositions of fact said to be derived from the 57 documents which the SFO were, in effect, requested to agree. (Such propositions were repeated in Ms Martin’s third witness statement dated the following day i.e. 4 December 2014.) However, as stated in a letter dated 4 December 2014 from the Treasury Solicitor on behalf of the SFO and putting on one side whether such proposal was sensible, the timing was, in my view, unreasonable. The SFO had very little time properly to consider these new “propositions” prior to this hearing and, unsurprisingly, did not agree to such proposal.

At the very least, the stated propositions of fact allegedly to be derived from the 57 documents were now – albeit very belatedly – clear although I do not propose to set them out in detail in this public Judgment.

However, there remained (and remains) the important question of relevance – or at least potential relevance – of such alleged propositions of fact to the proposed pending appeal in Guernsey. This remained somewhat obscure because RT/R&H had not prepared draft grounds of appeal in the Guernsey proceedings to explain the (potential) relevance of such documents as, in my view, ought to have been done.

This “gap” was also filled belatedly to some extent at least by Ms Martin in paragraph 11 of her third witness statement when she sought to explain the intended appeal in Guernsey by reference to the 57 documents as follows:

“11.

The essence of the case which R&H seeks to advance on the Guernsey appeal is as set out at paragraphs 11 and 16 – 18 of my first witness statement and at paragraphs 10 and 60 of the Guernsey Intervention Skeleton. It is that:

11.1

The result of the Guernsey trial and the evidence that was given at that trial were tainted by the continuation of the SFO investigation of which RT was a suspect, in circumstances where the Joint Liquidators acting with Grant Thornton (UK) LLP (together “Grant Thornton”, and represented principally by Mr Stephen Akers and Mr Hossein Hamedani) appear to have known that the basis of the SFO investigation was unsustainable yet continued to give support and misleading evidence to the investigation, and not to communicate to the SFO the reasons why the matters it was investigating could not sensibly amount to criminal offences by RT.

11.2

Grant Thornton and Investec Trust Guernsey Limited, the former TDT trustees (“ITGL”) both allowed or encouraged the SFO to continue to believe that ITGL, which as trustee of the TDT had carried out the transactions which were under investigation by the SFO, either had no direct involvement in the transactions, or had been deceived or coerced by RT and R20 Limited (“R20”) into carrying them out so that RT was the party responsible for any criminal offence which might have been committed in connection with the relevant transactions. This theory was false, and neither known (or at the least suspected) to be so by (at the latest) the end of 2011/start of 2012.

11.3

Grant Thornton and ITGL therefore bear significant responsibility for the continuation of the SFO’s investigation; and in Grant Thornton’s case can only be assumed to have desired the continuation of that investigation as a state of affairs which would assist the Joint Liquidations and/or Kaupthing in various civil proceedings in which their interests were adverse to RT’s and R&H’s.

11.4

ITGL appears to have tailored its evidence in the Guernsey proceedings in order to provide information which it considered the SFO would wish to hear and which would tend to exculpate it of responsibility in the matters which it knew that the SFO was investigation. Notwithstanding this, it is apparent from the Judgment of Lieutenant Bailiff Sir John Chadwick that ITGL’s evidence was accepted as being complete (without material omissions) and truthful, despite the fact that the Lieutenant Bailiff himself was aware there were some gaps and inconsistencies in their evidence.

11.5

These matters, and the effect of the SFO investigation more generally, had specific and identifiable effects on the evidence in and outcome of the Guernsey trial. In these circumstances, there are strong grounds for considering that key conclusions of fact made by Lieutenant Bailiff Sir John Chadwick are wrong, and the Lieutenant Bailiff’s judgment ought to be set aside as a result and the case remitted back for a retrial.”

Further details were given by Miss Newman in her skeleton argument – although, again, I do not propose to set out such details in this public Judgment. For present purposes, it is, I believe, sufficient to note certain broad points advanced by Miss Newman in her skeleton argument which were, in summary, as follows:

Miss Newman confirmed that, if granted permission by this Court to use documents to enable it to do so, R&H did intend to amend its grounds of appeal in the light of the 57 documents and that such intended new grounds of appeal were as outlined in the submissions filed by RT in the Guernsey Court of Appeal on 3 September 2014 (the “Intervention Skeleton”) and provided to the SFO on 23 September 2014. As summarised in her skeleton under the heading “Significance of the Factual Narrative”, these were as follows:

This further clarified the position but only partly: in order to carry out the balancing exercise properly, it seemed to me necessary to understand in clear terms what was the alleged specific relevance of one or more of the 57 documents to which one or more (new) intended grounds of appeal. To this end, in the course of the hearing, I ordered R&H to provide within a very tight timescale a schedule (the “schedule”) explaining the position. This exercise was duly carried out after completion of the oral hearing; and I should say that the schedule is a document which I found very helpful. However, I fully recognise that this procedure was far from satisfactory because it gave the SFO only a very limited opportunity properly to respond to such schedule. In the event, the SFO did respond in writing although the terms of such response were then the subject of objection (at least in part) on behalf of R&H. Without deciding the validity of such objection, I propose to ignore the points advanced by the SFO which were the subject of the objection.

For the sake of completeness, I should mention that in her third witness statement, Ms Martin also sought to prioritise the 57 documents. In particular, she identified three categories of documents viz those which were “top-priority”; those that were “second-level priority”; and those that were the “third (and lowest) level”. However, Miss Newman was at pains to emphasise that the order that she sought was and remained in respect of all 57 documents.

Against that background, Miss Newman submitted that the 57 documents were necessary for R&H to be able to make and substantiate its intended submissions in Guernsey. Indeed, she submitted that such submissions “cannot be made without the 57 documents”. In particular, as set out in her skeleton, she submitted that the documents show (i) the source and nature of the SFO’s original suspicions against RT; (ii) the close information-sharing relationship between GT and the SFO and the SFO’s reliance on what it was told by GT; (iii) GT’s developing understanding of the matters under investigation, as evidenced by the “draft Oscatello Memorandum” and the “Draft RT and R20 Involvement Memorandum” dated September and December 2010 respectively; (iv) GT’s continued support for (or at the least acquiescence in) the SFO’s allegations against RT; (v) the SFO’s awareness by late 2010 / early 2011 that it had to explain how its allegations of criminal offences by RT / R20 were consistent with the involvement of professional trustees, and its reliance for this purpose on the theory that ITGL might have been deceived or coerced by R20; (vi) GT proposing this theory to the SFO and actively directing the SFO’s attention to evidence said to support the thesis; (vii) the SFO concluding by late 2011 that the only real viable basis for the continuation of the investigation into RT was a thesis that the entry into the 19 December 2007 Framework Agreement and Overdraft Agreement involved deception and/or collusion by RT and R20 related to the omission of the intercompany loans from the Memo of Assets and Liabilities annexed to the Framework Agreement; (viii) that thesis being comprehensively discredited by the evidence which, belatedly, emerged from ITGL during the course of the Guernsey trial in June 2012; and (ix) the SFO discontinuing its investigation into RT, as a direct result of the evidence disclosed in the Guernsey trial, on the basis that there were “no grounds for continuing the investigation into RT’s borrowing from Kaupthing Bank” and that “No evidence has been found which would give rise to a reasonable prospect of conviction of RT”. RT cannot make and substantiate these submissions on the basis of existing publicly available documents and evidence. Among many other points which could be made in this connection, the Divisional Court was not required to reach a view as to whether or not there might have been a reasonable basis for suspicion relating to the Oscatello lending and the money market loans; nor could it have reached such a decision based on the limited information and disclosure available to it. Several of the 57 Documents post-date the Divisional Court hearing (May 2012).

Having been taken through the vast majority of the 57 documents individually by Miss Newman and having considered carefully the schedule referred to above, I am prepared to assume in favour of R&H that some or all of the 57 documents show the matters referred to in the previous paragraph. To the extent not already mentioned above, I also bear fully in mind the additional matters set out in paragraphs 52-57 of Miss Newman’s skeleton argument in particular:

However, I am unpersuaded that the balancing exercise which I am required to perform comes down in favour of granting permission to use the documents for the intended collateral purposes pursuant to CPR Part 31.22. I reach this conclusion for the following reasons.

First, although I readily accept that this was and is an extraordinary case and bearing fully in mind the main thrust of Miss Newman’s submission that the SFO’s criminal investigation was seriously flawed (which, I should emphasise, was and remains disputed by the SFO), the starting point is to recognise the strong public interest in preserving the integrity of criminal investigations; and that many of the 57 documents contain the SFO’s detailed notes of discussions with third parties and its own internal assessment and recommendations with regard to the criminal investigation. At the risk of stating the obvious, it is important to emphasise that this is not to say – and I certainly do not suggest – that such public interest is absolute. On the contrary, I fully recognise that it is only part of the balancing exercise. It is unnecessary to explain again the underlying rationale for such public interest but, in my view, such public interest must be fully recognised and given proper recognition in the balancing exercise.

Second, in considering such public interest, Miss Newman submitted that it was important to bear in mind that Grant Thornton had not intervened to make any submissions themselves by way of objection to the use of such documents in Guernsey. That is true. However, Grant Thornton had a representative in Court during the hearing and I was informed that they had not and did not consent. In any event, as submitted by Mr Saini, it seems to me that the SFO has its own independent interest in its capacity as a public prosecuting authority i.e. it is entitled to protection of all materials created in the criminal process subject, of course, to any relevant countervailing considerations which should be taken into account in the balancing exercise.

At one stage, I understood Miss Newman to suggest that whatever public interest might previously have existed in the present case was no longer extant because the threatened prosecution had been abandoned by the SFO. As formulated, I do not accept that submission. In my view, there is nothing in the authorities to suggest that the abandonment of a threatened prosecution would in any way destroy or remove such strong public interest; and, as a matter of principle, I see no reason why it should although I accept that the fact that such prosecution has been abandoned is a potentially relevant factor which needs to be considered – and which I certainly do bear in mind – in the context of the overall balancing exercise.

What I also, of course, accept is that the present application involves an important balancing act requiring a weighing up of the conflicting public interests as referred to by Jackson LJ; and that, regardless of the conclusion reached by this Court and the Court of Appeal in respect of the 22 documents, the necessary balancing exercise must be carried out on its own merits with regard to the particular 57 documents which are the focus of the present application.

Third, many of the points which Miss Newman seeks to derive from the 57 documents are very similar if not identical to the 16 propositions which are said in paragraphs 42-58 of Intervention Skeleton, to be supported by “public documents” – as appears to be expressly recognised in paragraph 70 of the Intervention Skeleton. In her third witness statement para 10, Ms Martin disputed that these public documents suffice but, as submitted by Mr Saini, on the bases only (i) that RT’s “submissions … of course go further than the 16 propositions”, without explaining in what way; (ii) that the public documents are “inadequate evidence” because they derive from a period before disclosure, which makes no sense; and (iii) that “several” of the 57 documents post-date the Divisional Court hearing which is not obviously of any relevance to the question of whether the public documents are sufficient. Further, Miss Newman submitted that to the extent that such “public documents” consist of pleadings in the existing proceedings, they are of lesser probative value than the underlying primary documents. I am ready to assume that such public documents may be of lesser probative value than the underlying primary documents at least in the context of any retrial if the Guernsey Court of Appeal were so to order. However, it does not appear that there is any impediment to making reference to any of these public documents so as to enable R&H to advance its case for the purposes of the intended appeal. Further, it is important to bear in mind that the “public documents” are not limited to pleadings. On the contrary, paragraph 39 of the Intervention Skeleton refers to other “public documents” including the important statement of Mr Gunnarsson dated 20 June 2014 which R&H will also be able fully to deploy on the intended appeal.

Fourth, even on the assumption stated above that some or all of the documents show the facts identified above, it seems to me that, as submitted by Mr Saini, R&H has failed to advance a cogent or comprehensible case as to the alleged relevance and probative value of the 57 documents in Guernsey which outweighs the strong public interest in preserving the integrity of criminal investigations. To some extent, this point covers ground similar to that addressed by Jackson LJ in paragraph 78 of his Judgment in the appeal in relation to the 22 documents referred to above where he sets out his conclusions as follows:

“(i)

...

ii)

It is self evident that there was communication between the GCA and Investec in early 2011. It is also self-evident that Investec knew of the SFO’s interest in their conduct in relation to TDT and the Kaupthing loans. If R & H wishes to argue that Investec tailored its evidence in the Guernsey trial in order to avoid the risk of Investec or its staff being prosecuted in England, R & H can deploy that argument on the material currently available. It is for the Guernsey courts to decide whether they accept that argument. I do not see the 22 documents as being of particular importance in relation to that issue.

iii)

R & H's advocate was able to comment at trial and will be able to comment at the appeal about Investec's failure to call seemingly important witnesses concerning the book entries, in particular Mr Rabie.

iv)

Even if the book entries were made with the knowledge of Investec's senior management, they would not have had the legal effect for which R & H contended: see the last two sentences of paragraph 162 of the Lieutenant Bailiff's judgment.

v)

The 22 documents, in so far as they add anything to the material which R & H already has, essentially go to the credit of Investec's witnesses.

vi)

The case did not turn on the credibility of Investec's witnesses: see paragraphs 75 and 88 of the Guernsey Court of Appeal's judgment dated 28^th November 2013.”

At the risk (yet again) of repetition, I fully recognise the importance of considering this application with regard to the 57 documents on its own merits and carrying out the necessary balancing exercise specifically in this context. However, as submitted by Mr Saini, the conclusions of Jackson LJ as set out above are significant in the context of the present application for the following main reasons.

So far as what Miss Newman described as the “hidden narrative” is concerned, it would certainly appear that the view taken by Jackson LJ in paragraph 78(vi) of his Judgment by reference to paragraphs 75 and 88 of the Judgment of the Guernsey Court of Appeal dated 28 November 2013, was that the case decided by the Lieutenant Bailiff and which is the subject of the pending appeal in Guernsey did not turn on the credibility of Investec’s witnesses. Miss Newman submitted that this was wrong and fails properly to take account of the fact that the Lieutenant Bailiff reached the conclusions which he did because of the absence of evidence from key ITGL individuals and/or because of his acceptance of evidence of Mr Clifford and Mrs Bleasdale in particular at Judgment [135] accepting that Mrs Bleasdale did not know what prompted Mr Rabie to make the July 2008 entries; and that the July 2008 entries did not reflect anything that had actually happened; Judgment [136] accepting Mr Clifford’s evidence (w/s ¶82) that Mr Rabie would not have been authorised to create or amend the loan arrangements; Judgment [137] concluding that no evidence had been adduced to permit the Court to find that Mr Rabie was authorised to effect any change in the pre-existing legal relationships between the Oscatello companies and the TDT trustees; Judgment [146], accepting Mrs Bleasdale’s evidence that no (express or implied) approval of the Oscatello, Glenalla and Thorson balance sheets took place during the 3 October 2008 board meetings, and that “no thought was given as to how the position had been reached with the shareholder loans”; Judgment [149] concluding, critically for the Lieutenant Bailiff’s determination of the case, that “the boards of directors of Oscatello, Glenalla and Thorson were not aware that the draft balance sheets which were before them for consideration on 3 October 2008 had been prepared on the basis of transactions which had not, in fact, taken place”; as well as other passages at Judgment [154], [158], [159], [160], [161], [162], [165], [169], [171], [176] and [247]-[251], all identifying gaps in ITGL’s evidence and/or accepting the evidence of ITGL’s witnesses.

I readily accept that, contrary to Mr Saini’s submission, these points are not necessarily undermined by the mere fact that the 7 main issues identified by the Lieutenant Bailiff in paragraphs 53, 64, 83 and 85 of his Judgment would appear to be somewhat narrow and to relate to events prior to the commencement of the criminal investigation by the SFO. However, I am unpersuaded at least by the breadth of Miss Newman’s submissions in this context. In any event, it seems to me that the effect of the decisions of the English Court of Appeal and the Guernsey Court of Appeal is as I have summarised above.

So far as the book entries are concerned, similar considerations apply: see, in particular, paragraph 78(iii) and (iv) of Jackson LJ’s Judgment.

For all these reasons, it seems to me that the 57 documents are, at best, likely to be of limited utility.

Fifth, it seems to me that there is also a risk of unfairness in Guernsey including to the SFO itself arising from the selection of the 57 documents amongst the 45,000 or so which were disclosed by the SFO in these proceedings. As submitted by Mr Saini, (i) the Divisional Court’s findings were limited to a challenge to the search warrants on the ground that the presentation to the Court had been inadequate; (ii) the issue as to whether the SFO had a proper basis for the investigation at other times in the chronology was an issue which was a topic of dispute in the underlying proceedings; and (iii) it is an issue (amongst others) concerning which the SFO disclosed 45,000 or so documents – not just 57. Much more controversially, Mr Saini submitted that R&H appears to wish to use the 57 documents to promote an entirely one-sided view of the SFO’s investigation in Guernsey in proceedings to which the SFO is not a party and that this is precisely the sort of mischief which the collateral use prohibition exists to prevent. In response, Miss Newman submitted in effect that the SFO had had more than ample opportunity to indicate what, if any, parts of the “hidden narrative” were incorrectly stated and had signally failed to do so; and that, in truth, there was no risk of unfairness. It is not easy to evaluate these submissions without considering the wider disclosure provided by the SFO. However, I accept Mr Saini’s submission that there is at least some risk of unfairness which is relevant as part of the balancing exercise. For the avoidance of doubt, my conclusion would be the same (i.e. to refuse permission) even ignoring such risk of unfairness; but it is a further consideration which, in my view, further supports such conclusion.

For the sake of completeness, I should mention that at the very end of the hearing, Mr Lodder QC sought to make further oral submissions on behalf of R&H. In support of such intended submissions, he provided to the Court a further schedule extending to some 72 pages which I had not seen previously and which had apparently only been served under cover of a letter dated 5 December 2014 apparently in relation to a different hearing originally fixed for 18 December 2014. In broad terms and from a very brief skim read of the opening few pages, it would appear that this schedule made various assertions of fact by reference, in particular, to certain documents and, as explained by Mr Lodder, was apparently intended to make very serious allegations against three individuals who were, so far as I am aware, totally unaware of the existence of such document still less such allegations. In my view, the tender of such document at that late stage of the hearing and in such circumstances without any supporting evidence was quite wrong. In the event and after taking further instructions, Mr Lodder informed me that he did not seek to make his intended submissions. I say no more about this.

For all these reasons, I reject the application on behalf of R&H under CPR 31.22. Counsel are accordingly requested to agree a draft order for my approval. Failing agreement, I will, of course, deal with any outstanding issues.