FM Capital Partners Ltd v Marino & Ors

This is an application by the third defendant, Mr Ohmura, for specific disclosure of documents. It raises an interesting question about waiver of privilege in one of its many meanings and has been very well argued on both sides. The background, in summary, is that on 29 August 2014 the claimant, FM Capital Partners Limited, received a letter from the Libya Africa Investment Portfolio (a Libyan sovereign wealth fund, which has been referred to as “LAP”) whose assets the claimant managed, making a series of serious complaints. Those complaints related to the way in which the assets had been managed and made allegations of breaches of duty and unlawful conduct by an individual called Mr Marino who was the chief executive officer of the claimant.

Immediately on receipt of that letter, solicitors then instructed by the claimant, Kingsley Napley, appointed the accountancy firm BDO to conduct an investigation. Very shortly afterwards, on 1 September 2014, Mr Marino was suspended from his position as CEO of the claimant. On 9 October 2014 Mr Marino was interviewed by representatives of BDO as part of its investigation. On 22 October 2014 BDO produced an interim report of which a copy was provided to Mr Marino in anticipation of a disciplinary hearing which was scheduled to take place on 30 October 2014. Mr Marino failed to attend the hearing on that day and on 3 November he was dismissed by the claimant for gross misconduct. On 23 December 2014 the claimant issued the present proceedings against Mr Marino alleging various dishonest breaches of duty.

Subsequently, further defendants were added. They include Mr Bessot, another employee of the claimant with whom a settlement has subsequently been reached, and the third defendant, Mr Ohmura, who makes this application. He is alleged to have dishonestly assisted Mr Marino and Mr Bessot in various breaches of duty. Other allegations of unlawful conduct are also made against him.

Disclosure has been given in this action and privilege has been claimed for certain documents which include documents created in the course of the investigation carried out by BDO. That is the first category of documents requested today by the third defendant on this application for specific disclosure. On his behalf, Mr Emmett invites the court to look critically at, and indeed to reject, the assertion made by the claimant that those documents are subject to litigation privilege.

The basis for the claim that they are covered by litigation privilege has been set out in evidence consisting of a witness statement from Mr Humphrey, a solicitor who now acts for the claimant, although he did not do so at the relevant time, and also Mr Crawford, who is a partner at Kingsley Napley, who were the solicitors acting at the relevant time for the claimant. They give evidence that, at the time when BDO were instructed and carried out their investigation, litigation was seriously contemplated in a number of forms. In the first place, the letter of complaint from LAP that I mentioned earlier expressly threatened proceedings and clearly, given the complaints made in that letter, made it likely that court proceedings would be brought on the basis of the allegations made in the letter. Secondly, those allegations raised serious questions about the conduct of Mr Marino which created a real prospect that the claimant would wish to bring proceedings against Mr Marino, as in due course did indeed happen. It is further said that, following his suspension on 1 September 2014, it was contemplated that Mr Marino might himself issue proceedings in relation to his suspension, which was a further potential set of proceedings. The evidence given is that it was in order to ascertain the rights and liabilities of the claimant and find out the facts in connection with those potential proceedings that I have mentioned that BDO were instructed, or at any rate that this was the dominant purpose of their instruction.

I see no reason on the basis of any of the points made on behalf of the third defendant to doubt that evidence, let alone any reason to reach with reasonable certainty or anything approaching it a conclusion that litigation was not the dominant purpose of the BDO investigation. The suggestion is that the disciplinary process which was pursued against Mr Marino is inherently likely to have been, and was, at least an equal purpose of the investigation. For what it is worth, I would have thought it inherently less likely that a company faced with serious allegations and a serious potential claim against it from one of its clients would be predominantly or even equally concerned with disciplining its own employee as opposed to preparing to defend litigation being threatened against it and to pursue a claim potentially against its employee. In any event, as I have said, none of the matters relied on in my view comes close to providing a reason to go behind the assertion of privilege that is made and supported by the claimant’s evidence.

That goes not only to the generality of the documents but to the interim report of BDO which is the particular document on which most focus has been placed in argument. The context in which that interim report was prepared is addressed by Mr Crawford in his second witness statement at para 7 and following and, again, I see no reason to doubt his evidence that its dominant purpose, as with the investigation as a whole, was the contemplated litigation – albeit that the report was used as a vehicle for informing Mr Marino in the context of the disciplinary process of the allegations against him and of the evidence relied on in support of those allegations.

I turn then to the alternative basis on which the application for disclosure of that report is made by the third defendant, which is that there has been a waiver of privilege in respect of that report as a result of its provision to Mr Marino. I have been referred to a number of authorities on this point. Of the two principal authorities cited, the first is the case of British Coal Corporation v Dennis Rye Ltd [1988] 1 WLR 1113. In that case the plaintiff brought an action claiming return of monies from the defendant and making other claims against it. There was also a criminal prosecution of the defendant. To assist in the conduct of the criminal prosecution the plaintiff made available to the police documents that were relevant to the prosecution which were protected by litigation privilege in that they had come into existence for the purpose of the civil proceedings against the defendant. The police or the prosecution then disclosed those documents to the defendant for the purpose of the criminal prosecution. It was held by the Court of Appeal that, nevertheless, there had been no waiver of privilege so far as the civil action was concerned.

The second main authority to which I was referred is the case of Berezovsky v Hine [2011] EWCA Civ 1089. In that case Mr Berezovsky, who was engaged in litigation against Mr Abramovich, provided drafts of witness statements which had been prepared for the purpose of that litigation to another individual most conveniently referred to as “Mr P” in order to assist Mr P with a claim for asylum. Subsequently, it was argued that the provision of those witness statements to Mr P had resulted in a waiver of privilege such that the documents could be used by the persons who succeeded to the claims of Mr P after he had died in disputes against Mr Berezovsky. The Court of Appeal held that it was implicit in the circumstances in which the draft statements had been provided to Mr P that they were entitled to be used only for the purposes of his asylum claim, and that there was no waiver of privilege which enabled them to be used for the purpose of the subsequent litigation.

The principle that I derive from those cases is that, if a privileged document is provided by A to B, the mere provision of that document, as is perhaps obvious, does not necessarily amount to a waiver of privilege. The extent to which there is any such waiver depends on to what extent there is an express or implied restriction on subsequent use of the document. I should say that, whilst the concept of waiver of privilege has a number of different meanings, it seems to me that the relevant concept here is that of confidentiality and the extent to which a document provided by one party to another ceases as a result of that communication to be confidential. The question, therefore, as I see it, is one of fact as to what were the express or implied terms on which the BDO report was provided to Mr Marino.

It is not suggested that there was any express restriction imposed on the use of that document. What is said is that, in circumstances where it was provided in the context of a disciplinary process and for the purpose of enabling Mr Marino to know what allegations were being made against him and what evidence was relied on in support of those allegations, there was an implied restriction on any use by him of the document other than for the purpose of the disciplinary proceedings. In the absence of any express limitation to that effect, I do not for my part feel able to infer that there was such an implied restriction. Certainly, I would accept that it could not reasonably have been supposed that Mr Marino was free to make whatever use he chose of the document for any purpose whatsoever. But in circumstances where, as indeed is the thrust of the claimant’s evidence, litigation was in prospect – including litigation against Mr Marino – and this was the dominant purpose in preparing the report, in the absence of any statement to the contrary, the inference that I would draw, objectively, is that Mr Marino would be free to use the report not only for the immediate purpose of the disciplinary process but for the wider purpose of the litigation against him which was likely to follow. It would to my mind, prima facie at least, be unreasonable and unfair to expect a person who has been provided with a report setting out allegations against him and evidence relied on, if he thinks that there is material in that document relevant to his defence, to be prevented from using it to defend himself against those allegations just because they are now made in civil proceedings as opposed to a disciplinary hearing. In the absence of any express limitation in the use of the document to the disciplinary hearing, I am not prepared to infer such a limitation.

That leads to the position that Mr Marino was, as I see it, entitled to deploy the document in these proceedings. He has then done so by disclosing it as part of his own disclosure. In those circumstances, it seems to me that the document must be one which can be used for the purposes of these proceedings and, therefore, by virtue of its disclosure by Mr Marino, privilege has been lost as against the other parties to these proceedings for the purposes of these proceedings. I therefore consider that the third defendant is entitled to use the BDO report for the purposes of these proceedings.

The next category of document of which disclosure is sought consists of documents created by the claimant for the purposes of the disciplinary process. The short answer to that head is that the claimant’s evidence shows that those documents have been reviewed for the purpose of disclosing any relevant documents. There is no reason to think that any relevant documents have been withheld except to the extent that privilege has been claimed. Other than in relation to the BDO report, therefore, I see no basis on which the third defendant should be entitled to any further specific disclosure.

The same applies to communications between the claimant and the National Crime Agency, which is the third category of documents claimed. Again, the evidence indicates that those documents have been reviewed for relevance and privilege. I have no reason to doubt the conclusion reached that no relevant documents exist which have been withheld.

That brings me lastly to documents recording the terms of two settlements. The first is the settlement I mentioned earlier between the claimant and Mr Bessot. The claimant’s skeleton argument conveniently distinguishes between three different categories of terms of that settlement agreement: terms relating to cooperation in relation to these proceedings; terms relating to the actual settlement of the claim, including any agreement that may have been made for Mr Bessot to make any payments to the claimant; and a third residual category of terms which would include standard clauses. I have made clear in the course of argument that, as regards terms about cooperation or assistance given in proceedings, I would think it necessary for the claimant to disclose any agreement under which any person is to be paid for giving evidence other than to receive reimbursement of actual expenses. Other than that, I can see no relevance in the first category of terms.

In relation to terms recording payment obligations or other terms of relief, I accept the argument made by Mr Pillow QC on behalf of the claimant as correct in principle that an agreement to pay a sum of money actually or contingently, if there is one, does not as a matter of law affect the liability of another defendant and only an actual receipt would do so. In principle, a release of one person could be a release of the other jointly liable defendant but, unless the settlement agreement contains a term which amounts or arguably amounts to such a release, I cannot see that its terms are relevant. I can also see no relevance on the third category of terms.

The second settlement in respect of which disclosure is sought is the settlement made between the claimant and LAP. Here the position in principle seems to me to be that, if such a settlement has been made which imposes or arguably imposes a limit on the liability of the claimant to LAP, then that aspect would be a relevant matter and any documents evidencing or recording it would be disclosable. The evidence given, however, in an affidavit that refers to the communications between the claimant and the LAP prepared for the purpose of an application for a freezing order against Mr Marino, indicates that the terms contain no such limit. I can see no reason to doubt that evidence or in those circumstances to make any order for disclosure in relation to that last category of documents.

The upshot is that the application will be granted in respect of one document only, namely the report of BDO. In relation to the other documents and categories of document, the application fails.

I am not going to make an order for costs in the third defendant’s favour when he has succeeded in relation to one document only but made an application which was very wide ranging. If it really were a question of winning on one point out of five, and could be approached in that numerical way, I would make an order in the claimant’s favour. However, the fact of the matter is that a lot of the argument did focus on the BDO report and it seems to me that it is potentially a document of some significance. In those circumstances, where it can be said that the applicant has had some success, albeit very limited, I am also not going to make an order in the other direction, and so the result will be no order as to costs. This has the happy by-product that it is not necessary to prolong this hearing any further in order to conduct the process of assessing costs at the end of what was meant to be a half day application.