Imerman v Tchenguiz & Ors

This is the final ruling which I was called upon to give at a hearing which took place on 2 November and continued into the next day. Because the hearing overran, I decided to reserve judgment.

This ruling relates to the Claimant’s application dated 7 October 2009 for an “unless” order in the light of what is said to be the Defendants’ failure to comply with certain parts of my order dated 31 July 2009, all of which relate to the delivery up of documents.

The relevant parts of the order are as follows:

“6.

Each of the Defendants shall, through their solicitors Zaiwalla & Co, by 4.30pm on Friday 4 September 2009 deliver up to the Claimant’s solicitors all copies of any hard copy document containing the Confidential Information or any part thereof and any notes, reports, index or catalogue based thereon including, for the avoidance of doubt, all copies of the Confidential Schedules to the Orders of Mrs Justice Cox dated 2 March 2009 and Mr Justice Eady dated 20 March 2009 which they retained and/or prepared pursuant to the provisos to paragraphs 4 or 5 of the Order herein of Mr Justice Eady dated 20 March 2009, and shall at the same time permanently delete from their computer systems any electronic copies thereof.

PROVIDED THAT

Nothing in this paragraph shall require the delivery up to the Claimant’s solicitors or to the Claimant, or the destruction of, material subject to the legal professional privilege of the Defendants or any of them. Any such material shall either be destroyed or deleted or delivered up to Zaiwalla & Co by 4.30pm on Friday 28 August 2009 to be placed into secure storage by them and not to be disclosed to the Defendants or any of them or to any other person save by order of the Court. The costs of any such storage are to be paid by the First and Second Defendants.

7.

The First, Second and Fifth Defendants shall, through their solicitors Zaiwalla & Co, by 4.30pm on Tuesday 25 August 2009, serve a copy of this Order upon and issue written instructions to:

…

(b)

any person to whom or entity to which the Confidential Information or any part of it has been communicated by them or on their behalf with the exception of the Claimant’s wife Elizabeth Tchenguiz Imerman, Withers LLP but including, for the avoidance of doubt, the Defendants’ legal advisers in these proceedings, to, as soon as reasonably practicable and in any event by 4.30pm on Wednesday 2 September 2009, delete permanently all electronic copies of the Confidential Information or any part of it or any notes or reports based thereon held on their computer systems and to deliver up to the Claimant’s solicitors for onward transmission to the Claimant, any hard copies of the Confidential Information or any part of it or any notes or reports based thereon in their possession, and to confirm to the Defendants’ solicitors in writing when these steps have been completed.

[There was a proviso in identical terms relating to legal professional privilege.]

8.

Each of the Defendants shall, by 4.30pm on Monday 7 September 2009, serve on the Claimant’s solicitors a letter from his solicitors, Zaiwalla & Co:

(a)

setting out the steps he has taken to comply with the Order at paragraphs 6 and 7 above; and

(b)

confirming that complete delivery up of and/or permanent deletion of the documents referred to in this Order and any other collections of data in any hard copy or electronic form which contain the Confidential Information or any part of it as he has undertaken to give has taken place; and

(c)

confirming that neither he nor anyone acting on his behalf or on his instructions has retained any copies of any part of the Confidential Information or any part thereof or any notes or reports based thereon in any form other than such part(s) of the Confidential Information as continues to be held by Alex Dunstan-Lee, KPMG Forensic, 20 Farringdon Street, London EC4A 4PP on computer back-up tapes pursuant to paragraph 8 of the Order of Mr Justice Eady dated 20 March 2009.

9.

Each of the Defendants shall, by 4.30pm on Friday 11 September 2009:

(a)

file and serve on the Claimant’s solicitors a Witness Statement confirming the matters set out at paragraph 8(a)-(c) above …”

Mr White QC, on the Claimant’s behalf, submits that the Defendants are in defiance of the order since, out of the thousands of documents in their possession, none has been delivered up in compliance. On the other hand, Mr Nathan QC, for the Defendants, has put forward various reasons why up to this point no delivery up has taken place (or, as Mr White would characterise them, “excuses”).

It is necessary at the outset to record, first, that the order of 31 July was negotiated and agreed between the parties before being approved by the court (by way of implementing the rulings contained in the judgment of 27 July) and, secondly, that no application has been made to discharge or vary any of its terms. It is true that Mr Nathan, in the course of argument, suggested that the order needed to be adjusted in certain respects in order to take account of some practical problems which had not, so he submitted, been addressed by the parties at the time the order was finalised. As I pointed out to him, however, even if the court dispenses with the need for a formal application, it is difficult to see how the terms of the order could be varied without a draft of the variation being put forward and giving Mr White an opportunity to consider and address it.

I believe I should summarise the reasons put forward by Mr Nathan before addressing the arguments in relation to them. First, reliance was placed on the proviso relating to legal professional privilege. Secondly, it is said that documents need to be retained (although he did not specify which) for the purposes of the pending application for permission to appeal to the Court of Appeal. Thirdly, it is said that documents (again unspecified) are required for preparing for trial on the outstanding issues not covered by the summary judgment ruling of 27 July. Fourthly, he argues that the Defendants need to retain the documents for insurance purposes in case there is subsequently a claim for negligence (although, again, it was not specified by whom such a claim might be made or in respect of what acts or omissions).

The Claimant now seeks an order that unless the Defendants comply with the paragraphs quoted above by 4.00pm on 9 November, the defence should be struck out and they should not be permitted to participate in the detailed assessment of the Claimant’s costs of the summary judgment application. He seeks also an order, in the light of their continuing non-compliance, that the Defendants should be ordered to pay the costs of this application on the indemnity basis.

As I have said, no documents were delivered up to the Claimant’s solicitors pursuant to paragraph 6 (i.e. Defendants’ hard copies) or pursuant to paragraph 7(b) (i.e. the lawyers’ hard copies). Mr Zaiwalla’s position, as the Fifth Defendant and as the solicitor acting on behalf of the other Defendants, was explained in a letter of 4 September addressed to the Claimant’s solicitors. It was said that none of the First to Fourth Defendants had any such hard copies in their possession or control, but it was necessary to explain Mr Zaiwalla’s position so far as his professional capacity was concerned.

He deposed that all hard copies of the Confidential Information and Schedules were held in storage by his firm. It was also stated that his papers and documents held electronically, in so far as they might contain any Confidential Information, were covered by the proviso (i.e. as to legal professional privilege). It was necessary for him and his firm to have access to documents covered by the order for purposes of the application for permission to appeal and preparation of relevant court documents. Accordingly, no deletion had taken place by that stage.

As to counsel, the explanation was given that all hard copy papers had been returned. Yet, since these had originally been provided to them as part of their instructions, they were covered by legal professional privilege. Furthermore, there were various markings or annotations on the papers. It is conceded by Mr White that annotations by counsel could be classified for present purposes as falling within the privilege proviso.

With the exception of Mr Richard Parkes QC, counsel had not up to that point deleted any of the information held electronically, for the reason that access might be required for the purpose of advising on the application to the Court of Appeal.

Not surprisingly, the Claimant’s solicitors have agreed that the legal advisers may retain and use documents for the purposes of the pending application. On the other hand, until such time as any application is made to the Court of Appeal to introduce fresh evidence, the concession was limited to the bundles that were prepared for the purposes of the summary judgment application heard before me in June of this year (together with written submissions prepared for that purpose). Against that background, the Claimant was not pressing for return of those documents at this stage.

If there comes a time when the Defendants seek permission from the Court of Appeal to introduce new evidence, the matter may well have to be reviewed. For the moment, however, the Claimant’s advisers believe that any genuine need for documents for the purposes of the Court of Appeal application is sufficiently covered. That seems to me to be correct.

Since receiving the letter of 4 September, the Claimant’s advisers have taken the stance that Zaiwalla & Co had misunderstood the scope of legal professional privilege and the extent to which the proviso would exempt them from compliance with the order. A number of issues of principle in this context have been raised in the course of argument. First, it was pointed out that the protection of privilege would not extend to hard copy papers returned by counsel merely on the ground that they had been part of their instructions. It is well settled that pre-existing documents do not become privileged just because they are submitted to lawyers for the purposes of advice or litigation.

For example, of central importance in this litigation are what have been described as the seven “Withers files” and the eighth file referred to in Mr Jeffrey Davidson’s report of 12 March 2009 and identified in paragraph 4(b) of the order of 31 July. The Claimant’s submission is that these should be returned, since they consist of pre-existing documents, and the only scope for the privilege exemption to apply to them would be in relation to any actual annotations made by counsel. Mr White submits that the way to deal with the annotations is for the documents to be returned with the annotations redacted. This is a familiar practice, of course, to which lawyers resort every day in the context of disclosing documents. I agree that this would be an appropriate modus operandi.

I should make it clear, however, that I do not accept the proposition that underlining or highlighting of documents would, in themselves, give rise to legal professional privilege. The appropriate test to apply is that of whether or not the markings in question would “give a clue” to the trend of advice being proffered to the clients by the lawyers: see e.g. Lyell v Kennedy (No 3) (1884) 27 Ch.D 1, 26 per Cotton LJ. There are all sorts of reasons why solicitors or counsel might underline or highlight a document and, save in very specific circumstances, one would not be able to draw any inference as to the trend of advice being proffered.

Another argument has been raised to the effect that, because some pages have been annotated by counsel (no doubt often different pages by different counsel), it would be possible to infer from such pages as were not annotated that these were considered not to be significant – thereby giving some clue as to the nature of the advice being given or strategy recommended. I would reject any such general argument.

First, it is a matter simply of common sense that an unmarked page cannot reveal anything to a reader apart from its contents. It is far-fetched to suggest that advice has been given by counsel or solicitors to their clients to the effect (say) that a page should be regarded as of no significance, merely by reason of the fact that it has not been annotated.

Secondly, it is important to recognise that the Defendants cannot in this context gain succour from the observations of the Court of Appeal in Lyell v Kennedy, cited above, in relation to the selection of documents. That case concerned circumstances in which certain extracts had been copied from public registers and in which the very act of selecting those extracts could be taken as indicating the trend of legal advice or “giving a clue”. One can readily understand that there may be circumstances in which that would be so. But that does not apply when addressing documents which were in the relevant party’s possession any way. They were not in that party’s possession by virtue of any act of selection or rejection. The principle discussed in Lyell v Kennedy has been construed in recent times more narrowly: see e.g. Sumitomo Corp v Credit Lyonnais Rouse Ltd [2002] 1 WLR 479. Thus, the “selection” doctrine addressed in Lyell v Kennedy does not assist the Defendants in relation to the documents in question here, since they did not come into their possession by a process of selection. It would provide no excuse for refusing to deliver up either annotated or unmarked pages. The only relevant justification would be in respect of any actual annotations made by lawyers or any expert consulted by them, which would clearly fall within the proviso contemplated in the order.

Despite all this, the Defendants’ solicitors stated on 30 September that all the papers received were covered by the provisos to the 31 July order and “do not fall to be delivered to your firm”.

No evidence in response to the Claimant’s application was, however, served until late on 29 October. It was at that stage that Mr Zaiwalla set out in his witness statement the various categories of documents held by him. It is accepted that three of those categories would appear to fall within the privilege proviso; that is to say, (1) instructions to and correspondence with counsel in respect of legal advice given by them and/or the conduct of this action, (2) instructions to and correspondence with experts engaged by Zaiwalla & Co, and (3) notes and notes of advice made by counsel, experts and by members of Zaiwalla & Co in connection with legal advice given to the Defendants and/or the conduct of the action, and also drafts of such notes.

There is another category which is somewhat generally worded but which, in principle, would also fall within the proviso, namely “other litigation working documents brought into being for the purpose of obtaining/giving legal advice and/or for the proper conduct of this action, including drafts of pleadings and other documents served or sent to [the Claimant’s solicitors]”.

In relation to the remaining categories, however, it is necessary to consider them in a little further detail and to explain why they are or are not protected from delivery up.

There are six copy sets of the Withers files (just short of 3,000 pages each) and two of File 8, to which I have already referred. These fall to be delivered up under the terms of the order, save in so far as there are annotations by the lawyers, or Mr Davidson, or any particular documents are within the summary judgment bundles required for the Court of Appeal.

Similarly, in so far as there are any pages of documents containing Confidential Information within the hearing files prepared for earlier applications (other than that for summary judgment), such pages should be delivered up (allowing for redaction of any annotations). The same reasoning would prevent Zaiwalla & Co retaining a “master set”.

Skeleton arguments other than those required for the application for permission to appeal should be returned (as falling within paragraph 6 of the order).

Likewise, copies of confidential schedules attached to the orders of 2 and 20 March, should be returned. An argument was developed by Mr Nathan that confidential schedules (including that attached to the 31 July order) were all in the public domain. But their contents were not dealt with in open court and they are deliberately marked “Confidential” to prevent general access. Revealing the contents to extraneous persons could well be a contempt of court. CPR 5.4C(1)(b) only apples to an “order given or made in public”. It is well known that the modern practice in cases of confidential information is to attach confidential schedules, so that those who have to comply will know exactly what it is that they are prohibited from disclosing. In any event, the two schedules attached to the March orders are specifically identified in the 31 July order.

Solicitors’ correspondence would not generally fall within legal professional privilege and should therefore be delivered up in so far as it falls within the order.

Finally, I should deal with Mr Nathan’s three practical problems. First, as to the Court of Appeal, that matter is sufficiently covered for the moment by allowing retention of the summary judgment bundles and written submissions. Secondly, if further documents are needed at any stage for trial preparation, an application can be made, if agreement cannot be reached, for disclosure. Thirdly, it is not the intention of the Claimant’s solicitors that the files returned should be destroyed. The documents delivered up will be kept securely and, in the event of an insurance issue arising in the future, they can be made available should it prove necessary.

Subject to the qualifications described above, I have in mind that delivery up should take place by 18 November at 4.30pm (although I will hear counsel’s submissions on timing). But I do not propose at this stage to make an unless order yet, because there is a great deal of material involved. I appreciate that the necessary work should already have been carried out, but I must deal with the situation as it now is. I will hear any necessary argument as to the terms of the order.