Tchenguiz & Ors v The Serious Fraud Office (SFO)

The background to these present proceedings is to be found in the judgment of the Divisional Court (the “DC Judgment”) in judicial review proceedings with Claim Nos CO/4236/2011 and CO/4468/2011 (the “JR Proceedings”) delivered on 31 July 2012 with the reference [2012] EWHC 2254 (Admin).

In summary, those JR proceedings concerned the business interests of two individuals i.e. Robert Tchenguiz (RT) and Vincent Tchenguiz (VT) and the companies and trusts through which their businesses are carried on in relation to what was said to be the unlawful entry, search and seizures in March 2011 of the homes of RT and of VT and the offices of R20 and of Consensus Business Group, as well as the arrests and investigations connected to this.

Towards the end of the DC Judgment under Issue 7, the Divisional Court considered what is referred to as “consequential relief”. In particular:

“285.

There are consequential claims.

(i)

Declaration

286.

The claimants sought a declaration that the warrants and searches and seizures consequent upon them were unlawful; they relied on decisions to the effect that this was relief that could be granted. Their entitlement to a declaration was accepted by the SFO.

287.

It will be necessary for that declaration to be drafted by the parties with care so that no misunderstandings arise in any other proceedings.

…

(ii)

Further conduct of the action

288.

It was common ground that this court should transfer the action to the ordinary list of the Queen's Bench Division under CPR Part 54.20 for any civil claims for damages to be pleaded and determined by a judge of the Division.

289.

The action will be assigned to a judge who will manage the case, calling upon the assistance of a Master, if necessary, but under the direction of the judge. It may be of assistance if we make agreed directions on the handing down of this judgment for a timetable for pleadings.”

Thereafter, the Divisional Court made orders (ultimately sealed on 20 September 2012) in both proceedings in substantially similar forms (the “DC Orders”) which provided in material part as follows:

“1.

QUASHES the search warrant issued by HHJ Worsley QC on 7 March 2011 to enter and search [the premises] (hereinafter “the Warrant”) on the grounds set out in the judgment, and consequently:

2.

DECLARES the entries, searches and seizures conducted pursuant to the Warrant to be unlawful on the grounds set out in the judgment; […]

4.

TRANSFERS, pursuant to CPR Part 54.20, any actions by the Claimants and the Interested Party for damages to a judge to be assigned of the Queen Bench’s Division;

5.

ORDERS that there should be a directions hearing for the further conduct of the action before the assigned judge, such hearing shall be listed in the usual way during the Michaelmas Term 2012, and the Claimants and the Interested Party shall serve heads of claim (so far as they are known) and proposed directions 21 days in advance of the hearing, and the Second Defendant shall serve his response to those heads of claim and proposed direction seven days in advance of the hearing.”

These current proceedings are, in effect, those contemplated by paragraph 4 of the DC Orders with the addition of certain other claimants. The trial of such claims is now set to take place between April and July 2014.

In broad terms, there are two groups of claimants i.e. those referred to as the R&H or VT Claimants (represented by Mr Thanki QC and his team); and those referred to as the RT Claimants (represented by Mr Smouha QC and his team). Although they served separate skeleton arguments and orally addressed the court separately, they each generally adopted each other’s submissions and, for present purposes at least and unless otherwise stated in this judgment, they stand or fall together.

In summary, the present claimants say that the searches, arrest and investigation and publicity surrounding them had a disastrous effect on their business interests causing very extensive financial losses and reputational harm; and they now seek damages in these proceedings in the total sum of approximately £300 million.

Pursuant to paragraph 5 of the DC Orders, the original claimants served Heads of Claim advancing their claims for damages on a number of different grounds including liability for trespass. On 22 November 2012, the defendant (the “SFO”) served its Response (“the Response”) signed by Leading Counsel which stated in paragraph 2 as follows: “The SFO admits liability for trespass to land in consequence of the order of the Administrative Court quashing the search warrants. It admits liability for any loss of use of the land sustained by the Claimants as a result of the trespass. The SFO denies liability for all other claimed consequential losses.”

Thereafter, pursuant to my order dated 5 December 2012, the claimants issued and served their respective Claim Forms and Particulars of Claim; and, on 4 March 2013, the SFO served its Defence together with a separate document entitled “Defendant’s Legal Submissions”. The SFO there denied liability and, in particular, denied any liability for trespass to land. This was plainly contrary to its earlier admission of liability in its Response. The explanation given by the SFO for this volte face appears from paragraphs 31-32 of the second witness statement of Jonathan Cotton served on behalf of the SFO:

“Reason for the application to withdraw the admission

31.

I have raised the circumstances of the making of the admission quoted … above with the Treasury Solicitor’s Department, counsel acting for the Defendant at the time and representatives of the Defendant. Without waiving privilege in the relevant communications, I understand that at the time that the Response was drafted and served in November 2012, the Defendant was of the opinion, having taken legal advice, that liability in trespass followed automatically from the Divisional Court’s findings and quashing of the warrants. Therefore, the SFO was of the view, at that time, that making the admission was the proper approach to take.

32.

However, as the Court will be aware, since the Response was drafted and served, there have been changes to the legal team representing the Defendant in this matter. Without waiving privilege in such matters, it is the case that, as a result of advice received from this new legal team, coming to the matter afresh, the Defendant took the different view that there was, in fact, a legitimate point to take on liability in trespass and that it has good prospects of success. I am satisfied, having made enquiries, that this is the only reason for the Defendant’s application to withdraw the admission. The Defendant respectfully requests that it be granted permission to withdraw its admission.”

Thus, the present position is that the SFO now seeks to withdraw its earlier admission and to contend that it is not liable for any private law damages for trespass to land. This is on the basis of two main grounds which Mr Dowley QC summarised in his skeleton argument as follows.

Ground 1: The warrants afford lawful justification

Ground 2: The trespass claims are barred by the Constables Protection Act 1750

For the avoidance of doubt, I should make plain that as all parties agreed and putting on one side any question of res judicata, it is not for me at this hearing to determine the underlying merits of the defences which the SFO would now seek to advance by way of defence to the claim for trespass. However, in any event, the claimants’ position is that (i) the SFO is not, or at least should not be, entitled now to withdraw its previous admission of liability; and (ii) in any event, the effect of the DC Orders is that the SFO is liable in trespass and cannot now dispute such liability on the basis that it is res judicata.

These points were initially raised at a previous CMC on 28 March 2013 and are the subject-matter of the present hearing. In essence, the questions which now arise for determination are as follows:

At the beginning of the present hearing, I expressed my concern as to the appropriate tribunal to determine the first issue. In particular, it seemed to me that there was at least some argument that this first issue should be resolved not by me but by the Divisional Court itself because, as appeared for the first time from the parties’ skeleton arguments, that issue potentially involved consideration not only of the terms of the DC Orders but also the arguments advanced in the course of the hearing before the Divisional Court and, in particular, the exchanges that took place between Counsel and the President of the Queen’s Bench Division. However, Mr Smouha submitted that the Divisional Court was no longer seised of the matter; and Mr Thanki and Mr Dowley both agreed that it was for me to determine the issue or, at the very least, that they were content that I should so.

Against that brief introduction, I turn to address the two main issues which arise for determination.

As to the relevant law with regard to res judicata, Mr Thanki submitted, in summary, as follows:

In my judgment, that summary is somewhat incomplete and potentially misleading, in particular because it is subject in part to certain qualifications and exceptions as appears for example from the recent decision of the Court of Appeal in Spicer v Tuli[2012] EWCA Civ 845; [2012] 1 WLR 3088. However, such qualifications and exceptions were not the subject of any debate before me; and, in broad terms, I did not understand either Mr Smouha or Mr Dowley to disagree with the propositions advanced by Mr Thanki in this context.

However, there was at least initially a potentially important dispute between the parties as to the scope of the applicability of the principle of res judicata in the present context. In particular, Mr Dowley submitted in his skeleton argument that it was a well established rule that a decision in judicial review proceedings cannot be relied on to found an estoppel per rem judicatem. In support of that submission, he relied upon a number of authorities viz.R v Lancashire County Council, ex parte Huddleston [1986] 2 All ER 941 at 945 per Sir John Donaldson MR;R v Secretary of State for the Environment, Ex parte Hackney London Borough Council [1983] 1 WLR 524 at 538-539 per May LJ, [1984] 1 WLR 592 at 601H-602B per Dunn LJ, 606D per Sir John Donaldson MR, 607D per Browne-Wilkinson LJ;R (Eco Power) v Transport for London [2010] EWHC 1683 (Admin); [2010] ACD 69 at [20] per Simon J; cited with approval in BA and Ors v Secretary of State for the Home Department [2012] EWCA Civ 944 at [27(f)] per Sir John Thomas P.

This was strongly disputed by the claimants. In particular, the claimants submitted that the authorities cited by Mr Dowley did not support the broad proposition which he sought to advance; that, in any event, such proposition was contrary to the decision of the House of Lords in Thrasyvolou v Secretary of State for the Environment [1990] 2 A.C. 273 and also the Supreme Court in R (Coke-Wallis) v ICAEW[2011] 2 A.C. 146; and that it was also inconsistent with the views expressed in the leading textbook, Spencer, Bower & Handley, Res Judicata at para 16.07 as well as the Australian case there cited: Spautz v Butterworth(1996) 41 NSWLR 1 CA. Rather, Mr Thanki submitted that the real issue in applying the doctrine of res judicata to judicial review decisions is not that the doctrine does not apply as a matter of principle, but that (as appears, for example, in Lord Bridge’s speech in Thrasyvoulou) it can be difficult to identify the issue which has been finally determined; that this is a frequent problem in judicial review cases, since the outcome of the judicial review will often be that a certain decision must be quashed as it was reached unreasonably or irrationally, but it will not decide what the outcome should be (which reverts to the decision-maker); and that such a judicial review decision could potentially create an issue estoppel as to the facts giving rise to the unreasonableness/irrationality, but could not create an estoppel in relation to the underlying finding of the decision-maker. However, Mr Thanki submitted that, where there is a clear issue which has been determined in the judicial review proceedings, this should as a matter of law and principle give rise to a res judicata estoppel.

In the event, it is unnecessary to resolve this dispute because in his oral submissions, Mr Dowley did not seek to press the broad submission he initially advanced in his skeleton argument. On the contrary, he made plain that he accepted that the conclusions of fact and law in the DC Judgment and the DC Orders were binding on the parties in the present context including, in particular, the declarations of the Divisional Court as contained in paragraph 2 of the DC Orders that the entries, searches and seizures conducted pursuant to the warrants were “… unlawful on the grounds set out in the judgment …”.

Notwithstanding, Mr Dowley submitted that this did not create any relevant res judicata so far as the present proceedings are concerned and, in particular, did not prevent the SFO contending that it was not liable for any private law claim for damages for trespass; and that there is nothing in the DC Judgment to lead to a different conclusion. In particular, Mr Dowley submitted, in summary, as follows:

The acceptance by Mr Dowley that the declarations contained in paragraph 2 of the DC Orders were binding and that the entries, search and seizures were therefore “unlawful” on the grounds set out in the judgment formed the bedrock of the claimants’ submission that this created a res judicata with the effect that the SFO could not now seek to contend that it was not liable in trespass. In particular, it was the claimants’ submission that this created a cause of action estoppel alternatively an issue estoppel. (I should mention that the claimants advanced a separate submission based on abuse of process. However, in my view, if the claimants fail in relation to their arguments based on the principle of res judicata, such separate submission must equally fail for similar reasons.)

The heart of the claimants’ case under this head was summarised by Mr Thanki as follows:

Similarly, Mr Smouha submitted that the DC Orders necessarily determined liability for trespass. In support of that submission, Mr Smouha advanced a number of specific points in a written note which were, in summary, as follows:

These are powerful submissions which I accept in part. In particular, I accept that, as submitted by Mr Smouha, it is certainly permissible to claim private law damages as part of a judicial review claim. I am also prepared to assume for present purposes in favour of the claimants that the claims for damages as set out in the respective Claim Forms are to be regarded as being (or at least including) claims for private law damages for trespass to land against the SFO in respect of what the claimants maintained were the unlawful entries, searches and seizures. However, it is important to note that this would seem to be contrary to what the Divisional Court was told at the time by at least Mr Keith QC on behalf of the VT Claimants on 31 July 2012 following delivery of the DC Judgment and in the course of submissions as to the form of the order. Thus, the transcript for that day at pp23-24 records as follows:

“MR KEITH: Lastly, in relation to the directions hearing, this is an issue which has caused my learned friends’ feathers to flutter in the past. The simple point is this: the public law issues are now live and must be resolved in terms of whatever damages flow from them. That is a matter for the commercial …

THE PRESIDENT: All they are arguing about is – it is very simple – do you put a piece of paper in first, and you then have a directions hearing with the benefit of that piece of paper, or do you do nothing until the directions hearing?

MR KEITH: It is the latter, my Lord, because the civil claims have not yet been instituted, and no court can have, with respect, the power to order that they be instituted, given the statute of limitations. The only live issue are the public law damages, for what they are worth, that flow from these public law proceedings, which are to be joined up.

THE PRESIDENT: You have to be very, very careful of all the cases on which – we heard Mr Eadie recently on the ability to bring private law claims when you have got a public law remedy …

MR KEITH: My Lord, it will be no exaggeration to say that the private law claims, if and when they are instituted, will not be straightforward …”(emphasis added).

It seems to me tolerably clear from this passage that Mr Keith’s position before the Divisional Court (at least at this stage of the proceedings) was that the existing JR proceedings did not include any private law claims; and that, if and when such claims were to be pursued, they would have to be included in new proceedings which had not yet been instituted. That would appear to be inconsistent with the submissions now advanced by the claimants in particular, Mr Smouha, that the JR proceedings included private law claims – specifically a private law claim for damages for trespass: if what Mr Keith said is right, then it seems that the main thrust of the arguments now sought to be advanced by the claimants fails in limine or at least is substantially weakened. Be all this as it may, for present purposes I am prepared to make the assumption in favour of the claimants as I have stated above i.e. that the claims for damages as set out in the respective Claim Forms are to be regarded as being (or at least including) claims for private law damages for trespass to land against the SFO in respect of what the claimants maintained were the unlawful entries, searches and seizures.

I am also prepared to accept Mr Smouha’s submission that, on the assumption that I have made in the claimants’ favour, if and to the extent that the SFO wished to contest such private law claims in damages, it was incumbent on the SFO in accordance with CPR 54.14 to serve detailed grounds and any written evidence within 35 days after service of the order giving permission. However, the position here is again somewhat complicated. In particular, it seems to me that there is at least a question mark as to whether or not the requirements of CPR 54.14 were formally triggered. As explained by Mr Bailin, so far as the VT claims are concerned, the SFO conceded not only permission but also the claim itself; as far as the RT claims are concerned, permission was conceded but not the claim itself. Be that as it may, there is no doubt that the SFO did serve detailed grounds; and there is also no doubt and it is indeed common ground that such detailed grounds did not raise the defences of “lawful justification” and under the 1750 Act that the SFO now wishes to advance. As stated above, those potential defences were not raised until service of the SFO’s Defence in March of this year. On this basis, I am prepared for present purposes to accept Mr Smouha’s further submission that the SFO failed to identify these defences to the private law claims for damages as it arguably should have done.

I should make plain that I am far from convinced that the assumptions I have made in favour of the claimants are correct particularly given Mr Keith’s position before the Divisional Court as appears from the transcript on 31 July 2012 which I have quoted above. However, even accepting as I am for present purposes prepared to do that (i) the claims advanced in the JR proceedings included a private law claim for damages for trespass to land; (ii) the SFO never raised the two defences to such claim that it now seeks to raise; and (iii) it would have been open for the Divisional Court to determine liability for such claim, it does not seem to me necessarily to follow that the Divisional Court did in fact determine such liability for trespass. That is the central issue here.

As to the determination of that central issue, there was a potentially important dispute as to the proper approach of the court and, in particular, as to what materials might be considered in that context. Mr Dowley submitted that I was entitled to have regard not only to the DC Orders and the DC Judgment but also to the full history of the proceedings including Counsel’s submissions and the observations of the Divisional Court itself following delivery of the DC Judgment when discussing the terms of the orders which the Court was being invited to make. In support of that submission, Mr Dowley relied in particular on two passages in Spencer Bower and Handley, Res Judicata, at paras 7.16 and 8.29 and also the decision of the Court of Appeal in Khan v Golecha International Ltd[1980] 1 WLR 1482 in particular the passage in the judgment of Brightman L.J. at pp1489-1490 citing with approval the dicta of Lord Wilberforce in Carl Zeiss Stiftung v Rayner & Keeler Ltd (No.2)[1967] 1 A.C. 853 at pp964-965 regarding the inquiry which the court may make to identify the issue: “[I]t is permissible to look not merely at the record of the judgment relied on, but at the reasons for it, the pleadings, the evidence ... and if necessary other material to show what was decided.” As I understand, Mr Thanki was broadly in agreement with this general approach. However, Mr Smouha submitted that although such an approach was permissible in the context of determining the existence or scope of any issue estoppel, the position was otherwise in the context of cause of action estoppel which was at least his primary case; and that, in such latter case, the scope of enquiry was limited essentially to the terms of the court’s order although he accepted that in the present case at least it was appropriate to look at the Claim Forms and the DC Judgment. Mr Smouha acknowledged that, so far as he was aware, there was no authority to support the distinction he sought to draw as to the proper scope of the enquiry between, on the one hand, cause of action estoppel and, on the other hand, issue estoppel but he submitted that it was justifiable as a matter of principle. I am unable to accept that submission. On the contrary, it seems to me both contrary to principle and lacking in reality. In particular, whether the court is concerned with cause of action estoppel or issue estoppel, the focus is properly to understand and to give effect to what is the “res” which has been “adjudicated”. As appears from the authorities, the principles must be applied to work justice and not injustice. On this basis, it seems to me not only desirable but imperative to adopt an approach which is not unnecessarily inflexible or blinkered but which has proper regard to both substance and reality. Any other approach would, in my judgment, give rise to a serious risk of potential injustice.

With these considerations in mind, I can now turn to the central issue i.e. whether the DC Orders or DC Judgment in effect determined the SFO’s liability for private law damages for trespass so as to give rise to an estoppel per rem judicatem – whether on the basis of cause of action estoppel or issue estoppel. In my judgment, the answer is “No” – and, for the avoidance of doubt, the answer is, in my judgment, the same whether the scope of the enquiry is limited, as Mr Smouha suggested, to the terms of the DC Orders and the DC Judgment viewed in the context of the parties’ respective Claim Forms or includes the other material including the full history of the proceedings. My reasons are as follows.

Looking simply at the DC Orders, the highpoint of the claimants’ case is, of course, that the DC Orders provided by paragraph 1 not only that the original warrants be “quashed” but also by paragraph 2 that the entries, searches and seizures conducted pursuant to the warrants were “unlawful”. However, as Mr Dowley submitted, it seems to me important that the wording of paragraph 2 goes on to state that such warrants were unlawful “… on the grounds set out in the judgment ...”. As submitted by Mr Dowley, those grounds are, in effect, public law grounds. Further, it seems to me that the authorities cited by Mr Dowley – in particular, Percy v Hall,Olotuand ex parte Evans – generally support the distinction which he seeks to draw that the mere fact that an act may be unlawful on public law grounds does not necessarily mean that this will give rise to a tortious liability on the part of a particular defendant. I was initially much impressed by the argument advanced on behalf of the claimants, in particular by Mr Smouha, that, unlike those cases, the DC Orders in the present case expressly provide that the entries, searches and seizures were “unlawful” on the grounds set out in the DC Judgment; that therefore any intended plea of “lawful justification” (as well as any defence under the 1750 Act) is necessarily inconsistent with the terms of such orders; and that such plea was therefore precluded on the basis of cause of action estoppel alternatively issue estoppel. In addition, of course, as recorded in paragraph 286 of the DC Judgment, the claimants’ entitlement to a declaration that the warrants and searches and seizures consequent upon them were unlawful was accepted by the SFO. To put the point rhetorically: How on earth can an act be “lawfully justified” if it is – and has already been held to be – “unlawful”? However, it seems to me that the main difficulty arises at least in part because of the terminology. The term “lawful justification” does not mean that the entries, searches and seizures were “lawful” as a matter of public law; and, at the sake of repetition, I should emphasise that Mr Dowley accepted that the entries, searches and seizures were unlawful as a matter of public law. Rather, as I understand, the term “lawful justification” is no more than a convenient shorthand expression used to indicate that, as a matter of private law, there is – or at least may be – a lawful or sufficient defence to a particular claim against a particular defendant. As such, it seems to me that Mr Dowley is right that the effect of paragraph 2 of the DC Orders is limited, in effect, to a declaration of unlawfulness on public law grounds.

Both Mr Smouha and Mr Thanki submitted that the foregoing reasoning is flawed in particular because it fails to recognise the important distinction between paragraph 1 and paragraph 2 of the DC Orders. In particular, they submitted that if Mr Dowley were right, paragraph 2 serves no real purpose i.e. it is nugatory; and that this points strongly in favour of the conclusion that Mr Dowley must be wrong. Again, I was initially impressed with that submission but I cannot accept it for three main reasons. First, having regard to the general nature of the claim as set out in the respective Claim Forms and viewing the DC Orders and DC Judgment in isolation, I am not persuaded that a separate declaration that the relevant acts were “unlawful” on the grounds set out in the DC Judgment would in fact serve no real purpose: at the very least, it seems to me there is, or may be perceived to be, intrinsic value in a public statement to such effect contained in an order of the Divisional Court reflecting the circumstances, as found by the Divisional Court, in which the original warrants were obtained i.e. by misrepresentation and/or non-disclosure. Secondly, it seems to me that the distinction drawn by Mr Dowley (i.e. the position, on the one hand, as a matter of public law and, on the other hand, any claim for private law damages) is supported by the terms of paragraph 288 of the DC Judgment which refers to the “common ground” that the action should be transferred “… for any civil claims for damages to be pleaded and determined by a judge of the [Queen’s Bench] Division …”Thirdly, it is, in my judgment, difficult, if not impossible, properly to consider this submission without going outside the terms of the DC Orders; and, as appears further below, if that is done, it seems to me relatively clear that whatever the Divisional Court was intending to do, it was not (objectively) intending to determine any private law claim in damages.

For these reasons, looking simply at the terms of the DC Orders and the DC Judgment against the background of the respective Claim Forms, I am not persuaded that the SFO is now precluded from advancing the defences it now seeks to raise by virtue of any estoppel per rem judicatem – whether on the basis of cause of action estoppel or issue estoppel.

In my judgment, that conclusion is reinforced when one looks at the full history of the JR proceedings including the arguments that were advanced by Counsel and the observations of the Divisional Court itself in the course of argument. I fully recognise that this history is far from straightforward; that it follows something of a chequered path; and that if the clock is stopped at any particular stage, there is at least seemingly some force in the conclusion advocated by the claimants. However, that is why I would emphasise the importance of looking at the full history: what is important is not what the position was or may seem to have been in the course of the proceedings at any particular point in time but, rather, what the Divisional Court (objectively) intended ultimately to determine.

In considering that history, it is convenient to focus primarily on the position adopted by the VT Claimants; and I am prepared to proceed on the basis that the RT Claimants are - or at least are to be treated as being - in at least the same position.

In this context, the starting point is the respective Claim Forms. As stated above, I am prepared to proceed on the assumption that these included a claim for private law damages for trespass to land. I also recognise that the VT Claimants maintained from the outset that they were entitled to an order that the entries, searches and seizures were unlawful: this was relief which they claimed in their original Claim Form.

After the SFO had conceded that the warrants should be quashed, the SFO initially contended in paragraph 37 of its skeleton argument dated 21 February 2012 that such an order, in addition to the quashing of the Warrants, would “add nothing”. The VT Claimants immediately put the SFO on notice that it disagreed in its letter dated 21 February 2012. Thereafter, the VT Claimants were ordered by an order of the Divisional Court dated 22 February 2012 to “particularise the basis of their claim for damages for trespass to land and goods” by 7 March 2012, which they duly did.

The List of Issues to be decided at the JR hearing clearly linked the formation of the declaration as to lawfulness sought by the VT Claimants to a future claim for trespass:“Issue 9: If the matter should not be remitted to a Judge in the Queen’s Bench Division in accordance with paragraph 8 above, the measure of damages which should apply to the claimants’ claim for trespass pursuant to the declaration of the unlawfulness of the warrants listed in paragraph 6 above.”

Paragraphs 49-55 of the VT Claimants’ skeleton argument dated 15 May 2012 for the JR hearing set out the basis on which they sought, in addition to an order quashing the warrants, a declaration as to the unlawfulness of the entries, searches and seizures. In particular, in paragraph 50, the VT Claimants expressly explained that the order was sought for the purposes of establishing the SFO’s liability for trespass:

“The [SFO] has simply stated that such a ‘declaration adds nothing’... The [SFO] is mistaken. It is necessary to have a declaration that the entries, searches and seizures were unlawful, otherwise the [SFO] is protected from suit for trespass to land and goods, unless it can be proved, in a lengthy private law action, possibly years hence, either malice in the obtaining of the warrant, or that the seizures were so grossly in excess of those permitted by the warrant.”

In response, the SFO agreed in its skeleton argument dated 15 May 2012 that it would not object to such a declaration of unlawfulness:

“3.3

Properly to reflect that concession, the Director would propose that alongside quashing the warrants, a declaration be made along the following lines. […]

“the High Court declares that: The warrants issued by the Central Criminal Court on 7 March 2011 […] were unlawfully obtained because the Information filed on behalf of the Director contained material errors of fact.”

3.4

The Director notes that the Interested Party [VT] now seeks a declaration that, in addition, the searches and seizures on the Claimants’ premises on 7 March 2011 were unlawful. While the Director does not consider that such a further declaration is strictly necessary, again to seek to resolve matters expeditiously and proportionately, if the Court were to consider that to be appropriate, then the Director would not object to such a declaration – on the basis that it flows directly from his original concession.”

Further, having made this concession, the SFO immediately went on to consider in paragraph 3.5 of its skeleton argument the private law damages consequences of the order:

“In light of that relief, following the Court's judgment in these proceedings, all aspects of the substantive claim for damages should be transferred to be heard as civil claims in the QBD in accordance with CPR Part 54.20. It is unquestionably the case that the remaining issues of causation and quantum are not appropriate to be determined in judicial review proceedings.”

This last passage was the subject of some debate before me. In particular, Mr Dowley submitted that the word “all” in the first sentence necessarily embraced all questions of liability including liability for trespass; and that this conclusion was unaffected by the second sentence referring to “the remaining issues of causation and quantum”. In contrast, Mr Thanki submitted that the effect of the second sentence was to make plain that civil (or private law) liability was, in effect, being conceded and that it was only causation and quantum which remained outstanding and required to be transferred and determined. In the event, the point is perhaps not absolutely clear-cut but, viewed at this point in time, it seems to me that Mr Thanki had the much better argument.

It is convenient to take stock of the position reached at this stage of the JR proceedings. As submitted by Mr Thanki, I accept that by the time of the JR hearing, (i) the SFO had accepted that it would not oppose an order that the entries, searches and seizures were unlawful; (ii) the VT Claimants had made it absolutely clear that such a declaration was sought so that the SFO would not be “protected from suit for trespass”;(iii) the VT Claimants had been ordered to, and had set out the basis of their claim for damages for trespass; and (iv) depending upon the proper interpretation of the passage cited above from para 3.5 of its skeleton argument, the SFO itself foresaw that the “remaining issues” for the civil law claim for trespass would be causation and quantum.

The concession by the SFO was discussed orally during the JR hearing. On 22 May 2012 i.e. day 1, Lord Goldsmith, Leading Counsel for Vincent Tchenguiz (as the interested party), explained at pp4-5 of the transcript:

“[The SFO] also concede that if the Court thinks it appropriate, they say they wouldn’t object to a declaration that the searches and seizures themselves were unlawful. That’s a very, very substantial concession. First, they concede, though my learned friend Mr Keith will deal with the detail of this, that the claim for damages which has been intimated by the Vincent Tchenguiz side, a very substantial claim for damages for the enormous damage to the business caused by this blaze of publicity to an ongoing business, that that should be transferred to the Queen’s Bench Division to be heard as a civil claim. So it would follow from what I’ve said on the first head that the liability to pay those damages must be conceded. The quantum will no doubt, of course, have to be carefully considered in the Queen’s Bench Division.”

There was some debate before me as to the full import of this passage. There is no doubt that Lord Goldsmith was emphasising the point that the concession that the searches and seizures were themselves unlawful was a substantial concession – indeed, as he remarked, even a “very, very” substantial concession. But, I do not read that passage as saying that the SFO had already conceded liability for any private law damages claim for trespass. Rather, it seems to me that the penultimate sentence is, in effect, a submission advanced by Lord Goldsmith that given the SFO had conceded “unlawfulness” therefore it must follow the SFO must concede liability to pay damages. Thus, I accept that at this stage, the argument being advanced – indeed being strongly advanced – was that the SFO must concede liability for trespass. But it does not seem to me that at least at this stage, the point goes further than this.

Later on the same day at pp100-103 of the transcript, Mr Keith addressed the Divisional Court further as to the reason why a declaration that the searches and seizures should be made:

“May I very briefly explain why a declaration that the search and seizures should be unlawful should also be made.

Firstly, contrary to the suggestion in the skeleton argument that this is remedy that was sought only by the claimants two weeks ago, in fact it was in the original claim form dated 9 May 2011 …

Secondly, sections 15 and 16 of the Police and Criminal Evidence Act, which my Lords will recall set out safeguards in relation to the issue and execution of search warrants expressly envisaged that if the terms of those sections are violated, then the entry on or search of premises under that warrant is unlawful. My Lords, the case law plainly indicates that illegality of a warrant through violation of those sections will render the entry and search unlawful as well as the warrant. We would suggest that it would be extraordinary, given the misrepresentations that have occurred in this case, and where we suggest the errors are more serious than in the norm of challenge warrants for the same consequences not to follow.

Thirdly, my Lords will have in the bundles of authorities, and I needn't take the court to them, a number of cases in which a declaration that the search and seizure is unlawful has been made by the court following findings that the warrant was unlawful ....

Fourthly, even the narrow concession made by the Serious Fraud Office to the effect the warrant is unlawful because it contained or was brought about by errors of fact, vitiated the issue of the warrant. This was not an error that came about as a result of a minor flaw in the execution of the warrant. The concession went to the way in which the warrant [was] obtained. Therefore, we say there should be a public declaration that the consequent search was unlawful as well. If the warrant was unlawful, the search and seizure could have had no proper lawful authority.

Fifthly, in relation to declarations, my Lords will know well that although they're a matter entirely for the discretion of the court, they will generally be made where it is just and convenient to do so and in particular whether they will serve some useful purpose. There are two reasons why we suggest a useful purpose would be served here. Firstly, there are practical consequences. As Mr Jones in the summary grounds set out -- and I am grateful to him for his arguments and I adopt them -- it's a defence to a private law action for trespass to and if the person, the defendant, is acting in obedience to a lawful warrant. That is why, of course, it's necessary to have a warrant quashed. Equally, it may be a defence to a claim for trespass to goods if the search was not after all illegal. So a declaration of unlawfulness of search and seizure will make it absolutely clear that all the steps pursuant to the search and seizure had no lawful authority and that will assist in clarifying the scope of the claim for damages to which I will turn when I address you in relation to remedy. Secondly, we suggest that there would be a further indirect purpose in the public interest. The courts have often stated that the maintenance of standards is of the first importance in relation to the issue of warrants, not only for the obvious reason that the ordinary citizen is entitled to enjoy his privacy but because of the proper co-operation between the court and the police.

We suggest that the behaviour here has imperilled that trust and that there should be a clear indication of the consequences of the unlawfulness of the warrant. So for all those reasons, we invite my Lords to grant a declaration, not just that the warrants were unlawful but the search and seizures were as well. May I then turn to the other public law heads of illegality, which are grounds 1, 2, 3 and 4 in that list of issues.

THE PRESIDENT: Yes.

MR KEITH: My Lords, very briefly, because it may be that my Lords are prepared to hear -- and you indicated that you're prepared to hear substantive argument on those heads, that there are a number of reasons why we suggest that resolution of those arguments matter, notwithstanding that my Lords will in any event quash the warrants. They are these -- they are as follows. The Serious Fraud Office concede now that all aspects of the substantive claim for damages should be transferred under Part 54(20) of the Civil Procedure Rules for causation and quantum to be determined, liability no longer now being in issue. They contend, however, that that is all that should be done. It is right insofar as it goes but it doesn't deal with the fact that the claimant has in fact pleaded claims for aggravated and exemplary damages. The claims for special damages will, of course, result from the quashing of the warrants, subject to proper causation and quantum. But what won't necessarily follow from the warrants being quashed are the claims for aggravated and exemplary damages …”(emphasis added).

I accept that this is an important passage; that it demonstrates that Mr Keith was expanding on the similar point that Lord Goldsmith had previously advanced and even going somewhat further; that, in particular, the parts underlined in this passage support the claimants’ arguments here that, so far as the claimants were concerned, at least one of the purposes of the court making a declaration of unlawfulness was, in effect, to preclude any defence to liability in respect of a private law claim for damages for trespass to land; and that all aspects of the substantive claim for damages should be transferred for causation and quantum to be determined because, as it was said by Mr Keith, liability was now no longer in issue. However, it has to be borne in mind that this is no more than the argument being advanced by Counsel on behalf of the claimants; and it remains to consider the further arguments subsequently advanced by Mr Eadie on behalf of the SFO as to whether or not the court should grant a declaration as well as the interchanges with the President on that topic which occurred towards the end of the hearing on 24 May 2012 i.e. day 3 at pp32-41. Although somewhat lengthy, the relevant parts of this passage warrant citation lest it might be thought that any part is taken out of context:

“MR EADIE: .We don't think [the declaration] is necessary, but if the court wishes to, we're not going to stand in its way, extend that to cover the searches and seizures the only note of caution I would introduce in relation to that is that you will be aware that there are a series of live issues that may or may not have to be determined when one gets into a damages claim about the precise manner in which the searches were in fact conducted. It drifts into the LPP issues I'm going to come in to a moment. What we would respectfully submit, given that those are going off, and given that there is at least scope for misunderstanding, is that if you were persuaded that searches and seizures should be included in the declaration, the wording that should be added at the end of the declaration, we suggest in 3.3, should link, as it were, the searches and seizures aspect back to the information and its errors. So you would add words that went something along the lines of at the end of the declaration we suggest, "and consequently the searches and seizures were unlawful".

THE PRESIDENT: Would that allow them to argue in the civil proceedings that there were other issues to the searches and seizures which could be gone into?

MR EADIE: My Lord, yes, we wouldn't quibble with that if they became live issues in those proceedings and I think it's –

THE PRESIDENT: What you don't want us to do is inadvertently to expand the scope of what the consequences of our decision were. You leave the aspect of the way in which it was carried out to evidence if it's in issue; is that right?

MR EADIE: Yes, it is. That's exactly it. That's why we suggest the form of words we do.

…

MR EADIE: The second aspect then, moving from quashing and declaration to damages. My Lords, we are a little concerned about one issue in relation to this. We're all agreed that damages should be hived off to be determined in the proper form by way of a pleaded case in the Queen's Bench Division. My submission is, and it may be that here I part company with Mr Keith, my submission is that that case should be hived off, transferred, in its entirety, by which I mean liability and quantum, including the necessity, therefore, to plead out whatever causes of action may be relied upon by Mr Vincent Tchenguiz to sustain his claim for damages. This isn't here, in these proceedings, a summary judgment application on a properly pleaded claim for trespass to goods. There are no private law causes of action pleaded or brought in this judicial review. There is, as my Lords will be well aware – authority perhaps isn't needed for this proposition, but if it is needed and anyone wants me to produce it I will – there is no cause of action for damages for breach of public law. There is no cause of action for pure administrative wrongdoing. That's Quark Fishing [2006]1 AC, Baroness Hale at paragraph 96. But there are a myriad other cases establishing that proposition and principle. And the concern that we have is that the attempt that appears to be being made at the moment by Mr Vincent Tchenguiz's legal team is, as it were, to say let's just transfer everything over. And it's only causation and quantum thereby, as it were, blurring the damages that might be said to flow from the particular cause of action that is pleaded, because one can quite see a sensible argument, I don't know whether it would work or not, but one can see a sensible argument that says if your cause of action is purely trespass to property or to goods, the damages that you're entitled to as a result of that cause of action are minimal/zero because you really have no damage that flows from that cause of action. If on the other hand, what you're trying to do is to say: we want all the consequences of all the publicity and everything else that flowed from it, which appears to be what they want to do, then it may well be that you to have plead a very different cause of action, for example in misfeasance, or you have to try and attempt, perhaps improbably given cases like Al Kazuli Daf(?), to get a duty of care off the ground in relation to the Serious Fraud Office. But the only reason I raise them is not to seek the determination of the court but to indicate that what we don't want, as it were, is to drift into the position where in essence what is going to be said in the Queen's Bench Division action is: you've determined all the liability issues, don't worry about how the cause of action works, don't worry about time or damage to that, you can just look at all the consequences and then just say, how much loss do those consequences cause? That, in my respectful submission, would be an entirely wrong approach in principle.

THE PRESIDENT: Okay. Then what they will face is an issue estoppel on what we determine in the judgment.

MR EADIE: Well, yes, whatever is live there can be argued about in the civil action.

THE PRESIDENT: You say the consequences that it gives rise to various issues will be determined in these proceedings and those will, therefore, amount to an issue estoppel, but as we're not determining any private law proceedings, the consequences of our determination have to be worked in the private law proceedings.

MR EADIE: My Lord, that's exactly the point, and what I don't want, as it were, is to fall into a trap on behalf of the government, as it were, so as to expose them to, as it were, a claim that has in some shape or form bypassed a perfectly legitimate point, which on mature reflection the government could properly take in a claim for hundreds of millions of pounds worth of damages in the civil action. So we respectfully submit that the right and proper course --

THE PRESIDENT: Would be an order that the civil claim be pleaded.

MR EADIE: Exactly.

THE PRESIDENT: Defence in a hearing before the judge who is to hear the case for directions.

MR EADIE: Exactly so. Then whatever points my learned friend can properly rely upon by way of my Lords' judgment can properly be relied upon. No one is prejudiced thereby. I just don't want to be -- I just got a kind of ghastly sense at midnight last night that we were falling into a trap if one simply said "Transfer over solely causation and quantum". So I really want the position preserved.

THE PRESIDENT: Yes, your position being that you dissect each cause of action that may be available on the basis of our determination in these proceedings and the government may turn round and say "Ah, each fails for different technical reasons."

MR EADIE: It might do. Or that you need to link, as it were, the claims for damages to the specific cause of action. Some causes of action may be more difficult than others. One envisages that a pure cause of action not requiring damage or trespass may be easier to establish. But the question then would be, what damages may flow from that, non sequitur that you can just muddle everything up together and say consequence is X, therefore quantum Y. That's the concern …” (emphasis added).

To my mind, this is a very important passage. Mr Thanki sought to argue that in truth, it really did not assist much, if at all, because it was not dealing or concerned with civil liability for trespass which had, in his words, been previously “parked” on one side since, as he submitted, the SFO had already accepted liability for a private law claim for damages for trespass. Rather, submitted Mr Thanki, this passage was concerned with other possible private law claims that might be advanced by the claimants in respect of which the SFO had not conceded liability and, more specifically, what particular losses that might be claimed might be recoverable on the basis of any possible causes of action that might be advanced.

I readily accept that there are certain difficulties with this passage e.g. if Mr Smouha is right, the assertion by Mr Eadie that there were no private law causes of action pleaded or brought in the judicial review proceedings was wrong – although, as I have already noted, Mr Keith subsequently appears to have been of the same view as Mr Eadie with the result that Mr Smouha (not Mr Eadie) is wrong. I also accept that there is nothing express in this exchange to the effect that the SFO was continuing to deny civil liability for trespass. However, reading the passage as a whole and, I hope, fairly, it seems to me plain that Mr Eadie was not conceding liability for any private law claim for damages whether for trespass or otherwise; that, on the contrary, his submission was that, so far as any private law claim for damages was concerned, the case should be hived off or transferred in its entirety i.e both liability and quantum; that he was emphasising that he did not want to fall into any “trap”; and that the President was equally making it plain that although the DC Judgment would give rise to certain issue estoppels, the Divisional Court was not determining any private law proceedings and that the consequences of the DC Judgment would have to be worked out in such private law proceedings.

Following this exchange, Mr Keith responded with further submissions later that same day i.e. 24 May 2012, the relevant part of which appears at pp115-117 of the transcript:

“MR KEITH: My Lords, in relation to the declaration --

THE PRESIDENT: Yes.

MR KEITH: -- we're grateful for what I think was [a?] concession by my learned friend that provided the court does not stand in our way they have no opposition to the application for a declaration that the search and seizure was unlawful. It is difficult to know whether that was proffered in a concessional moment or a combative moment, but for our part we would suggest that for all reasons that I invited the court to have regard to in my opening submissions it must follow.

In relation to damages, we're also grateful that there appears to be no objection to the transfer of the claim under Part 54.20 that concession was made in relation to ground 5, but it must also follow in relation to the other public law heads, grounds 1, 2, 3 and 4.

My Lords, there's no trap here. What we suggest is a sensible and proportionate course, which is this, ground 5 being plainly before the court and conceded and a matter on which my Lord is plainly seized, it makes no sense to put over the other public law heads grounds, 1, 2, 3 and 4. Grounds 1 and 2 are intimately connected to ground 5 and to the whole history of this sorry affair, in relation to which my Lords have heard two days of argument. They are all public law heads of argument in relation to which this court is particularly well suited to resolve, and it simply makes no sense for these public law issues to be transferred, along with questions of remoteness and quantum on damages.

THE PRESIDENT: To the extent that there may be a claim, say for wrongful imprisonment or anything of that kind, those haven't yet been formulated --

MR KEITH: Of course.

THE PRESIDENT: -- and, therefore, to the extent that there may be damages for the public law remedies, for any public law breaches, all we would do is find breaches and refer the questions of damages, if any. If they are private law claims, there will have to be a statement of claim. And to the extent to which we've made any decisions which are binding for the future, they are binding for the future. But whether there are any technical defences is for a future --

MR KEITH: My Lord, has it absolutely.

THE PRESIDENT: I don't think there's any difference between you.

MR KEITH: Indeed, my Lord has it absolutely. Of course, my Lords' rulings in relation to the public law heads cannot be dispositive of civil law liability, but it plainly makes sense, given that we are here before my Lords to argue the points --

THE PRESIDENT: They will take place as an issue estoppel.

MR KEITH: They are resolved. It is certainly open to them to take issue on the civil law liability, but we're not here to determine that issue.

THE PRESIDENT: Okay.” (emphasis added).

Again, this seems to me an important passage. Throughout this exchange, there would appear to be an underlying recognition of the distinction between, on the one hand, public law and, on the other, any private law claims. Specifically, Mr Keith does not take issue with Mr Eadie’s earlier submission that so far as any civil (i.e. private law) liability is concerned, the entire case i.e. both liability and quantum should be transferred. On the contrary, Mr Keith seeks to allay Mr Eadie’s “ghastly sense at midnight”that the SFO was falling into a trap by making it plain that there was no trap. Moreover, Mr Keith accepted that the rulings of the Divisional Court “… cannot be dispositive of civil law liability …” which was, of course, the main thrust of Mr Eadie’s earlier submissions.As it seems to me, it is for this reason that the President said that he did not think that there was any difference between the parties. Mr Thanki’s submission was that this whole passage was not focussing on any civil liability for trespass to land which had, as he submitted, already been “parked”. However, that does not appear in terms from the passage itself; and, on the contrary, the tenor of this passage is in the most general terms. As I understand, there were no other further relevant submissions in response by other Counsel acting for the claimants.

As to the DC Judgment itself which was delivered on 31 July 2012, I have already quoted the relevant paragraphs towards the end of the judgment; and I have also already referred to the further submissions made by Mr Keith on that day.

Finally, I should mention a point advanced on behalf of the claimants with regard to the terms of the “admission” made by the SFO on 22 November 2012 which I have already quoted viz “The SFO admits liability for trespass to land in consequence of the order of the Administrative Court quashing the search warrants.”In summary, what the claimants say is that this is not in truth an “admission” at all but rather a recognition of the effect of the DC Orders in particular because of the words “in consequence of”. At the very least, the claimants say that it shows that the SFO itself recognised at least in November 2012 that the effect of the DC Orders was as the claimants now assert i.e. to preclude the SFO from disputing liability for trespass. That may well be right but it does not seem to me that this point assists the claimants on the crucial issue for determination i.e. what was in fact the effect of the DC Orders.

The exercise of trawling through the various documents setting out the parties’ respective positions and the transcripts of the hearing in order to assist in determining the proper effect of the DC Orders and DC Judgment is not one which I have embarked on with much enthusiasm. However, for the reasons stated above, it seems to me that, at the end of the day, such exercise confirms the conclusion that I reached on the narrow basis i.e. that the court was not (objectively) intending to determine any civil i.e. private law claim for damages including any liability for trespass to land and that the DC Orders do not preclude the SFO from disputing liability for trespass. Accordingly, I answer the first question: “No”.

By way of postscript to this issue, I should mention that it was submitted on behalf of the SFO that there cannot be any res judicata as against certain claimants i.e. RT, R20 Ltd and VT because these claimants had not yet issued or pleaded any claim for trespass against the SFO as at 20 September 2012 i.e. when the DC Orders were sealed; and that, for similar reasons, there was no need to withdraw the admission (as to which see below). In the event, it is unnecessary to decide these points.

I can deal with this issue more shortly. It was common ground that this was governed by CPR r14.1(5); that accordingly the court has a discretion to allow the admission made by the SFO to be withdrawn; and that the SFO bore the burden of satisfying the court that it should be permitted to withdraw the admission having regard to the matters set out in CPR 14PD7.2 and the guidance to be found in Sowerby v Charlton[2006] 1 WLR 568 CA in particular at [35]-[36] although, as Brooke LJ stated, the exercise of the discretion will always depend on the facts before the court.

As to these matters and whilst recognising that the burden lies on the SFO, it is convenient to identify the objections raised by the VT Claimants in support of their objection to the grant of permission which were summarised in their skeleton argument as follows:

In broad terms, the RT Claimants advanced similar objections, although they fairly accepted that they could not identify any tangible prejudice as such.

Although certain of these points of objection have some force, I have no doubt that, subject to the question of costs (as to which it will be necessary to hear further argument), overall justice demands that the SFO be permitted to withdraw the admission. In particular, I bear in mind that (i) I have not considered – indeed the parties were agreed that I should not consider – the merits of the defences now sought to be raised and, on that basis, it seems to me that I must proceed on the basis that such defences are at least arguable; (ii) the amounts at stake are potentially significant; (iii) although the SFO has not waived privilege, I have no reason to suppose that the decision to seek to withdraw the admission is not as stated by Mr Cotton, nor that it is made other than in good faith; (iv) absent irremediable prejudice, the overriding objective demands or at least points strongly in favour of the court arriving at a decision which is correct in law rather than on a foundation based upon an admission which may be incorrect as a matter of law; (v) although to allow the SFO to withdraw its admission at this stage of the proceedings is certainly regrettable and inconvenient, the trial is set to commence about 10 months away i.e. in April 2014 and I do not consider that there is any relevant irremediable prejudice to the claimants; (vi) there is no legitimate prejudice to the claimants in being required to meet the defences on their merits whereas there is, by contrast, considerable potential prejudice to the SFO if it is not allowed to pursue the defences at all.

I should mention that in support of the SFO’s application, Mr Dowley initially submitted in his skeleton argument that one point in favour of the exercise of the court’s discretion was that the defences which the SFO now seeks to advance will, if accepted, save the “public purse” a very considerable amount of money. As I have stated, there is no doubt that the amount at stake is potentially significant; and I accept that that is certainly a relevant consideration. But I do not consider that the fact that such defences, if accepted, will save the “public purse” – as opposed to any other purse – a considerable amount of money is of any additional relevance whatsoever. In the event, Mr Dowley accepted that this must be so.

For these reasons, I have no doubt that the answer to this second question is “Yes”; and that the SFO should be granted permission to withdraw its admission.

In light of the above, Counsel are requested to seek to agree an order (including costs and any other consequential matters) for approval by the court failing which I will deal with any outstanding issues.