Tchenguiz & Anor v Rawlinson And Hunter Trustees SA & Ors

The background to these present proceedings is to be found in the judgment of the Divisional Court in judicial review proceedings with Claim Nos CO/4236/2011 and CO/4468/2011 delivered on 31 July 2012 with the reference [2012] EWHC 2254 (Admin). Those 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 and is said to be the unlawful entry, search and seizures by or at the instigation of the defendant, the Serious Fraud Office (“SFO”) at certain premises in London as well as the arrests and investigations connected to this. In broad terms, there are two groups of claimants i.e. those referred to as the R&H or VT Claimants and those referred to as the RT Claimants. In summary, the present claimants say that the effect of the searches, arrests and investigation and the 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. The substantive hearing of that claim is now scheduled to take place in 2014.

In the course of the original investigation about which complaint is brought in these proceedings, the SFO gathered material using its powers under s2 of the Criminal Justice Act 1987 (“CJA”). Following the court's order that the parties give disclosure in these proceedings, the SFO wrote to various third parties who could be identified as having provided documents to the SFO in the course of that investigation for their observations as to whether disclosure should be given of material provided by them to the SFO pursuant to the CJA. Several third parties objected to the SFO giving such disclosure on the basis, so it was said, that, pursuant to the CJA, the SFO was not legally entitled to give disclosure of such material absent the consent of the party who provided it.

The SFO does not agree with that position taken by those third parties. Hence, the SFO has issued the present application seeking a declaration in the following terms: “A declaration that [the SFO] is not prevented by the provisions of the Criminal Justice Act 1987 (“CJA”) from giving disclosure in this action of documents received from third parties in response to notices under section 2 of the CJA and permitting inspection of such disclosed documents.” That application has been served on the following third parties viz Royal Bank of Scotland, Deutsche Bank, BNP Paribas and Goldman Sachs International. In the event, only one of these third parties i.e. Deutsche Bank has appeared to make submissions in support of its position although, as I understand, the formal position of the other third parties remains unchanged. The claimants support the position taken by the SFO.

It is important to note that the declaration sought by the SFO is limited to the point of principle i.e. whether the terms of the CJA in effect prohibit the SFO from giving disclosure of the relevant documents or, in other words, whether there is an absolute bar on disclosure under the CJA. Thus, it is common ground that I am not concerned, at least at this stage, with any issue that might arise as to what specific documents might or might not be discloseable or be subject, for example, to any other statutory bar (eg. under the Official Secrets Act) or other claim for privilege. Notwithstanding, Mr Beloff QC on behalf of Deutsche Bank submitted that if, contrary to his primary position, there was no absolute bar under the CJA, it would, or at least might, be convenient for the court to pronounce at this stage on the principles which should inform the disclosure exercise that would then have to take place. In particular, Mr Beloff submitted that Deutsche Bank should not, as a result of the exercise of compulsory powers, be any worse off than if the application for disclosure had been made against Deutsche Bank directly. I recognise that that may be an important point which may have to be considered in due course. However, it does not seem to me to be appropriate to deal with it at this stage in particular because (i) the point does not strictly arise in the context of the present application for a declaration; (ii) both the SFO and the claimants had not had sufficient time to consider the point; and (iii) it seems to me that any such argument should, if possible, be considered not in the abstract but, if and when it arises, by reference to particular documents or classes of documents.

S1(1) of the CJA constitutes the SFO. Under s1(3), the Director has power to “investigate any suspected offence which appears to him on reasonable grounds to involve serious or complex fraud”. S2 then provides for the investigation powers of the Director (s2(1)). In this context, s2(3) provides that:

“The Director may by notice in writing require the person under investigation or any other person to produce [at such place as may be specified in the notice and either forthwith or at such time as may be so specified], any specified documents which appear to the Director to relate to any matter relevant to the investigation or any documents of a specified class which appear to him so to relate; and—

For these purposes, pursuant to ss2(4) to (6A), the SFO can obtain a warrant authorising a constable to enter (using such force as is reasonably necessary for the purpose) and search premises, and to take possession of documents. S2(10) allows obligations owed in respect of banking confidentiality to be overridden in the specific circumstances therein identified. S2(13) provides that:

“Any person who without reasonable excuse fails to comply with a requirement imposed on him under this section shall be guilty of an offence and liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding level 5 on the standard scale or to both.”

Accordingly, s2 of the CJA subjects the recipient of a notice to a compulsory obligation to produce the relevant documentation, enforceable by criminal sanction.

S3 of the CJA deals with disclosure of information. Ss3(1) and (3) provide that:

“(1)

Where any information [to which section 18 of the Commissioners for Revenue and Customs Act 2005 would apply but for section 18(2)] has been disclosed by [Her Majesty's Revenue and Customs] to any member of the Serious Fraud Office for the purposes of any prosecution of [an offence relating to a former Inland Revenue matter], that information may be disclosed by any member of the Serious Fraud Office—

(a)

for the purposes of any prosecution of which that Office has the conduct

(b)

to the [Revenue and Customs Prosecutions Office] for the purposes of any prosecution of an offence relating to a former Inland Revenue matter; and

(c)

to the Director of Public Prosecutions for Northern Ireland for the purposes of any prosecution of [an offence relating to a former Inland Revenue matter],

but not otherwise.

…

(3)

Where any information is subject to an obligation of secrecy imposed by or under any enactment other than an enactment contained in the Taxes Management Act 1970, the obligation shall not have effect to prohibit the disclosure of that information to any person in his capacity as a member of the Serious Fraud Office but any information disclosed by virtue of this subsection may only be disclosed by a member of the Serious Fraud Office for the purposes of any prosecution in England and Wales, Northern Ireland or elsewhere and may only be disclosed by such a member if he is designated by the Director for the purposes of this subsection.”

S3(5) provides that:

“Subject to subsections (1) and (3) above and to any provision of an agreement for the supply of information which restricts the disclosure of the information supplied, information obtained by any person in his capacity as a member of the Serious Fraud Office may be disclosed by any member of that Office designated by the Director for the purposes of this subsection –

(a)

to any government department or Northern Ireland department or other authority or body discharging its functions on behalf of the Crown (including the Crown in right of Her Majesty's Government in Northern Ireland);

(b)

to any competent authority;

(c)

for the purposes of any criminal investigation or criminal proceedings, whether in the United Kingdom or elsewhere, and

(d)

for the purposes of assisting any public or other authority for the time being designated for the purposes of this paragraph by an order made by the Secretary of State to discharge any functions which are specified in the order.”

As submitted by Mr Eadie QC on behalf of the SFO, by reason of the nature of the information which the SFO will or may obtain using its powers, and by reason of the compulsory powers themselves, the SFO owes a duty of confidence in respect of the information which it receives. In that context, Mr Eadie relied on Marcel v Commissioner of Police [1992] Ch 225 (“Marcel”) in particular per Sir Nicholas Browne-Wilkinson at p236B-237D and per Nolan LJ at p261B. That would seem indisputable and, indeed, it was accepted by Mr Beloff. It was also common ground that such duty of confidence is, in effect, overridden in the limited circumstances set out in s3(5) so as to permit the SFO voluntarily to give disclosure of documents obtained pursuant to its statutory powers to certain third parties in the circumstances there specified – although none of those circumstances applies here. Thus, it is also indisputable that the SFO does not have power to disclose documents voluntarily to the claimants since this would not fall within one of the specific “gateways” in s3(5): see Morris v Director of the SFO [1993] Ch 371 (“Morris”). Equally, it was common ground that confidence alone is not a basis for not giving disclosure in civil litigation: Science Research Council v Nassé [1980] AC 1028.

Building on these blocks, Mr Eadie submitted that the effect of s3(5) is not to impose a statutory prohibition in addition to the duty of confidence to which the SFO is subject; and that accordingly, the provisions of the CJA do not preclude the SFO from giving disclosure in this action of material obtained pursuant to its compulsory powers in s2 of the CJA, nor (should it be so contended) material provided to it voluntarily. It is at this stage that Mr Beloff parted company with Mr Eadie. In particular, although Mr Beloff accepted that (i) the present disclosure exercise is not being made voluntarily by the SFO but pursuant to the court’s order in these proceedings and (ii) there is no express provision in the CJA in effect prohibiting the SFO from complying with such obligation, nevertheless he submitted that the CJA imposed what he described as an “implied restriction on disclosure”; and that, in circumstances where none of the gateways in s3(5) applies, that restriction overrides any obligation to give disclosure under CPR 31.

In considering that submission, there was some debate as to the circumstances in which legislative implications are legitimate, a topic discussed in some detail in Bennion on Statutory Interpretation, 5th Edition, Sections 173-174. According to that text, an approach based on what is “necessary” or “obvious” is or may well be too narrow and the question of whether an implication should be found within the express words of an enactment depends on whether it is proper or legitimate to find the implication in arriving at the legal meaning of the enactment, having regard to the accepted guides to legislative intention. In any event, whether the test is one of “necessity” or what is “obvious” or “proper”, I am unable to accept Mr Beloff’s submission that there is an implied restriction in the CJA so as to override the obligation on the SFO to provide disclosure pursuant to the court’s order still less to prevent the court making such order. In my judgment, this is so for the following reasons.

First, the starting point is the language of the CJA itself. As Mr Beloff himself recognised, it contains no express prohibition. I am prepared to accept that that is not necessarily determinative but, at the very least, it is an important place to start.

Second, I am wholly unpersuaded that Mr Beloff’s implied restriction is “necessary” or “obvious” or “proper”. In particular, as submitted by Mr Eadie, the existence of an absolute bar would be a “strong beast”; this is an important consideration in deciding whether it should, in effect, be “created” by implication; and this points strongly against any such implied restriction. Moreover, I also agree with Mr Eadie in his submission that it is extraordinarily difficult to see how such a “strong beast” would be formulated within the context of the existing statutory wording.

Third, although I accept there is no direct authority as such, it seems to me that the authorities point against the absolute bar for which Mr Beloff contends. For example, in Marcel, the Vice-Chancellor, having considered the nature of the duty of confidence in that case, summarised the position at p237D as follows:

“So, in my judgment, where the police or any other public authority use compulsory powers to obtain information and documents from the citizen, the relationship between them is such that the information or documents are received solely for those purposes for which the power was conferred and equity imposes on the public authority a duty not to disclose them to third parties, save under order of the court …” (emphasis added).

To my mind, the last words “save under order of the court” necessarily recognise that the duty of confidence which exists in such circumstances is subject to any order of the court – at least in the absence of clear statutory wording to the contrary. (This passage was considered by Warren J in Standard Life Assurance Ltd v Topland Co Ltd [2010] EWHC 1781 (Ch), [2011] 1 WLR 2162 (“Standard Life v Topland”) where he said at para 88 that it was not entirely clear to him how the involvement of the court at that stage is juridically justified. However, the circumstances of the present case perhaps provide an example of what the Vice-Chancellor in Marcel might have had in mind.) I fully recognise that certain of the views expressed by the Vice-Chancellor were disapproved in the Court of Appeal and the order he made was varied on appeal. I also recognise that Marcel was not concerned with the CJA but rather with the Police and Criminal Evidence Act 1984 and, as submitted by Mr Beloff, the latter contains no direct analogue to s3(5) of the CJA. However, it seems to me that on this particular point, the views expressed by all three judges in the Court of Appeal are of general import and point strongly against the existence here of any absolute bar viz.

“That said, however, the powers the police have to use seized documents for the purposes indicated by the Vice-Chancellor do not, in my judgment, absolve the police from the duty which police officers share with every other citizen to obey the orders of the courts in civil proceedings and in particular to obey subpoenas duly served upon them”. (Dillon LJ at p256H-257A)

“The statutory powers given to the police are plainly coupled with a public law duty. The precise extent of the duty is, I think, difficult to define in general terms beyond saying that the powers must be exercised only in the public interest and with due regard to the rights of individuals. In the context of the seizure and retention of documents, I would hold that the public law duty is combined with a private law duty of confidentiality towards the owner of the documents. The private law duty appears to me, as it did to the Vice-Chancellor, to be of the same character as that which formed the basis of the House of Lords decision in Attorney-General v. Guardian Newspapers Ltd. (No. 2) [1990] 1 A.C. 109. It arises from the relationship between the parties. It matters not, to my mind, that in this instance, so far as the owners of the documents are concerned, the confidence is unwillingly imparted. My disagreement with the Vice-Chancellor, as I have indicated, stems from my belief that the duty of confidence in circumstances such as those of the present case is outweighed by the requirements of a subpoena”. (Nolan LJ at p261A-C)

“With great respect to the Vice-Chancellor, who did not have the benefit of the full submissions made on behalf of the Commissioner of Police of the Metropolis which we have enjoyed, I for my part think that he misdirected himself in principle in regarding his discretion as fettered by such rigid restrictions. The result is that the discretion falls to be exercised by this court anew. I of course accept that there is a public interest in ensuring a proper observance by the police of the obligation of confidentiality in respect of documents seized under relevant powers. It is the existence of this obligation which, in my judgment, alone gives rise to a cause of action at the suit of the person from whom the documents were seized in cases where the police use or propose to use them otherwise than for police purposes at a time when they are still properly retaining them. I cannot, however, see why that public interest should in all cases and in all circumstances outweigh the public interest in ensuring a full and fair trial on full evidence in cases where the police have seized documents under Part II of the Act of 1984 and wish to use them for the purpose of assisting the supposed victim of an alleged crime to obtain a fair trial of a claim for damages in a civil case on full evidence. Everything must depend on the circumstances of the particular case.” (Sir Christopher Slade at p265D-G)

In addition, Mr Eadie sought to rely upon two prior decisions under the CJA viz Morris and Standard Life v Topland which I have already referred to.

Morris was a case in which the Court (Nicholls V-C) had to consider whether the SFO had the power voluntarily to disclose documents obtained in the course of its investigations, other than in the particular circumstances identified in s3(5) of the CJA. The Court held that although the SFO did not have such power and thus could not voluntarily provide such documents to a liquidator, the SFO could be ordered by the Court to provide documents to the liquidator (see at p380F-H) and such an order was made. No party, nor the Court, seems to have suggested that any such order was prevented by the CJA which is perhaps surprising if Mr Beloff were correct. However, as submitted by Mr Beloff, I accept that there was no argument in that case in support of any absolute bar and, since the issue was not raised, the decision in Morris is of limited assistance.

The second case relied upon by Mr Eadie i.e. Standard Life v Topland was one in which the question arose as to the use to which a person, who received documents from the SFO for the purpose of criminal proceedings, could put such documents. In particular, Mr Eadie relied upon paragraphs 81, 85-86 and 92 of the judgment of Warren J in that case. However, as submitted by Mr Beloff, it seems to me that the main issue in that case was very different from the issue of principle here. To that extent I agree that it is of no real assistance on that issue.

Fourth, it is noteworthy that, in contrast to the position under the CJA, other statutes do contain express prohibitions which in effect constitute an absolute bar against disclosure e.g. s19(2) of the Anti-Terrorism, Crime and Security Act 2001, s33(1) of the Serious Organised Crime and Police Act 2005, s82 of the Banking Act 1987 and s348 of the Financial Services and Marketing Act 2000. I readily accept that the effect of such express statutory provisions would be to “trump” the obligation to give disclosure (to use Mr Beloff’s phraseology). However, it seems to me that the existence of these express restrictions in these other statutes do not assist Mr Beloff but, on the contrary and as submitted by Mr Eadie, point in favour of the SFO’s position with regard to the position under the CJA which, in striking contrast, does not contain any express prohibition.

Mr Beloff submitted that this ignores the analysis in Rowell v Pratt [1938] AC 101 which concerned the scope and effect of s17 of the Agricultural Marketing Act 1931 (“the 1931 Act”). In particular, Mr Beloff relied upon the passage from the speech of Lord Wright at p106 when he stated: “I do not agree that there is any rule of construction or any prime facie implication which makes it necessary to have express words to prohibit a person from producing a document or giving oral testimony if ordered to do so by a Court in legal proceedings. But perhaps it is more accurate to say that here the actual language can only be construed as covering such a case.”(emphasis added). It is true that there was no express prohibition as such in the 1931 Act and yet the House of Lords was in effect prepared to construe the enactment or to imply a term so as, in effect, to prohibit disclosure. However, the 1931 Act did expressly provide that the giving of disclosure constituted a criminal offence and was subject to criminal sanctions. It was on this basis that the House of Lords decided to imply a term in effect prohibiting disclosure. Thus, Lord Wright stated at p105: “It is curious that the sub-section does not contain an express prohibition, but a prohibition must be implied when the act is made a criminal offence, punishable by fine or imprisonment or both.” However, there is no equivalent provision in the CJA. For these reasons, it seems to me that Rowell v Pratt does not assist Mr Beloff and that, if anything, it provides support for the SFO’s position.

In this context, Mr Beloff also sought to rely upon the analysis of Laddie J in BCCI v Price Waterhouse [1998] Ch 84 with regard to the scope and effect of s82(1) of the Banking Act 1987 (“the 1987 Act”) which provides:

“Except as provided by the subsequent provisions of this Part of this Act — (a) no person who under or for the purposes of this Act receives information relating to the business or other affairs of any person; and (b) no person who obtains any such information directly or indirectly from a person who has received it as aforesaid, shall disclose the information without the consent of the person to whom it relates and (if different) the person from whom it was received as aforesaid.”

At [1998] Ch p103B-G, Laddie J summarises and then deals with one of the arguments advanced that s82 of the 1987 Act does not constitute an absolute bar:

“Mr. Malek argued that the Act contained no express fetter on the court's power to order discovery in civil proceedings and that, had that been intended, clear words would have been used by the draftsman. He drew my attention to section 10 of the Contempt of Court Act 1981, where such clear wording is used. He said that there was no need for any such fetter. The court was well able to balance the interests of the persons whose commercial information was at risk of disclosure and the needs of the parties to civil litigation. Furthermore he suggested that the current climate is for more, not less, disclosure. He also drew an analogy with the common law, where private obligations of confidence were overridden by the obligation to give discovery.

“Absent relevant authority, I would be inclined against Mr. Malek's argument. The analogy with the common law is a false one. The court will order discovery of confidential material because the private rights and interests of the parties cannot be allowed to frustrate the public interest perceived to exist in full exchange of documents relevant to court proceedings. But even that interest is subordinate to the public policy considerations which justify the embargo on disclosure of privileged communications. Where the legislature has determined that it is in the public interest that certain types of information should not be disclosed on pain of punishment save in defined and limited circumstances, the court should be wary of adding to the list of exceptions. Here the primary purpose of the prohibition in section 82 is to protect persons whose commercial information comes into the hands of the bank. This is subject to certain defined exceptions, contained in sections 83 to 85. Those include, for example, the right to disclose information for the purpose of any criminal proceedings whether under the Act or otherwise (section 85(1)(a)) or proceedings under section 7 or 8 of the Company Directors Disqualification Act 1986 (section 85(1)(e)). It is therefore clear that the question of the extent to which the embargoed material could be used in legal proceedings had been the subject of consideration by the draftsman. If discovery in civil proceedings was to be exempt from the effect of section 82(1), one would have expected the draftsman to have included an express provision to that effect.”” (emphasis added)

Although this analysis is, of course, very interesting in the context of the 1987 Act, it does not seem to me of much, if any, assistance to Mr Beloff in the context of the CJA. On the contrary, it seems to me plain from that passage itself and also the remainder of the reasoning in that case that the conclusion reached by Laddie J that the court had no power to order the disclosure of documents containing information covered by s82(1) of the 1987 Act was based on the particular wording of that provision which, unlike the CJA, contains an express prohibition of disclosure. As submitted by Mr Beloff, I accept that the precise wording of the various other legislative provisions referred to above varies from Act to Act and that there is no “standard formula” as such. However, the important point remains that the CJA contains no express prohibition.

In summary, Mr Beloff submitted that (i) the coercive powers to obtain documentation are conferred upon the Director for the specific public purposes set out in CJA s2(1)); (ii) the disclosure powers are themselves strictly limited in terms of the recipients of any disclosure; (iii) the disclosure powers can be deployed even within those limits (a) only reasonably and in good faith and (b) subject to a duty, unless there is good reason not to do so, to give the person whose documentation is to be disclosed the opportunity to make representations against such disclosure (R (Kent Pharmaceuticals Ltd) v Director of the Serious Fraud Office [2005] 1 WLR 1302 at [20], [27]-[29] and [40]); and that these factors forcibly suggest that the legislature did not envisage that there could be any disclosure beyond those limits for private purposes such as those of the claimants, unless unambiguously provided for by other legislation.

Further, he submitted that quite separate from the ordinary duty of confidentiality that might arise in a private law context, there was an important public interest in maintaining the confidentiality of material provided to the SFO under its compulsory powers which was, in effect, much broader that the ordinary duty of confidentiality in a private law context as identified and emphasised by the House of Lords in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177 (“Taylor”), which case decided that material obtained by the SFO and disclosed by it to a defendant as unused material was subject to an implied undertaking on the part of the defendant not to use them for any collateral purpose. In particular, Mr Beloff relied upon the passage in the speech of Lord Hoffmann said (at p.211B-C):

“Many people give assistance to the police and other investigatory agencies, either voluntarily or under compulsion, without coming within the category of informers whose identity can be concealed on grounds of public interest. They will be moved or obliged to give the information because they or the law consider that the interests of justice so require. They might naturally accept that the interests of justice may in the end require the publication of the information or at any rate its disclosure to the accused for the purposes of enabling him to conduct his defence. But there seems to me no reason why the law should not encourage their assistance by offering them the assurance that, subject to these overriding requirements, their privacy and confidentiality will be respected.” (emphasis added)

In further support of this part of his argument, Mr Beloff also relied upon the following passage of Lord Keith in Home Office v Harman [1983] AC 280 (“Home Office v Harman”) at p308B-C:

“Upon the question whether such a rule of law should now be judicially declared, I am of the clear opinion that it should not. Discovery constitutes a very serious invasion of the privacy and confidentiality of a litigant's affairs. It forms part of English legal procedure because the public interest in securing that justice is done between parties is considered to outweigh the private and public interest in the maintenance of confidentiality. But the process should not be allowed to place upon the litigant any harsher or more oppressive burden than is strictly required for the purpose of securing that justice is done. In so far as that must necessarily involve a certain degree of publicity being given to private documents, the result has to be accepted as part of the price of achieving justice.”

So far as the court’s powers to order disclosure are concerned, Mr Beloff further submitted that it was important to bear in mind that such powers as are contained in the Civil Procedure Rules are entirely general; that they are not substantive but procedural only; and that they are, in effect, subordinate rules only to be contrasted with the CJA which is the nature of primary legislation.

I fully recognise the force of these submissions. However, they do not, in my judgment, go so far as to justify the implication of an absolute bar nor, if it is any different, a construction or interpretation of the CJA which would have such effect. Nor do I accept Mr Beloff’s bold but possibly somewhat overambitious peroration (if that is the right word) that to reject his suggested implied restriction would “go against the grain of the legislation itself” or “drive a chariot (sic) and horses” through s3(5) of the CJA. On the contrary, as Lord Hoffmann himself expressly recognised in the passage just quoted from Taylor, people might naturally accept that the interests of justice may in the end require publication and that, although their privacy and confidentiality will be respected, that is subject to the overriding requirements of the “interests of justice”. To my mind, such language is inconsistent with any absolute bar absent clear words to such effect. So too, in my judgment, is the passage from the speech of Lord Keith in Home Office v Harman quoted above. I accept, of course, that the consideration of the public interest may be relevant in a particular case when the court is deciding whether or not to make an order for disclosure. However, that exercise is quite discrete from the point of principle which is the subject of the present argument.

For all these reasons, it is my conclusion that the SFO is not prevented by the provisions of the CJA from giving disclosure in this action of documents received from third parties in response to notices under s2 of the CJA and permitting inspection of such disclosed documents and that I should grant a declaration to that effect. Accordingly, Counsel are requested to seek to agree a draft order (including costs and any other consequential matters) for my approval. Failing agreement, I will deal with any outstanding issues.