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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Tchenguiz & Anor v Director of the Serious Fraud Office [2014] EWHC 1315 (Comm) (29 April 2014) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2014/1315.html Cite as: [2014] EWHC 1315 (Comm), [2014] WLR(D) 186

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		29 April 2014

CPR 31.22

Mr Justice Eder:

Introduction

1. This Judgment concerns an application by the claimants (the "RT claimants") with regard to their proposed use of certain documents disclosed by the defendant (the "SFO") in the course of the current proceedings.
2. In its original form, the application was in respect of two different categories of documents. The first category related to certain documents in respect of which the RT claimants wished to obtain legal advice from certain Guernsey lawyers. In the event, the SFO were "neutral" with regard to such application; and I made an order in effect permitting use of such documents for that purpose. It is unnecessary to say anything more with regard to such documents.
3. The second category related to some 198 documents which the RT claimants wish to provide to independent counsel not currently instructed in these proceedings for the purpose of obtaining such counsel's advice ("criminal advice") as to whether a certain third party, Grant Thornton UK LLP ("Grant Thornton") and/or any of its servants/agents and/or any officers/agents of the SFO have committed any criminal offences by reason of Grant Thornton having provided to the SFO false or misleading allegations of criminal conduct by the first claimant, Robert Tchenguiz ("RT"); or by Grant Thornton having made false statements in court proceedings; and by reason of the 'co-operative relationship' which was formed between Grant Thornton and the SFO during its investigation into RT. The RT claimants also wish to obtain advice as to the prospects of and procedures for the initiation of a criminal prosecution if the view is taken that any criminal offence was committed. I shall refer to all the foregoing as the "proposed course of action".
4. I should mention that for their part Grant Thornton (who were given notice of the RT claimants' application) have confirmed through their solicitors that they have no objection to the proposed course of action.
5. As set out in his skeleton argument, Mr Bailin QC on behalf of the RT claimants summarised the specific reasons for the proposed course of action as being that these documents appear to raise serious issues about whether individuals employed:

i) by Grant Thornton made false or misleading statements to the SFO when providing information under s2 Criminal Justice 1987 ("CJA 1987") which conduct may amount to a criminal offence under s2(14) CJA 1987;

ii) by Grant Thornton made false allegations of criminal fraud to the SFO in the course of a criminal investigation with intent that those allegations be taken seriously which conduct may amount to the criminal offence of perverting the course of justice;

iii) by the SFO agreed to perform their functions improperly (e.g., by not acting independently; or by agreeing to provide Grant Thornton with information about RT or other aspects of the investigation) in exchange for an advantage from Grant Thornton (e.g., obtaining information from Grant Thornton and/or its co-operation in the investigation) which conduct may amount to the criminal offence(s) of receiving or paying a bribe: ss1 and 2 Bribery Act 2010.

iv) by the SFO committed perjury in relation to the evidence placed before the Divisional Court.

The application

6. The application is made against the background of CPR 31.22 which provides as follows:

"(1) A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed except where -

(a) the document has been read to or by the court, or referred to, at a hearing which has been held in public;

(b) the court gives permission; or

(c) the party who disclosed the document and the person to whom the document belongs agree."

In passing, it may be noted that (as appears from Hollander, Documentary Evidence (11^th Ed) para 27-37) although this rule is relatively new, it was intended to re-state the law in relation to what had previously been an "implied undertaking" save as relates to documents read out in open court: see Marlwood Commercial Inc v. Kozeny [2005] 1 WLR 104 (CA) at para 10.

7. There are two separate limbs to the application. First, the RT claimants seek a declaration that they do not require the permission of the Court under CPR 31.22(1)(b) for the proposed course of action; alternatively, if they do require such permission, the RT claimants seek an order granting such permission.
8. I heard the application in relation to the proposed course of action on Friday 11 April 2014. At the end of the hearing, I indicated my conclusions in relation to both limbs viz (i) that permission was required for the proposed course of action; and (ii) that I would grant such permission. This Judgment sets out my reasons for these conclusions.
9. I deal with each limb in turn.

Is permission required?

10. Mr Bailin's primary submission was that permission was not required for the proposed course of action. In that context, Mr Bailin submitted in summary as follows:

i) A party who has been given disclosure is entitled to legal advice as to the meaning and implications. Such advice does not amount to collateral use of the disclosure and is within the "use … for the purpose of the proceedings in which it is disclosed": CPR 31.22(1). Advice on the implications of a disclosed document does not amount to use of that document for a collateral purpose.

ii) The contention that passing a disclosed document to a legal adviser for advice is an improper collateral use of that document is surprising as well as novel. The effect of the SFO's position would be that the RT claimants do not have an unfettered right to legal advice as to the legality of acts which affected them and courses of conduct which might be open to them.

iii) It is inherent within CPR 31.22 that a party's legal advisers must, without making any application under CPR 31.22, be able to read disclosed documents and advise on potential collateral proceedings (criminal or civil) which might arise from those documents. That advice does not constitute collateral use. It would only constitute collateral use (for which permission/consent would be required) if steps were taken to commence such proceedings e.g., by passing the documents to a relevant prosecutor. Were it otherwise, a party which wished to make an application under CPR 31.22 to deploy disclosed documents in collateral proceedings would already be in breach of CPR 31.22 by virtue of having advised on such use prior to the making of the application. Such a construction of CPR 31.22 would be perverse: c.f. the commentary in Hollander, §27-09.

iv) If the RT claimants' present legal advisers can read disclosed documents and advise on potential collateral proceedings (criminal or civil) which might arise from those documents, there can be no difference in principle if the RT claimants wish to use specialist, independent counsel for the criminal aspect. A litigant has an unfettered right to instruct a different lawyer for distinct aspects of his case. In general, a litigant who uses (or seeks to use) different lawyers for different proceedings or different aspects of related proceedings should be in no different position to a litigant who uses a single lawyer (or set of lawyers) for all his proceedings. CPR r 31.22 does not alter this: see e.g., Virgin Media Communications Ltd v. BskyB Group [2008] 1 WLR 2854, particularly at §§20, 25, 31.

11. As appears from those passages in Virgin Media v BskyB, I readily accept that there is a very strong desirability of any litigant being able to instruct the lawyer of his choice; that there is no reason why external lawyers should not be in the same position as in-house lawyers who receive disclosure subject to separate undertakings; and that it is hard to conceive of circumstances where disclosure in one set of proceedings would preclude lawyers from acting in other proceedings between the same parties. I am also prepared to assume (without deciding the point) that the RT claimants' existing team might well be entitled to advise on whether disclosed documents revealed any criminality; and I fully recognise that it may be difficult to draw the line between such a situation and the proposed course of action. In particular, I readily accept that it is difficult to suppose that the RT claimants' existing team would be in breach of CPR31.22 if, when reading these documents for the purpose of the present proceedings, they permitted their minds to wander to consider any possible criminality and gave advice to the RT claimants in relation thereto; that the suggestion of any breach in such circumstances might be said to be absurd; that a strict logician might say that there is no difference between such a situation and the RT claimants' proposed course of action; and that, on such basis, a construction of CPR31.22 which would, in effect, prevent the RT claimants from obtaining criminal advice from "external" lawyers is not only illogical but would create an unacceptable anomaly inconsistent with the general thrust of the passages referred to in Virgin v BskyB. I consider this point further in the context of the second limb of this application.
12. Be all that as it may, it seems to me that however difficult it may be to justify as a matter of pure logic, a distinction is to be drawn with respect to the proposed course of action as based on the reasons set out in Mr Bailin's skeleton argument. Ultimately, the answer depends on the proper characterisation of the "purpose" for which the documents are "used". In my view, the proposed course of action which involves giving the documents to other counsel specifically to obtain criminal advice for the reasons set out in Mr Bailin's skeleton cannot properly be characterised as being "… for the purpose of the proceedings in which [the documents are] disclosed …" In my view, the words of CPR 31.22 are clear. In particular, they put an important restriction on the use of documents received by a party by way of disclosure in the course of proceedings. Given the compulsive nature of the disclosure process, it seems to me that the Court should be astute to ensure that such process is not used for some collateral process or ulterior motive unless, of course, one or more of the exceptions (including the grant of permission) are satisfied; and that the rule should be construed and applied accordingly.
13. I should mention that Mr Bailin suggested at one stage of his oral argument in response to questions by me that the requirement of the wording of CPR31.22 was satisfied here because the result of the criminal advice may ultimately assist the RT claimants in these proceedings (for example, as he submitted, in the course of cross-examination of the SFO's witnesses at trial). For my part, such suggestion had some possible attraction. A fortiori, as it seems to me, if it were said that the purpose of the proposed course of action was to consider whether such criminal advice might assist in these proceedings. However, so far as I am aware, such suggestion had not previously been foreshadowed as the purpose of the proposed course of action at least expressly in previous correspondence nor in any witness statement nor even in Mr Bailin's skeleton argument; and Mr Bailin frankly accepted that it was entirely speculative. For these reasons, it seems to me that such suggestion is of little, if any, assistance to Mr Bailin.
14. It is for these reasons that I concluded that the proposed course of action involved the collateral use of the relevant documents and was, in effect, prohibited by CPR31.22 without the permission of the Court.
15. In reaching this conclusion, I should make plain that I have ignored the submission made by Mr Eadie QC on behalf of the SFO that the proposed course of action is purely "tactical" on the part of the RT claimants and, in effect, designed to put improper pressure on the witnesses who will be called by the SFO at the trial which is now fixed to start in October 2014. That may or may not be so. However, I do consider that point in the context of the second limb of the present application i.e. whether or not permission should be granted – to which I now turn.

Permission?

16. In this context, Mr Bailin drew my attention to a number of authorities (both pre-CPR and post-CPR) which considered the applicable principles with regard to the exercise of the court's discretion viz. Crest Homes v. Marks [1987] AC 829 (HL), Cobra Golf Inc v. Rata [1996] FSR 819 (Laddie J), SmithKline Beecham Plc v. Generics (UK) Ltd [2004] 1 WLR 1479 (CA), Marlwood Commercial Inc v. Kozeny [2005] 1 WLR 104 (CA) and Hollander §27-38. In the light of these authorities, Mr Bailin submitted as follows:

i) There are no general principles and each case turns on its own facts: Crest Homes at p 860.

ii) The court will not modify the undertaking unless there are "special circumstances" and where to do so will not do "injustice to the party giving discovery": SmithKline at §36.

iii) The public interest principle of discovering the truth and making full disclosure "operates in favour of releasing relevant documents from hub into satellite proceedings as long as no significant injustice is done to the disclosing party": Cobra Golf at p 831 (emphasis added).

iv) The most important consideration is "the interest of justice which involves considering the interest of the party seeking to use the documents and that of the party protected by the CPR 31.22 order": SmithKline at §37.

v) If documents are or might be obtainable from another source, e.g., via CPR r 31.17 or s2(3) CJA 1987, then this would be a material consideration in favour of permitting collateral use: SmithKline at §37; c.f. Marlwood at §47. However, the fact that the documents would not be obtainable from any other source is not a factor against permitting collateral use.

vi) Whether the proposed collateral use is in court proceedings or outside litigation e.g., for disclosure to the press. Prima facie if it is for use outside litigation, it is not the court's function to release for that purpose: Cobra Golf at p 832.

vii) Whether, if the collateral use is in aid of criminal or civil proceedings, those proceedings are in this country or abroad: Cobra Golf at p 832.

viii) In so far as the satellite proceedings are in this country, if they are criminal proceedings, the court must take into account the possibility of the application being a method of by-passing the privilege against self-incrimination: Cobra Golf at p832.

ix) "[T]here is every reason for supposing that (in the absence of any special factor) in the individual case the public interest in the investigation and prosecution of serious fraud outweighs the general concern of the courts to control the collateral use of documents produced compulsorily on disclosure": Marlwood at §§47, 52

x) "[A] court will usually release a collateral undertaking in response to a request from the criminal authorities": Hollander at §27-38.

17. I did not understand that Mr Eadie challenged any of these general propositions. However, he submitted in summary as follows:

i) The burden of proof is on the party who asserts that the prohibition on collateral use should be lifted to "… demonstrate cogent and persuasive reasons why it should be released", amounting to "special circumstances": Marlwood Commercial Inc v Kozeny [2005] 1 WLR 104 at para 30 per Rix LJ, citing Crest Homes Plc v Marks [1987] AC 829.

ii) Despite repeated requests in correspondence by the SFO's solicitors that the RT claimants should set out clearly their reasons for wishing to take criminal law advice at this stage of the proceedings, there had never been any satisfactory answer.

iii) There is no obvious reason why such criminal advice is required now. The events in issue in this case are shortly to be the subject of detailed analysis over a twelve-week trial at which a series of witnesses will give live evidence as to those events and the documentary record. If the RT Claimants wish to take criminal legal advice, the obvious time to do so would be after a judgment rather than at the present time. At that stage, any possible criminal advice could be obtained with the benefit of the totality of the relevant evidence as given in the course of the trial rather than by reference to documents alone.

For these reasons, Mr Eadie submitted that the RT claimants had failed to satisfy the burden of proof on them so as to persuade the court to exercise its discretion in their favour. On the contrary, as already noted above, Mr Eadie submitted that the proposed course of action is purely "tactical" on the part of the RT claimants and, in effect, designed to put improper pressure on the witnesses who will be called by the SFO at the trial which is now fixed to start in October 2014; and that is a very cogent countervailing argument against the grant of permission under CPR 31.22. Further, Mr Eadie relied upon a passage in the judgment of Sir Nicholas Browne-Wilkinson V-C in E.M.I Records Ltd v Spillane [1986] 1 WLR 967 at p977B-C to the effect that "… it would be quite wrong to authorise [the use of disclosed documents] in criminal proceedings brought under fiscal laws and having no connection with the original cause of action …".

18. In considering these submissions, there is the obvious point that the grant of the permission contemplated by CPR 31.22 is ex hypothesi one which is to be exercised to enable documents to be used for purposes other than the proceedings in which the documents have been disclosed; and that therefore the fact that the documents in question are to be used for some collateral purpose cannot, of itself, be a bar to the grant of permission. However, given the compulsive nature of the disclosure process in legal proceedings and consistent with Marlwood and Crest Homes, I fully accept that the burden of proof lies on the applicant seeking permission and that the bar is high i.e. the applicant must show "cogent and persuasive reasons" why any particular document should be released amounting to "special circumstances". In my view, it is important that these requirements are not in any way watered-down. Nevertheless, they are, in my view, satisfied here for the following reasons.
19. First, it seems to me important to recognise that the proposed course of action is of a very limited nature i.e. it is to obtain criminal advice only - not to deploy the documents or information contained therein in criminal proceedings nor for any other purpose. As submitted by Mr Bailin that seems to me a relatively modest collateral use. Further, as submitted by Mr Bailin, it does not seem to me that the passage cited by Mr Eadie from EMI Records v Spillane assists in the present context. In particular, the order sought does not seek to authorise the use of documents in criminal proceedings; and, in any event, the proposed course of action is not concerned with "fiscal laws" having no connection with the original cause of action.
20. Second, to prevent any party from obtaining legal advice for whatever reason is, in my view, a very drastic restriction on that party's ordinary rights. Indeed, it seems to me that any such restriction runs counter to the rule of law and is potentially objectionable on that basis. For the avoidance of doubt, I do not consider that there is much, if any, force in Mr Eadie's argument that permission should not be granted now but should be left until after the trial. On the contrary, it seems to me that a party's ordinary right to obtain legal advice should not generally be hampered by the imposition of any time constraint.
21. Third, most if not all of the documents "belong to" the SFO (within the meaning of CPR 31.22(1)). Accordingly, there is no possibility that those documents could have been obtained by means of a third party disclosure application under CPR 31.17.
22. Fourth, I bear in mind Mr Bailin's submission that the proposed course of action relates to what are said to be possible perjury, perjury-type offences and bribery offences; that those are serious offences, especially when the context is that, if they occurred, it was in the course of an investigation into allegations of serious fraud; and that there are strong public interest considerations which led to the Court of Appeal in Marlwood to conclude that the specific investigation of serious fraud outweighed the general concern about controlling collateral use and which are equally applicable in the case of perjury-type offences committed during the course of a serious fraud investigation. In this context, I should make it absolutely plain that these are merely Mr Bailin's submissions; that I have not considered the substance of any possible allegations; and that therefore I have no idea whether any criminal offences may have been committed. It is also important to note that Marlwood was concerned with the investigation of fraud by a public body which is, it might be said, very different from the position here of the RT claimants. However, I accept that if – I repeat if – the documents reveal any criminality, then that would obviously be a serious matter; and, in my view, any party who may be a victim of such a possible criminal offence should, in principle, be entitled to obtain legal advice in relation thereto.
23. Fifth, the possible anomaly which I have already referred to in the context of the first limb of this application between, on the one hand, criminal advice being given by an existing team of lawyers and, on the other hand, an "external" lawyer points in favour of the grant of permission.
24. Sixth, apart from its main argument that there are no cogent reasons or special circumstances to justify the grant of permission under CPR 31.22, the SFO's main objection is that the proposed course of action would have an intimidating and "chilling effect" on the ability of its witnesses "… to speak candidly in these proceedings" if witnesses in this trial had the spectre of criminal proceedings hanging over them. However, I accept Mr Bailin's submission in response i.e. such situation is not at all unusual – the solution is that the judge can warn such witnesses about the privilege against self-incrimination (which is part of the common law and Article 6 ECHR) if necessary so that the witness can make an informed decision about whether to answer the particular question or not; and that a person's status as a witness in civil proceedings cannot insulate or shield them from investigation or prosecution. In any event, there is, as yet, no "spectre" of existing criminal proceedings hanging over any witness. To repeat: the proposed course of action is limited to the obtaining of criminal advice by the RT claimants.
25. Finally, I should address the point raised by the SFO that the RT claimants are motivated for tactical reasons with the possible implication that the RT claimants are, in truth, contemplating bringing what the SFO would (or might) say was a vexatious or frivolous private prosecution against certain SFO and/or Grant Thornton individuals. In that context, I should make plain that the RT claimants emphatically reject the suggestion made by the SFO that the proposed course of action is tactical. On the contrary, they say that RT was himself the subject of a criminal investigation which came to naught; and that if those involved in or responsible for his investigation have themselves committed criminal conduct, that is patently something he is entitled to know and receive advice about. In my view, there is much force in that submission. In any event, it seems to me that, as submitted by Mr Bailin, it is well-established that if a private prosecutor brings a case in bad faith or based upon evidence which does not provide a realistic prospect of conviction then a public prosecutor can take over the private prosecution and stop it: R (Gujra) v DPP [2013] 1 AC 484, SC. Quite apart from the fact that the suggested implication ignores that the proposed course of action is (as I have repeatedly emphasised) limited to the obtaining of criminal advice, it seems to me that that is a sufficient safeguard against any potential misuse of documents.
26. It is for these reasons that I concluded that there were special circumstances which justified the grant of permission to the RT claimants to use the documents for the limited purpose of the proposed course of action.