Billionaires, Bungled Raids and protecting internal investigations from unwanted disclosure orders - Tchenguiz and another v Serious Fraud Office and others (2013).

Robert and Vincent Tchenguiz have compelled disclosure of Grant Thornton’s (GT) reports to the liquidators of companies forming part of their business empire in the course of their £300 million claim against the Seriod Fraud Office (SFO) for the damage to their business interests caused by the SFO’s subsequently abandoned prosecution. Their victory highlights the key requirements for any business wishing to collect evidence confidentially and keep it behind the veil of “litigation privilege”.

GT submitted five reports and documents to its clients, the liquidators of companies that had formed part of the Tchenguiz empire. The reports identified transactions that might need to be reversed by the liquidators utilising their statutory powers and the overall “residual assets” left over for the creditors, as well as dealing with proceedings against the liquidators and possible proceedings by the liquidators. GT had allowed the SFO to see the reports and documents. Although the SFO had transcribed parts of them, GT had not allowed them to make copies. GT relied on litigation privilege to preclude disclosure of them to the Tchenguiz brothers.

The court concluded that the reports and documents had not been produced for the dominant purpose of obtaining information or advice in connection with contemplated or pending litigation, or of conducting or aiding such litigation (the test for litigation privilege since Waugh v British Railways Board (1980)). In this case, the reports had been produced for other purposes as well and it was impossible to say that litigation was the “dominant” purpose. However, allowing the SFO to see the documents would not have amounted to a waiver of privilege had they been privileged. (You can access the full judgment in the case here).

What proactive measures can help safeguard “privileged” reports when a business undertakes its own investigation of an event or commissions an external adviser to do that for them? In simple terms, the corporate client needs to work closely with its lawyers and insurers and they all need to be very clear about what they are doing. It won’t be enough to rubber stamp the report “Prepared in Contemplation of Litigation”.

It will be important to set out in the report the factual details of the event and why it is felt there is a threat of litigation along with who, either specifically or by way of “class of litigant”, it is felt the likely threat is coming from. The report should make clear that the report has been produced solely for the purpose of that actual or contemplated litigation. Of course, this is not just a matter of form and the contents of the report will have to be consistent with that statement,

Finally, careful thought needs to be given to circulation of the report outside the entity for whom it is prepared – circulation to outside bodies can result in a waiver of privilege (although the judge held that wasn’t a problem in Tchenguiz) and might convey the impression the document was prepared for purposes other than actual or contemplated litigation.

Specialist insurance policies are available which may provide cover for the costs of this exercise.