In Tchenguiz v Director of the Serious Fraud Office (Non-Party Disclosure) (2014), the Court of Appeal dismissed a claim of litigation privilege relating to five reports prepared on the instructions of liquidators.

Background

Robert and Vincent Tchenguiz brought a claim against the Director of the Serious Fraud Office ("SFO") to compensate them for the financial losses and reputational harm which they claimed they had suffered as a result of their arrest by the SFO in March 2011 and the connected searches and seizures instigated by the SFO.

The application for the search warrants used by the SFO had been made to the Criminal Court on the basis of five reports prepared by Grant Thornton. The Claimants, who wanted to know the basis on which the court had granted the warrants, sought disclosure of the reports. The SFO had been shown the reports by Grant Thornton but had not been permitted to make copies and so was not in a position to disclose the reports.  The Claimants therefore applied for third party disclosure from Mr Akers and Mr McDonald, the joint liquidators of a company that formed part of the Tchenguiz Discretionary Trust, and who, as the commissioners of the reports, were able to disclose them.  The joint liquidators refused disclosure on the basis that the reports were covered by litigation privilege.

Decisions

Eder J in the Commercial Court, stated that disclosure of all five reports was "necessary and appropriate" as it was relevant to both the case of the Claimants and the defence of the SFO.  Eder J also rejected the claim to assert litigation privilege, on the basis that the witness statement in support of the liquidators, refusing disclosure, had not sufficiently demonstrated that the dominant purpose of the reports was use in actual or anticipated litigation or for obtaining legal advice about such litigation.  He recognised that difficulties can arise where documents are produced for a dual purpose; here one report had been commissioned by the liquidators partly in order to identify intra-company balances which should be reversed and partly on the basis of the possible need to take recovery proceedings. But the fact that the solicitor for the joint liquidators did not attempt to establish which of the dual purposes was dominant meant that a claim for privilege could not be established.  The fact that this report was subsequently sent to counsel did not change the position as to whether it was covered by litigation privilege because the litigation privilege must have existed when the communication was originally produced.  The rejection of the claim of litigation privilege formed the basis of an appeal by the liquidators.

In the Court of Appeal, Lord Justices Tomlinson, Ryder and Moore-Bick unanimously dismissed the liquidators' appeal.  Tomlinson LJ's judgment reiterated that the evidence did not justify the claim to privilege as it did not, with "clarity and precision", establish which of the purposes for commissioning the reports was dominant. Tomlinson LJ also found that the appellants had not sufficiently demonstrated that there was a real prospect of litigation when the reports were produced. He referred to the case of United States of America v Philip Morris Inc (No.1)(2004) to highlight that the assertion of the liquidators that litigation was an obvious possibility will not sufficient to claim privilege. Instead they should have satisfactorily demonstrated that litigation was in "real prospect".

Comment

This decision has highlighted again that litigation privilege can only be claimed if the dominant purpose for which a document is produced is to obtain advice or information in connection with pending or contemplated litigation.  Tomlinson LJ's judgment also serves as a useful reminder of the high threshold of the test.  Litigants and solicitors should include as much precise information as possible about any contemplated litigation if they wish to demonstrate successfully that a document was produced in prospect of litigation and thus claim litigation privilege.  Involving lawyers at an early stage in a dispute should assist in maximising the prospect that litigation privilege will apply, making clear the litigation context for the creation of the documents.