The Serious Fraud Office (SFO) recently announced that it has settled claims brought by Vincent and Robert Tchenguiz arising from the manner in which it investigated their alleged involvement in the collapse of Icelandic bank Kaupthing hf. This investigation had seen both of the brothers arrested in a March 2011 dawn raid that was later found to be based on unlawfully obtained search warrants.
These proceedings have generated a number of noteworthy interim decisions concerning disclosure, including decisions regarding inadvertent disclosure of privileged material (for further details please see "Court confirms position on inadvertent disclosure of privileged documents"), the application of the Criminal Justice Act 1987 to disclosure in civil proceedings and third-party disclosure orders.
The latest decision, Tchenguiz v Director of the Serious Fraud Office ( EWHC 2379 (Comm)), relates to Robert Tchenguiz's and other corporate claimants' rights to use documents disclosed in these English proceedings in concurrent proceedings in Guernsey.
The claimants initially applied for permission to instruct a review team, including lawyers familiar with the details of certain discrete proceedings in Guernsey, to identify further documents disclosed by the SFO which might have been relevant to the Guernsey proceedings. Specifically, the function of the review team was said to be solely to advise as to whether any particular documents or sets of documents from the SFO's disclosure had or could have a significant bearing on the outcome of the appeal in the Guernsey proceedings. The court accepted that the outcome of the Guernsey appeal was likely to have a substantial effect on the claimants' rights and the proposed review could well have resulted in the identification of potentially relevant documents in those proceedings.
The claimants accepted that the documents produced by the SFO in the English proceedings were subject to the general prohibition set out in Civil Procedure Rule 31.22 against using documents disclosed in proceedings for other purposes.(1)
The claimants had already made a similar application in these proceedings for permission to use documents disclosed by the SFO to obtain legal advice as to possible criminal offences.(2) In that decision the court applied the principles set out in Marlwood(3) requiring any party requesting such an order to "demonstrate cogent and persuasive reasons why it should be released", amounting to "special circumstances".(4) The court in this earlier decision also emphasised the importance of protecting the public interest by ensuring that material disclosed in proceedings was not used for collateral purposes.
In considering the current application the court set out the key principles to be taken from its previous decision:
- Whether use of a document amounts to collateral use depends on the proper characterisation of the purpose for which the documents are used.
- 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. Nevertheless, the burden of proof is on the applicant to show "cogent and persuasive reasons" why any particular document should be released amounting to "special circumstances".
- The provision of documents to counsel to advise while maintaining confidentiality in the documents is (in ordinary circumstances) collateral use of only a "very limited nature".
- To prevent any party from obtaining legal advice for whatever reason is a drastic restriction on that party's ordinary rights. Such a restriction runs counter to the rule of law and is potentially objectionable on that basis.
- 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. There is a strong desirability of any litigant being able to instruct the lawyer of its choice. If advice of a certain nature can be provided by the applicant's existing or in-house legal team, it is prima facie anomalous for an external lawyer not to be able to provide advice of the same nature; this is a factor which points in favour of the grant of permission.
The claimants submitted that the current application satisfied these principles on the following grounds:
- The application was a request for permission to pass documents to the review team for the purposes of receiving legal advice.
- The legal advice was directed to the making of further Civil Procedure Rule 31.22(1) applications in the proceedings. It was "use [of documents]... for the purpose of the proceedings in which [they were] disclosed". The court's previous decision specifically recognised that giving documents to a lawyer to advise may not be prohibited by Civil Procedure Rule 31.22(1) where "the purpose of the proposed course of action was to consider whether such... advice might assist in these proceedings". In this case, it was said that the advice would assist in the current proceedings, both in the making of Civil Procedure Rule 31.22(1) applications and at trial.
- The claimants had a genuine and urgent need for legal advice in relation to the relevance for Guernsey appeal purposes of documents disclosed by the SFO in the current proceedings. This need for legal advice could not practicably be satisfied other than by the instruction of a dedicated review team including individuals with detailed familiarity with the Guernsey proceedings.
- Any potential prejudice identified by the SFO (whether prejudice to itself or third parties) was in relation to the future deployment of disclosed documents or information in open court. The claimants argued that it could not sensibly be claimed that the SFO's or third parties' interests were affected by an expansion of the legal team reviewing the SFO disclosure to include seven additional lawyers. The review team was prepared to sign any reasonable confidentiality undertakings which were required and was bound by Civil Procedure Rule 31.22(1) in any event.
- It was illogical for the claimants to be permitted to instruct counsel of their choice for some discrete part of the current proceedings, but not to be permitted to instruct the same people to advise on the potential relevance to the Guernsey appeal of documents disclosed by the SFO. The claimants argued that such a position would be arbitrary and cause real difficulty and injustice.
The SFO argued that the application should not be permitted, as the claimants failed to demonstrate any cogent and persuasive reasons or special circumstances; further, it was fundamentally wrong to describe the proposed review as "limited" because:
- it would necessarily involve an external review team carrying out a new trawl through at least part (if not all) of the SFO's disclosure; and
- the object of such exercise was at least ultimately to use documents for a collateral purpose which was contrary to the public interest.
Without commenting on the likely prospects of any future application, the court felt unable to deny the claimants the opportunity to make an application in the current proceedings; this would be contrary to ordinary principles of justice and fairness and was in itself a cogent and persuasive reason as well as a special circumstance in favour of granting permission. This may not have been the case had the court been in a position to say that any such possible future application was doomed to fail in any event, but it was impossible to reach that conclusion at this stage.
The SFO also sought to oppose the application by arguing that allowing the claimants to use the disclosed information in the manner requested would circumvent the statutory procedure – laid down in the Evidence (Proceedings in Other Jurisdictions) Act 1975 and Part 34 of the Civil Procedure Rules – by which the Guernsey courts can seek the assistance of the English courts in obtaining documentary evidence within England. While the court acknowledged that the existence of the procedure and the Evidence (Proceedings in Other Jurisdictions) Act was potentially a highly relevant consideration to the exercise of the court's discretion under Civil Procedure Rule 31.22, it did not consider that it was a bar to the exercise of such discretion. Further, the claimants would be unable to make any application in Guernsey without (at least arguably) breaching Civil Procedure Rule 31.22.
In allowing the application the court was strongly persuaded by the fact that the proposed course of action did not, at this stage at least, involve the use of any documents in the Guernsey proceedings. In granting the application the court gave permission subject to the review team agreeing to enter into suitable confidentiality agreements and the SFO being properly protected with regard to its reasonable costs.
The crucial factor in coming to this decision was that the proposed review was a limited course of action. It merely involved preliminary steps necessary to enable the claimants to receive legal advice and, if so advised, to make an appropriate application pursuant to Civil Procedure Rule 31.22.
The court more recently handed down its decision in a further application made by the claimants under Civil Procedure Rule 31.22(1)(b) for permission to use 22 separate documents in the Guernsey proceedings.(5) These documents were not subject to the review granted under the court's decision described above. However, the application did require the court to develop the points considered in the first application above.
In this further decision, the claimants' request to be allowed to deploy these 22 documents in the Guernsey proceedings was refused. In doing so, the court highlighted the following principles:
- Any application pursuant to Civil Procedure Rule 31.22 requires a balancing exercise – that is, an exercise which balances the interests of the party that has disclosed the documents in the current proceedings with the interests of the other party receiving those documents to use them for some collateral purpose.
- There can be no doubt that the party seeking permission under Civil Procedure Rule 31.22 must show cogent and persuasive reasons amounting to special circumstances so as to persuade the court to grant the requisite permission.
- The claimants' desire to seek to use the documents went beyond their own private interests because there was a very strong public interest in discovering the truth.(6) The court referred to comments made by Justice Laddie in Cobra(7) emphasising that prima facie it is not in the interests of justice to hinder a party from advancing a good claim or defence in other proceedings.
- There was some force in the argument that there was potential unfairness to the parties opposing the claimants in Guernsey if permission were now granted to them to use the documents in those proceedings. However, any potential unfairness would be lessened by the fact that the opposing parties in Guernsey were perhaps likely to know what further contact there may have been between the SFO or the Guernsey authorities and the individuals concerned. In this case it was impossible to say whether this would be the case; in any event, whatever those opposing parties may know, it did not follow that they would necessarily have the full picture of the investigations being carried out by the SFO or the Guernsey authorities at that time.
- Although the documents in question were potentially relevant to the Guernsey proceedings and the claimants' interests could be seriously affected by those proceedings, it was relevant to make a proper assessment of the likely probative value of the documents if they were to be admitted. The court suggested that if the documents were "crucial" or "decisive" to the Guernsey proceedings, the argument for permitting collateral use would obviously be stronger than might otherwise be the case (although it would not necessarily follow that permission would be granted). The court considered the claimants' counsel's assessment of the documents – that "[a]t the very lowest, the recently provided documentation could very well have filled the evidential gap that the judge perceived and as such may have led him to reach a different conclusion" – and found that this fell far short of suggesting that the documents were crucial or decisive.
- The documents contained information relating to a criminal investigation carried out by the SFO. Although the information contained in the documents did not consist of direct evidence of any particular witnesses, the documents certainly contained information as to the methodology employed by the SFO and the interaction between the SFO and the Guernsey authorities. As such, the court considered that there was a strong public interest against permitting the use of such documents for collateral purposes.
- This public interest consideration was fortified by the fact that the documents related not merely to the steps taken by the SFO itself, but to the interaction and cooperation between the SFO and the relevant Guernsey authorities pursuant to a specific request by the SFO for mutual legal assistance. To permit documents of this kind to be used for a collateral purpose (including the use of the documents in the Guernsey proceedings) may potentially jeopardise the willingness of foreign states to cooperate in respect of similar criminal investigations in future.
These recent decisions reinforce the application of the principles outlined in Marlwood to decisions made using the court's discretion under Civil Procedure Rule 31.22(1)(b) and, in doing so, make clear that when applying for permission to use documents for purposes other than the proceedings in which they were disclosed, the bar is set very high.
In this particular case, the court was faced with a difficult balancing act reflecting the tension between, on the one hand, the strong public interest of confidentiality in the documents in question and, on the other, the private interests of the claimants and the associated public interest in discovering the truth. The eventual decision of the court demonstrates the weight given to the public interest of protecting confidentiality and maintaining international cooperation in criminal investigations.
Although the claimants were unsuccessful in obtaining permission to deploy the documents in the Guernsey proceedings, the court did comment that the matters identified as pointing against the grant of permission might have been assuaged at least in part if it were possible to reduce further the number of documents which the claimants sought to deploy and/or to redact the documents so as to exclude certain information contained in the documents which was objectionable to the SFO and the Guernsey authorities.
For further information on this topic please contact Laura Martin at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email (email@example.com). The RPC website can be accessed at www.rpc.co.uk.
(1) A separate pending application for permission to use 22 particular documents in the Guernsey proceedings had been listed to be heard on July 21 2014.
(3) Marlwood Commercial Inc v Kozeny  1 WLR 104.
(4) At §43 per Lord Justice Rix.
(5) Tchenguiz v Serious Fraud Office  EWHC 2597 (Comm).
(6) The documents in question were said to relate to steps taken by Guernsey to respond to a request for mutual legal assistance made by the SFO under Section 7 of the Crime (International Cooperation) Act 2003. For reasons of confidentiality the court did not set out the exact contents of the document in the public judgment.
(7)  FSR 819, 831 para 11(d)-(e).