Factual and Procedural Background
The present proceedings arise from judicial review claims concerning alleged unlawful entry, search, and seizure activities, as well as arrests and investigations instigated by the defendant, the Serious Fraud Office ("SFO"), at certain premises in London. The claimants, divided into two groups known as the VT Claimants and the RT Claimants, assert that these actions and the related publicity caused significant financial losses and reputational harm to their business interests, seeking damages totaling approximately £300 million. The substantive hearing is scheduled for 2014.
This judgment addresses an application by the VT Claimants under CPR 31.17 for third party disclosure of five specific documents ("the Reports") prepared by the accounting firm Grant Thornton ("GT") on instructions of the Joint Liquidators of Oscatello Investments Limited ("Oscatello"). These Reports were shown to the SFO but were not permitted to be copied. The RT Claimants have not made a formal application but have agreed the present application covers all claimants.
The Joint Liquidators oppose disclosure on grounds of necessity/relevance, litigation privilege, and discretion. The background includes the complex liquidation of Oscatello and related companies, controlled by trustees of the Tchenguiz Discretionary Trust ("TDT"), with the main beneficiaries being the individuals identified as RT and his family. The Oscatello Companies engaged in equity/debt investments and derivatives trading, funded by Kaupthing Bank until its collapse in 2008, after which the Joint Liquidators were appointed.
The liquidation has involved extensive litigation across multiple jurisdictions. The VT Claimants have also threatened claims against the Joint Liquidators arising from the criminal proceedings initiated by the SFO, alleging misleading conduct by the Joint Liquidators to damage VT and the Tchenguiz Family Trust ("TFT").
The Reports at issue were commissioned by the Joint Liquidators and relate to various aspects of the Oscatello Companies’ financial and legal position, including litigation contemplated or pending in Guernsey and potential claims against various parties associated with the claimants.
Legal Issues Presented
- Whether the five Reports prepared by Grant Thornton and held by the Joint Liquidators are subject to disclosure under CPR 31.17.
- Whether the Reports attract litigation privilege and, if so, whether such privilege has been lost or waived.
- Whether disclosure of the Reports is necessary and relevant to fairly dispose of the claim or to save costs.
- Whether, assuming privilege does not apply or is lost, the court should exercise its discretion to order disclosure considering competing public interests, including confidentiality and pending or contemplated litigation.
Arguments of the Parties
Appellants' (VT Claimants') Arguments
- The Reports are highly relevant and likely to support their case or adversely affect the SFO’s case as they formed a core part of the information relied upon by the SFO in the investigation and preparation of the Information used to obtain warrants.
- The SFO did not make copies of the Reports but only took notes, so disclosure from the Joint Liquidators is the only way to have a complete picture of the information provided to the SFO.
- The VT Claimants allege the SFO uncritically accepted GT’s input despite GT’s lack of impartiality, making the Reports central to their allegations.
- The Reports are necessary to dispose fairly of the claim and to save costs.
- They reject the claim that litigation privilege applies to the Reports, arguing that the dominant purpose test is not satisfied and that the privilege claim is recent and unsubstantiated.
- They submit that confidentiality in the Reports has been lost as detailed notes from the Reports have been disclosed in open court and are in the public domain.
Respondents' (Joint Liquidators') Arguments
- Disclosure should be refused on grounds of necessity/relevance, litigation privilege, and discretion.
- Litigation privilege applies because the Reports were commissioned for the dominant purpose of obtaining information or legal advice in connection with pending or reasonably contemplated litigation.
- The Joint Liquidators are partners/directors of GT and have a legitimate interest in maintaining privilege over the Reports.
- The Reports relate to complex, pending, or contemplated litigation, including proceedings in Guernsey involving parties associated with the claimants.
- There is a strong public interest in preserving the confidentiality of documents produced for litigation purposes, especially where disclosure could be used adversely against the insolvent estate.
- The disclosure to the SFO was limited, and privilege has not been waived or lost; confidentiality remains intact despite the existence of notes in the public domain.
- Even if the court finds privilege does not apply, the court should exercise discretion against disclosure considering competing public interests.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| R (Prudential plc) v Special Commissioner of Income Tax [2013] 2 WLR 325 |
Accountants’ advice does not attract legal advice privilege; requirement to satisfy litigation privilege test. |
Confirmed that the Joint Liquidators must prove the dominant purpose test for litigation privilege. |
| United States of America v Philip Morris & British American Tobacco [2004] EWCA Civ 330 |
Litigation must be reasonably in prospect (more than a mere possibility) for privilege to apply. |
Used to assess whether the Reports were prepared for the dominant purpose of litigation reasonably in prospect. |
| Westminster International v Dornoch Ltd [2009] EWCA Civ 1323 |
Clarification of the dominant purpose test and evidential burden for litigation privilege. |
Applied to determine the sufficiency of evidence supporting the claim of litigation privilege. |
| West London Pipeline and Storage v Total UK [2008] 2 CLC 258 |
Burden of proof on party claiming privilege; requirement for specific evidence of dominant purpose. |
Considered in relation to the evidence provided by the Joint Liquidators’ solicitor and its adequacy. |
| Waugh v British Railways Board [1980] AC 521 |
Definition and scope of litigation privilege. |
Guided the court’s assessment of whether the Reports were produced for the dominant purpose of litigation. |
| Price Waterhouse v BCCI Holdings (Luxembourg) SA [1992] BCLC 583 |
Distinction between investigations to establish facts and privilege; dominant purpose must be litigation. |
Used to illustrate the high threshold for dominant purpose and that fact-finding alone does not attract privilege. |
| B v Auckland District Law Society [2003] 2 AC 736 |
Limited waiver of privilege does not necessarily cause loss of privilege. |
Referenced in argument regarding whether disclosure to the SFO caused loss of privilege. |
| British Coal Corporation v Dennis Rye Ltd (No 2) [1988] 1 WLR 1113 |
Disclosure of privileged documents to prosecuting authorities for limited purposes does not amount to waiver. |
Applied to support the position that disclosure to the SFO does not cause loss of privilege generally. |
| Three Rivers District Council v Governor and Company of the Bank of England [2005] 1 AC 610 |
Confidentiality is a precondition for privilege. |
Used to differentiate loss of confidentiality from waiver of privilege. |
| BBGP Managing General Partner Limited v Babcock & Brown Global Partners [2011] 2 WLR 496 |
Confidentiality as a distinct issue from privilege. |
Supported the view that loss of confidentiality extinguishes privilege. |
| Gotha City v Sotheby's [1998] 1 WLR 114 |
Confidentiality and privilege principles regarding disclosure to third parties and public domain. |
Considered in relation to whether the Reports remain confidential despite notes being in public domain. |
| NRG v Bacon & Woodrow [1995] 1 All ER 976 |
Confidentiality and privilege protection in communications. |
Applied to assess the confidentiality of the Reports despite limited disclosure. |
Court's Reasoning and Analysis
The court began by considering the necessity and relevance of the requested disclosure under CPR 31.17(3), concluding that the Reports are likely to support the claimants’ case or adversely affect the SFO’s case, given the central role the Reports played in the investigation and preparation of the Information used to obtain warrants. The court accepted that disclosure is necessary and appropriate, subject to confidentiality and privilege considerations.
Regarding litigation privilege, the court applied established principles requiring that documents must be created for the dominant purpose of pending or reasonably contemplated litigation. The court scrutinised the evidence provided by the Joint Liquidators, primarily the statement of their solicitor, Mr Verrill, who was not involved in the original preparation of the Reports.
The court found that the evidence did not sufficiently establish that any of the five Reports were produced for the dominant purpose of litigation. In particular, the first two Guernsey Reports were prepared to assist with understanding scenarios and litigation strategy but also for purposes independent of litigation. The other three Reports were prepared in contemplation of possible claims but lacked specificity and the prospect of litigation was at most a possibility rather than reasonably in prospect. The court emphasised the high threshold of the dominant purpose test and distinguished fact-finding or information gathering from privileged legal advice preparation.
The court also addressed the issue of loss of confidentiality, noting that detailed notes from some Reports were disclosed in open court and are in the public domain. However, it held that this does not amount to loss of confidentiality in the Reports themselves, as the disclosure was limited and not authorised by the Joint Liquidators. The court found that privilege had not been waived or lost by such limited disclosure to the SFO under statutory powers.
Overall, the court rejected the claim to litigation privilege over the Reports but recognised the importance of confidentiality and the competing public interests involved. The court invited the parties to agree on terms for confidentiality and use of the Reports if disclosure is ordered.
Holding and Implications
The court held that the Joint Liquidators' claim to assert litigation privilege over the five Reports fails. Consequently, subject to any agreed terms regarding confidentiality and use, the court is prepared to order disclosure of the Reports to the claimants.
The direct effect is that the claimants will gain access to the five Reports, which are relevant and necessary to the fair disposal of the claim. This decision does not create new precedent but applies established principles strictly, emphasizing the high threshold for litigation privilege and the distinction between fact-finding and privileged legal advice. The court also underscores the importance of protecting confidentiality in complex multi-jurisdictional insolvency and litigation contexts, balancing public interest considerations carefully.