England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Commercial Court

		St. Dunstan's House, Fetter Lane, London, E.C.4.
		Thursday, 3rd December 1998

MR. JUSTICE RIX: In this case the plaintiff, Dubai Aluminium Company Limited ("Dubal"), which operates an aluminium smelter in Dubai, sues among other defendants, Mr. Riyadh Al Alawi, the first defendant, in respect of his conduct as its sales manager during the years 1984 to 1993.

Dubal makes essentially three claims against Mr. Al Alawi. The first is a claim for money had and received in the sum of $804,000. Mr. Al Alawi admits that he received this money but alleges that he gave consideration for it. Dubal alleges that he gave no consideration and that the money was paid by a company then called Marc Rich & Co AG ("Richco") as part of a dishonest scheme hatched, inter alios, by Dubal's chief executive, Mr. Ian Livingstone, under which Richco pre-bought Dubal's aluminium at a discounted price and in return provided finance in a very large sum for the construction of a fourth potline, all on what are said to be disadvantageous terms to Dubal.

The second claim is for damages for breach of Mr. Al Alawi's contract of employment in the sum of approximately $8.5 million representing the total of all such payments by Richco to various Dubal employees and others arising out of this allegedly dishonest transaction.

The third claim is to recover secret commissions in an unquantified sum which it is alleged it must be inferred that Mr. Al Alawi obtained out of his employment with Dubal. Among the grounds put forward for this inference is the allegation that during the years he was employed by Dubal, Mr. Al Alawi accumulated far more than he officially earned. It is also alleged that he participated during this period in the making by Dubal of highly disadvantageous agreements, and that his fortune is the result of pay-offs for such involvement.

The background to these claims, at any rate so far as they involve other parties such as Mr. Livingstone and Richco and their participation in the Richco Consultancy Agreement, may be found in Dubai Aluminium Company Limited v Salam (unreported, 17 July 1998).

On 28 July 1998 I made an Anton Piller order and a worldwide Mareva order against Mr. Al Alawi. I am very shortly to hear Dubal's summons under RSC O14 for summary judgment against Mr. Al Alawi on the first claim for $804,000 and Mr. Al Alawi's summons to discharge the Mareva in whole or in part. One of the grounds put forward by Mr. Al Alawi for such discharge is that in investigating his finances and assets Dubal has employed agents who have acted in contravention of the Data Protection Act 1984 or Swiss Banking laws, or have trespassed on Mr. Al Alawi's property and converted documents fetched out of his dustbins.

In this connection, Mr. Al Alawi has sought discovery under RSC O24 r7 of the reports and other documents relating to such investigations as to his financial affairs by Page Associates, who are a firm of private investigators. O24, r7 permits discovery of particular documents "at any time". It is accepted by Dubal that such documents are relevant and discoverable, but it is alleged that legal professional privilege attaches to them. It is accepted by Mr. Al Alawi that prima facie such privilege would attach to them, but for the fact that they are part of or relevant to criminal or fraudulent acts or purposes or acts or purposes which are otherwise iniquitous.

In this connection, Mr. Clive Freedman QC, who appears on behalf of Mr. Al Alawi invokes the doctrine, in itself well-established, that, in the words of Lord Sumner in O'Rourke v Derbishire [1920] AC 581 at 613:

"No-one doubts that the claim for professional privilege does not apply to documents which have been brought into existence in the course of or in furtherance of a fraud to which both solicitor and client are parties. To consult a solicitor about an intended course of action in order to be advised whether it is legitimate or not, or to lay before a solicitor the facts relating to a charge of fraud, actually made or anticipated, and make a clean breast of it for the object of being advised about the best way to meet it, is a very different thing from consulting him in order how to plan, execute or stifle an actual fraud."

This doctrine, or exception to the general rule of legal professional privilege, is exemplified in a number of decisions such as R v Cox (1884) 14 QBD 153, Williams v Quebrada Railway Land & Copper Co [1895] 2 Ch 751, and more recently in Barclays Bank PLC v Eustace [1995] 1 WLR 1238.

In R v Cox at 167, Stephen J said referring Lord Bougham's judgment in Greenough v Gaskell 1 My & K 98, that

"The reason on which the rule [of privilege] is said to rest cannot include the case of communications, criminal in themselves, or intended to further any criminal purpose for the protection of such communications cannot be possible otherwise than injurious to the interests of justice and to those of the administration of justice. Nor do such communications fall within the terms of the rule. A communication in furtherance of a criminal purpose does not 'come into the ordinary scope of professional employment'. A single illustration will make this plain. It is part of the business of a solicitor to draw wills. Suppose a person, personating someone else, instructs the solicitor to draw a will in the name of the supposed testator, executes it in the name of the supposed testator, gives the solicitor his fee, and takes away the will. It would be monstrous to say that the solicitor was employed in the 'ordinary scope of professional employment."

In Ventouris v Mountain [1991] 1 WLR 607 at 611, Bingham LJ spoke of the rule of privilege existing "in the absence of iniquity". It would seem that the concept of iniquity covers "crime or fraud" (R v Cox at 165), the "criminal or unlawful" (Bullivant v A-G for Victoria [1901] AC 196 at 201) and "all forms of fraud and dishonesty such as fraudulent breach of trust, fraudulent conspiracy, trickery and sham contrivances" (Crescent Farm (Sidcup) Sports Limited v Sterling Offices Limited [1972] 2 Ch 553 at 565: see Barclays Bank v Eustace at 1249CD per Schiemann LJ). In the latter case the court of appeal held that the effecting of transactions at an under value for the purpose of prejudicing the interests of a creditor (see section 423 of the Insolvency Act 1986) could be regarded as "iniquity" in this context, and that it was sufficient for the loss of privilege that there existed a "strong prima facie" case of such a purpose.

On the other hand Schiemann LJ also cited Goff LJ in Gamlen Chemical Co (UK) Limited v Rocham Limited (unreported CA 7 December 1979) to the following effect:

"The court must in every case, of course, be satisfied that what is prima facie proved really is dishonest, and not merely disreputable or a failure to maintain good ethical standards, and bear in mind that legal professional privilege is a necessary thing and is not likely too be overthrown, but on the other hand the interests of victims of fraud must not be overlooked. Each case depends on its own facts."

Thus in Crescent Farms the doctrine was not extended to the tort of inducing breach of contract.

The matters complained of in the present case, based upon Dubal's own evidence, and the very detailed information there found about Mr. Al Alawi's bank, credit card and telephone accounts, including the admission made by Dubal's solicitor, Mr. Cranston, in his third affidavit, that information in relation to certain of Mr. Al Alawi's accounts had been obtained by a sub-agent instructed by Page Associates making what Mr. Page of that firm called "pretext calls" to the banks concerned, are as follows. It is submitted that such information was by its nature confidential, and that access to it was unauthorised; that other than the reference to such pretext calls, no explanation had been provided as to how it had been provided as to how it had been obtained, and that in the circumstances very strong inferences were to be drawn that the information had been obtained by means of false representation and impersonation, and that criminal offences had been committed, either in England under the Data Protection Act 1984 or in Switzerland under the banking secrecy laws there in force.

Under section 5(6) of the Data Protection Act 1984 (as amended by the Criminal Justice & Public Order Act 1994)

"A person who procures a disclosure to him of personal data, the disclosure of which to him is in contravention of sub-section (2) or (3) above, knowing or having reason to believe that the disclosure constitutes such a contravention, shall be guilty of an offence."

As to Swiss law, Mr. Al Alawi relies on the evidence of a Swiss attorney, Ms Michelle Caratsch who cites article 47 of the Federal Law on Banks & Savings Institutions of 8 November 1934 to the following effect:

"Whoever discloses a secret confided to him in his function as a member of a corporate body, an employee, a mandatory, a liquidator or a commissioner of a bank, as an observer of the Banking Commission, as a member of a corporate body or employee of a recognised auditing body, or discloses a secret to which he has become privy in this function, or whoever attempts to instigate such a breach of professional secrecy, is punishable with imprisonment up to six months or with a criminal fine of up to CHF50,000."

She goes on to state that the law also contains provisions making it a criminal offence punishable law for someone who does not himself owe a duty of secrecy to attempt to instigate a breach of article 47, and that the violation of the duty of secrecy is punishable whether it is committed intentionally, recklessly, or negligently.

This evidence is not answered on behalf of Dubal. Indeed, Mr. Pelling, who appears for Dubal, has not been concerned to answer Mr. Al Alawi's complaints on the facts, but rather has taken a stand in principle to which I will refer below. In the circumstances, while I do not think that Mr. Pelling accepts the strictures made, and I am certainly in no position to find exactly what has been done or whether Dubal's solicitors or Page Associates themselves had foreknowledge of such matters, nevertheless I believe that I can find there to be a strong prima facie case of criminal or fraudulent conduct in the obtaining of such information concerning Mr. Al Alawi's accounts, and indeed in the light of Mr. Pelling's approach to his submissions I think I can proceed for present purposes on the assumption that such conduct has occurred. In my judgment such conduct constitutes crime, fraud or iniquity within the scope of the doctrine discussed above.

In saying this, I put on one side a further complaint by Mr. Al Alawi that his dustbins had been searched and documents obtained from them and copied before being put back, which conduct Mr. Freedman submits constitutes the torts of trespass and conversion and also falls within the scope of the doctrine. In my judgment, however, such civil wrongs do not amount to crime, fraud or iniquity.

Mr. Pelling submits, however, that the conduct complained of cannot give rise to loss of legal professional privilege for the documents generated by it, even though such conduct is to be characterised as crime, fraud or iniquity. He points out that no authority has extended the exception to privilege this far, and that all the cases which uphold it are concerned with instances where solicitors have become involved, whether innocently or not, with the planning or carrying out of iniquitous acts, such as a fraud or crime which have themselves become the subject matter of litigation. Secondly, he submits that any extension of the exception to privilege would be inconsistent with the principle by which relevant evidence is admissible however it is come by. Thirdly, he submits that the ramifications of the extension of an exception to privilege contended for was dangerously uncertain.

For the purposes of his second submission, Mr. Pelling cited the well-known case of Karuma v R [1955] AC 197. There Goddard CJ said at 205:

"In their Lordships' opinion the test to be applied in considering whether evidence is admissible is whether it is relevant to the matters in issue. If it is, it is admissible and the court is not concerned with how the evidence was obtained."

Lord Goddard then cited Crompton J in R v Letham (1861) Cox

Criminal Cases 498 at 501:

"It matters not how you get it, if you steal it even, it would be admissible."

In my judgment, it has to be recognised that there is a clash of principle and public interest in this area. There is of course the very strong public interest in legal professional privilege for which I need not cite authority. There is also the public interest, no less strong, in combating crime or fraud and in protecting the victims or potential victims of it. Thirdly, there is the public interest, reflected in Karuma, in trying cases on relevant evidence in the attempt to arrive at a true and just determination at trial. How can these interests best be reconciled?

I acknowledge that no case has gone so far as Mr. Freedman now submits I should go in extending the exception to privilege on which he relies. On the other hand, the exception itself is an established one, and I know of no case in which the current issue has arisen for decision. That the problem of data protection is a modern one is reflected in the relatively recent date of the Data Protection Act, and in the fact that the ramifications of that legislation are only still more recently becoming clearer: see for instance the advice issued by the Bar Council in July 1997 headed "The Data Protection Act 1984 and the Bar" set out at page 121 of Gee on Mareva Injunctions and Anton Piller Relief, 1998, 4th edition.

It seems to me that if investigative agents employed by solicitors for the purpose of litigation were permitted to breach the provisions of such statutes or to indulge in fraud or impersonation without any consequence at all for the conduct of litigation, then the courts would be going far to sanction such conduct. Of course, there is always the sanction of prosecutions or civil suits, and those must always remain a primary sanction for any breach of the criminal or civil law. But it seems to me that criminal or fraudulent conduct for the purposes of acquiring evidence in or for litigation cannot properly escape the consequence that any documents generated by or reporting on such conduct, and which are relevant to the issues in the case, are discoverable and fall outside the legitimate area of legal professional privilege. It is not as though there are not legitimate avenues which can be sought with the aid of the court to investigate (for instance) banking documents. That apparently is true in Switzerland as well. In any event, the material being investigated is usually material which falls within the other party's possession or control, and which in all probability he will in due course be obliged to disclose himself. In such circumstances, it does not seem to me to be too great an intrusion on legal professional privilege to require documentation such as is in question in this case should be disclosed. Otherwise the position would be that the party employing the criminal or fraudulent agent would have it entirely within his own power to decide which of the criminally or fraudulently acquired information he was willing to rely on and disclose and which he was not. Where such a party will be asking the court to make inferences from such material, it is only fair that such material should be seen as a whole.

In my judgment the Karuma principle is consistent with this view, rather than against it. That principle is concerned with vindicating the truth with the aid of relevant evidence, rather than excluding such evidence on the ground that it has been improperly come by. That principle cannot be said to require privilege even where crime or fraud has been committed to obtain information.

Ultimately, it seems to me that criminal or fraudulent conduct undertaken, for the purposes of litigation falls on the same side of the line as advising on or setting up criminal or fraudulent transactions yet to be undertaken as distinct from the entirely legitimate professional business of advising and assisting clients on their past conduct, however iniquitous. In this connection the extracts that I have cited above from R v Cox at 167 appear to me to lend support to my conclusion. I therefore think that the documents sought in the present case are in principle within the established exception.

As to the extent of the disclosure required in such a case, that can always raise difficult questions, but the problem is not a new one. It has to be solved on a case by case basis, and even on a document by document basis, in accordance with the principles laid down in The Good Luck [1992] 2 LLR 540, and G. Capital Corporate Finance Group Ltd. v. Bankers Trust Co. [1995] 1 WLR 529. See also The Segheera [1997] 1 LLR, 160.

Although I have read the material in question, I have not re-read it in the light of that judgment, and there is still an opportunity for you, Mr. Pelling, for instance, to make submissions as to the extent of the disclosure which I have in principle said ought to be given. For instance, I have in mind, speaking from memory, that there are some documents there which relate to the "dustbin" point rather than to the other point, on which I am prepared to give relief.

MR. PELLING: Yes, and I think also there are references to other material where it is not obvious how it has been sourced, and which has not been the subject of specific evidence.

MR. JUSTICE RIX: I think you ought to have an opportunity to, as it were, consider my judgment and the documents in question, albeit a brief opportunity, because I suspect that Mr. Freedman will want to see the material which is properly disclosable in time for Monday's application.

MR. PELLING: Yes.

MR. JUSTICE RIX: But if we can address the matter again by the end of the day so that I can make a decision, if not tonight at any rate by first thing tomorrow morning, I think that will answer all necessities.

MR. FREEDMAN: Yes. We would hope to have such documents as we were entitled to have under your Lordship's judgment some time tomorrow morning in order to be able to work on it in preparation for Monday.

MR. PELLING: I would hope to be able to make some sensible comment on that perhaps after the luncheon adjournment.

MR. JUSTICE RIX: The next item on the agenda is your motion to commit.

MR. FREEDMAN: My Lord, may I deal with the question of costs now?

MR. JUSTICE RIX: You can deal with it now.

MR. FREEDMAN: My Lord, I respectfully submit this is an entirely self-contained application standing free of anything else. There have been a significant amount of costs incurred in relation to it, and I would respectfully submit that those costs ought to be paid by the Plaintiff to the First Defendant.

MR. JUSTICE RIX: Yes. Can you resist that, Mr. Pelling?

MR. FREEDMAN: My Lord, I would also invite your Lord, in view of the self-contained nature of the application, and perhaps having regard to the nature of the conduct that was referred to, to order that the costs be paid forthwith.

MR. JUSTICE RIX: Yes.

MR. PELLING: My Lord, I do not oppose an order as to costs. I oppose the application that the costs be paid forthwith, and I also apply for leave to appeal.

Dealing first with the taxed and paid forthwith point, my Lord, the point is a novel one. There is no authority on it, and the matter has been dealt with as a matter of principle. In those circumstances, in my submission, the matter is properly dealt with by an order for costs in the ordinary way.

Secondly, so far as leave to appeal is concerned, again the matter has been argued as a matter of principle. The point is a novel one, and it is one of general importance.

MR. JUSTICE RIX: On the assumption that leave to appeal is either given by me or applied for if not given by me, how would the matter be proceeded with?

MR. PELLING: My Lord, the answer to that lies very much in my having a little opportunity to discuss the matter with my solicitors as part and parcel of the review of the material over the luncheon adjournment. It may be that, having reviewed the material, a pragmatic decision is taken.

On the other hand, it may be, having reviewed the material, the view is take that the matter ought to be tested elsewhere, and if it is right that it should be tested, because it raises a novel point of general importance, then the pragmatic difficulties that arise as a result of it ought not to interfere with that determination.

MR. JUSTICE RIX: What does Mr. Freedman say?

MR. FREEDMAN: My Lord, I do not accept that the fact that it has not arisen before makes it a matter of public importance. It would be of public importance if there was some doubt about which way the decision should go, but, on my Lord's judgment, consistent with all principle, this falls within the very centre of the exception to legal professional privilege, and therefore there is not anything that requires or justifies a review, unless a different court takes a different view, but that is a matter for them and not for my Lord.

MR. JUSTICE RIX: I do not know if there is anything further you want to say?

MR. PELLING: My Lord, no. Your Lordship has the points.

MR. JUSTICE RIX: My view is that I cannot say that it is without interest in principle. It is not an exercise of my discretion but, on the other hand, I think that, given the structure of the present state of this litigation, if there is to be any appeal it is one that you have to ask the Court of Appeal to advance, and you would have to do so immediately.

MR. PELLING: My Lord, for practical reasons, I obviously cannot give much consideration to that before the luncheon adjournment. Perhaps the way forward may be to review the position after lunch.

MR. JUSTICE RIX: Yes.

MR. PELLING: Leaving me to make an appropriate application if necessary to the Court of Appeal tomorrow.

MR. GOURGEY: My Lord, before we finish on the question of costs, since I think this was a hearing in chambers I can ask for a certificate for two Counsel?

MR. JUSTICE RIX: Yes. Can you oppose that? No. I will give you your costs, certificate for two Counsel, but I will not make an order that it be paid forthwith.