Tchenguiz case gives more guidance on scope of litigation privilege

CA judgment is next step in Tchenguiz damages claim

The Court of Appeal has recently provided further important guidance on the scope of litigation privilege. The guidance was contained in a judgment handed down on 20 February in Rawlinson & Hunter Trustees SA v Akers & Another, an appeal in the Tchenguiz brothers’ high-profile claim for damages against the Serious Fraud Office (SFO) arising from, inter alia, their successful judicial review.

Mr Justice Eder’s order of 31 July 2013 provided for the disclosure of five reports prepared by Grant Thornton that were shown to (but not copied by) the SFO as part of its investigation into the collapse of Icelandic bank Kaupthing.

The third-party disclosure application was brought against two Grant Thornton partners in their capacity, from February 2010, as joint liquidators of Oscatello Investments Limited, a BVI company. The liquidation has been concerned with litigation in London, BVI, Isle of Man and Guernsey. The reports were commissioned by the joint liquidators and were retained by them. The SFO relied on the content of the reports in their flawed application for warrants to search Vincent and Robert Tchenguiz’s homes and business premises.

Mr Justice Eder decided that it was appropriate to make disclosure of the reports. Plainly the reports were relevant to the claimants’ case and the judge rejected the joint liquidators’ assertion that litigation privilege attached to the documents. The liquidators appealed.

Lord Justice Tomlinson (with whom Lord Justices Moore-Bick and Ryder agreed) ruled that Mr Justice Eder was correct in finding that the claim to litigation privilege was not made out: “The mere fact that a document is produced for the purpose of obtaining information or advice in connection with pending or contemplated litigation, or of conducting or aiding in the conduct of such litigation, is not sufficient to found the claim for litigation privilege. It is only if such purpose is one which can properly be characterised as the “dominant purpose” that such claim for litigation privilege can properly be sustained.”

The judges emphasised that, where documents are prepared for multiple purposes, it is incumbent on the party asserting the privilege to establish on the evidence that the litigation is the dominant purpose.

The judgment also provides that, even in contentious liquidations, it cannot be right that everything a liquidator does can be assumed to be done in contemplation of litigation. Litigation must be “reasonably in prospect” when a document is created for a claim to litigation privilege to be sound. This is a heavy burden to discharge and is a particular challenge where the issue has not been fully considered at the time the relevant document was first created. A party asserting such a privilege claim must be able to show that they were aware of circumstances which render litigation between them and a particular party a real likelihood rather than a mere possibility. It is not enough simply to identify potential causes of action or defendants to potential claims.

The reports will now be provided to the claimants.

Sean Jeffrey, partner, regulatory litigation practice, Stephenson Harwood