The National Crime Agency v Perry & Ors

Neutral Citation Number: [2014] EWHC 3759 QB IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION Case No: HQ13X03198 Royal Courts of Justice Strand, London, WC2A 2LL Date: 12/11/2014 Before : THE HONOURABLE MR. JUSTICE WILKIE - - - - - - - - - - - - - - - - - - - - - Between : THE NATIONAL CRIME AGENCY - and - (1) MR ISREAL IGO PERRY (2) LEADENHALL PROPERTY LIMITED (3) MALLETT FORD INCORPORATED (4) CÔTE D’AZUR ESTATE LLC (as trustee of the HERITAGE TRUST) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Claimant Defendant Stephen Nathan QC, Sarah Harman, Donald Lilly (instructed by National Crime Agency) for the Claimant Philip Jones QC, Adil Mohamedbhai (instructed by Asserson Law Offices) for the Defendants Hearing dates: 6th November 2014 - - - - - - - - - - - - - - - - - - - - - Judgment Mr Justice Wilkie : Introduction 1. 2. 3. The Defendants apply for an order for disclosure and inspection of legal advice obtained by the NCA’s predecessor organisation (SOCA). The application is dated 8th October 2014. The evidence said to give rise to the entitlement to have this documentation disclosed is a witness statement of a Ms Oakley, a solicitor now acting for the NCA. The immediate legal context of the application is that the Claimant, having commenced a civil recovery claim against the Defendants on 25 th September 2012, served a notice of discontinuance on 15th May 2014. On 21st May 2014, Mr Justice Popplewell granted the NCA permission, “if and to the extent that such permission is required”, to discontinue its claim, and, in addition, made the following order: “13.1 Save as previously ordered otherwise, NCA pay the Defendants’ costs of the claim and of the PFO proceedings on the standard basis, such costs to be subject of detailed assessment if not agreed. 13.2 The Defendants shall have liberty to apply within 21 days of this order to vary the basis of the costs order under paragraph 13.1 above and/or to apply for pre-judgment interest on such costs.” On 11th June 2014, the Defendants applied for costs to be paid on an indemnity basis, including between the dates of 23rd May 2011 and 15th May 2014. The issue between the parties on the question of indemnity costs is whether the Claimant conducted the litigation unreasonably in a particular respect. It is said by the Defendants that the evidence of Ms Oakley, on behalf of the Claimant seeking to resist an order for costs on an indemnity basis, has amounted to a waiver of legal privilege such that I should order disclosure and inspection of certain limited categories of documents which otherwise would be governed by legal professional privilege. The background 4. 5. On 24th October 2007, the first Defendant was convicted in the District Court of Tel Aviv of theft by an authorised agent. The first Defendant was sentenced to 12 years imprisonment. On 5th February 2009, the Supreme Court of Israel upheld the convictions but reduced the first Defendant’s sentence from 12 to 10 years. On 23rd May 2011, the Supreme Court of Israel looked again at the case and, again, upheld the convictions. It is now accepted by both the Claimant and the Defendants that the effect of the lead judgment of the Supreme Court given by Justice Procaccia was to limit the amount found by the District Court to have been stolen by the first Defendant. The District Court had initially concluded that the sums stolen amounted to the total of insurance premiums levied against pensioners said to be the victims of the theft, a sum of in excess of DM300 million. The effect of the Procaccia judgment was that the amount found to have been stolen was the difference between the 6. 7. 8. 9. insurance premiums levied against the pensioners and the open market cost of such insurance as if provided by a legitimate independent third party insurer (“the Delta”). In September 2012, the Claimant commenced a civil recovery claim against the Defendants under part 5 of the Proceeds of Crime Act 2002, which is, effectively, a statutory tracing claim permitting the NCA to obtain an order, vesting in a trustee, property that can be traced to the proceeds of criminal activity. Prior to commencement of the civil recovery proceedings, the NCA’s predecessor (SOCA) had, on 8th August 2008, obtained a disclosure order against the first Defendant and, on 28th October 2009, it obtained a world wide property freezing order (PFO) from the High Court against the Defendants. In due course, on 25 th July 2012, the UK Supreme Court allowed the Defendants’ appeals, in respect of the disclosure order and PFO, by declaring that civil recovery orders under part 5 could only be obtained in respect of property located within this jurisdiction and it varied the PFO to exclude foreign situated assets. That gave rise to a change in the legislation, pursuant to the Crime and Courts Act 2013, which inserted schedule 7A into the Proceeds of Crime Act 2002, permitting civil recovery of assets located outside the jurisdiction in specific circumstances. Following upon the Supreme Court of Israel’s additional ruling of 23rd May 2011, the Defendants obtained a report from an Israeli legal expert, Dr Leshem, to the effect that the Procaccia judgment reduced the quantity of money found to have been stolen from the victims such that it now amounted to “the Delta”, a sum as yet unascertained. This report was sent to SOCA (the cash forfeiture team not the civil recovery team) on 22nd August 2011. On 29th November 2013, the NCA applied for leave to amend its points of claim in the civil recovery action. In support of that application it relied on a report obtained by it from another Israeli legal expert, Mr Horesh. His report agreed with Dr Leshem about the effect of the Procaccia judgment in the Israel Supreme Court of 23 rd May 2011. The NCA had, therefore, by that date, effectively conceded that it could no longer put forward a case in the civil recovery litigation based upon the District Court’s finding that DM300 million had been stolen by the first Defendant. The NCA’s application for permission to amend was refused by Popplewell J on 22 nd January 2014. The effect of his judgment was to require the NCA to calculate the Delta. On 15th May 2014 the NCA served notice of discontinuance in respect of its claim, which resulted in the order of Popplewell J on 21st May 2014, including his order in respect of costs. 10. At the heart of the application by the Defendants for costs on an indemnity basis between the date of the Procaccia judgment and the date of discontinuance of the action lies the assertion that the NCA has conducted the litigation unreasonably, in particular, by failing to obtain advice in respect of the effect of the Procaccia judgment and by continuing, in this litigation, to rely on the District Court’s judgment. On the information available to the Defendants when they launched their application for an order for costs measured on an indemnity basis, it was contended that it was unreasonable for the NCA to have failed to obtain independent Israeli legal advice when the NCA was first appraised of the additional hearing judgment. 11. In the evidence filed by the NCA, resisting the application for costs on an indemnity basis, Ms Oakley filed a witness statement on 19th September 2014. That witness statement includes the following passages, which have been the focus of the argument before me (emphasis added): “23. SOCA was made aware of the [additional hearing] judgment by the Israeli prosecutors on 31st May 2011. They provided the judgment in its original Hebrew, an English translation of the decision was obtained by SOCA on 22nd June 2011. Having received Israeli legal advice (in respect of which privilege is not waived) SOCA considered that the Procaccia judgment [i.e. the additional hearing judgment] left the factual findings of the Judge Caspi [i.e. the Judge who gave the District Court judgment] including the findings in respect of the amounts stolen by Mr Perry and the organisation unchanged. Subsequently through articles in the Israeli press in respect of the arguments made by Mr Perry in defence of a class action suit in Israel brought against him, the civil recovery legal team at SOCA became aware in broad terms of Mr Perry’s arguments in relation to the impact of the Procaccia judgment; namely that the Supreme Court had determined that only the “Delta” … had been stolen. SOCA discussed this argument with legal advisors in Israel. Given (a) the rejection of the appeal and Mr Perry’s “insurance evidence” (including the argument that no sums had been stolen at all); (b) SOCA’s own reading of the English translation of the judgment and (c) having received Israeli legal advice (as to which, again, privilege is not waived), SOCA considered that the Procaccia judgment did not alter the findings of Judge Caspi …” 12. Ms Oakley later said at paragraph 30 (emphasis added): “It was SOCA’s view that, certainly prior to receipt by the civil recovery team of Dr Leshem’s report, it had an adequate understanding of the Israeli judgments, including the Procaccia judgment. When the report was received by the civil recovery legal team in November 2012, the points of claim had already been filed (on 25th September 2012) and SOCA was awaiting the points of defence. It was considered the appropriate course would be to await the service of the defence and directions in the normal course before undertaking further Israeli law advice so that an expert could opine on both the defence and Dr Leshem’s report at the same time. That was particularly so given that SOCA had already considered in more general terms whether the arguments raised by Mr Perry in the context of the class action claim in Israel impacted upon Judge Caspi’s factual findings in respect of the amounts stolen, and it had been satisfied that those findings remained unaltered by the Procaccia judgment. This again was in the context of the previous Israeli advice regarding the Procaccia judgment and the seemingly plain wording of the judgment itself.” 13. The application for disclosure and inspection of the documents containing, or recording, the Israeli legal advice obtained on the two occasions in 2011 (June and November) referred to in paragraph 23 of Ms Oakley’s witness statement, is on the basis that it is contended that Ms Oakley has disclosed not only the fact that legal advice was obtained, as she has described, but also the content of that legal advice namely that the additional hearing before the Supreme Court had left the factual findings of the District Court unchanged. It is also contended that Ms Oakley has deployed that advice in resisting the application for an order that costs be awarded on an indemnity basis. It is said that this is a necessary implication from what Ms Oakley has said in paragraphs 23 and 30 of her witness statement. It is contended, therefore, that this amounts to a waiver of privilege (even though unintended) by Ms Oakley and that, accordingly, I should make the orders sought for discovery and inspection of the documents containing or recording that Israeli legal advice. The principles governing whether waiver of privilege has occurred 14. 15. I have been taken, carefully, by both counsel, through the extensive authoritative case law giving guidance on the concept of waiver of privilege. In the light of the way the argument has proceeded, it is unnecessary for me to refer in any detail to that detailed examination of the authorities. In my judgment, the principles have most conveniently and recently been summarised by Mr Justice Elias in certain passages in the judgment of the EAT which he gave in Brennan v Sunderland City Council [2009] ICR 479: “63 … The fundamental question is whether, in the light of what has been disclosed and the context in which disclosure has occurred, it would be unfair to allow the party making disclosure not to reveal the whole of the relevant information because it would risk the court and the other party only having a partial and potentially misleading understanding of the material. The court must not allow cherry picking, but the question is: when has a cherry been relevantly placed before the court? 64. Typically, as we have seen, the cases attempt to determine the question whether waiver has occurred by focusing on two related matters. The first is the nature of what has been revealed; is it the substance, the gist, content or merely the effect of the advice? The second is the circumstances in which it is revealed; has it simply been referred to, used, deployed or relied upon in order to advance the parties’ case? As Waller LJ observed in the Dunlop Slazenger case [2003] EWCA Civ 901. The principles are not altogether easy to discern, partly perhaps because of the vagueness of the language adopted – for example, sometimes reliance and deployment are used as separate terms and sometimes they appear to mean much the same thing – and partly because the cases are necessarily fact sensitive … 66. Having said that, we do accept that the authorities hold fast to the principle that legal advice privilege is an extremely important protection and that waiver is not easily established. In that context something more than the effect of the advice must be disclosed before any question of waiver can arise. 67. However, in our view, the answer to the question whether waiver has occurred or not depends upon considering together both what has been disclosed and the circumstances in which disclosure has occurred. As to the latter the authorities in England strongly support the view that a degree of reliance is required before waiver arises, but there may be issues as to the extent of the reliance…” Submissions and conclusions 16. 17. 18. 19. The Defendants contend that, by necessary implication, paragraphs 23 and 30 of Ms Oakley’s witness statement not only refer to the fact that independent Israeli legal advice was sought on two occasions in 2011 on the effect the Procaccia judgment had on the findings of fact about the amounts stolen by the District Judge, but, by implication, her evidence reveals the content of that advice and seeks to deploy it in rebutting the contention that the NCA conducted the various legal proceedings against the Defendants unreasonably and, in particular, between 23rd May 2011 (the date of the additional judgment of the Israeli Supreme Court) and 15 th May 2014 (the service of the notice of discontinuance on the Defendants). The Claimant’s position is one which has been carefully formulated. It is to the effect that the evidence of Ms Oakley “is what it is”. Her evidence, it is said, reveals the fact that independent Israeli legal advice was sought and “received” on two occasions in 2011 and that having “received” that legal advice SOCA considered that the Procaccia judgment left the factual findings of the District Court, including the amounts stolen, unchanged. On the second occasion the sources of information accumulated, which resulted in SOCA forming that view, included: the rejection, after that additional hearing, of the Defendant’s appeal; the argument of Mr Perry that no sums had been stolen at all; and SOCA’s own reading of the English translation of the Procaccia judgment. The Claimant contends that the evidence of Ms Oakley does not reveal to the reader what the Israeli advice was, and/or with what degree of firmness any such advice might have been given. Nor does Ms Oakley’s witness statement indicate, one way or the other, whether, and if so to what extent, that Israeli advice was consistent with, or contradictory to, the view which SOCA took as to the effect of the Procaccia judgment on the findings of fact of the District Court on the amount stolen. The Claimant, therefore, contends that Ms Oakley’s evidence does not even make reference to or reveal “the effect of” the Israeli advice received by SOCA, let alone its contents, nor does it reveal whether, or not, SOCA had regard to that advice and whether, or not, it adopted it or acted, to any extent, consistently with it, in adopting the view which it did on the effect of the Procaccia judgment on the amount stolen (until it took the opinion of Mr Horesh). The Claimant, therefore, says that the contents of Ms Oakley’s witness statement, as highlighted, fall short of amounting to waiver of legal privilege. Accordingly, legal privilege being an absolute right if asserted, it follows that I do not have any power to order disclosure or inspection of any document containing or recording that Israeli advice. In my judgment, the Claimant is correct in its analysis of Ms Oakley’s witness statement. She goes no further than to state that independent Israeli advice was “received” and that its receipt was part of the context in which SOCA formed, for itself, the view that the Procaccia judgment did not affect the District Court’s findings of fact on the amount stolen. The Claimant has adopted a very careful formulation in Ms Oakley’s witness statement, which falls short of even identifying for the reader the effect of the independent Israeli legal advice received, let alone deploying it. By so doing the NCA has chosen to limit, in this way, the evidence upon which Mr Justice Popplewell will have to consider, in this respect, whether to make an order for costs on an indemnity basis. That is a choice the NCA has made and it is fully entitled to make it. Accordingly, in my judgment, this application for disclosure and inspection of any document containing or recording the advice received by SOCA from the Israeli legal expert in June and November 2011 fails and is dismissed. 20. 21. 22. 23.