Istil Group Inc & Anor v Zahoor & Ors

[2003] EWHC 165 (Ch) IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION Before MR JUSTICE LAWRENCE COLLINS Between HC 02 C 02711 Royal Courts of Justice Strand London WC2A 2LL Friday, February 14, 2003 (1) ISTIL GROUP INC (2) METALSUKRAINE CORPORATION LIMITED and Claimants (1) MOHAMMAD ZAHOOR (2) REVENTOX CONSULTING LIMITED Defendants and Between MOHAMMAD ZAHOOR and Part 20 Claimant (1) ISTIL GROUP INC (2) INTERNATIONAL STEEL AND TUBE INDUSTRIES LIMITED Part 20 Defendants JUDGMENT Approved by the Court for handing down Mr Andrew Green (and Mr Ian Mill QC on the further hearing) (instructed by Schillings) for the Claimants Mr John Higham QC (of Stephenson Harwood) for the Defendants I direct that pursuant to CPR PD 39 PARA 6.1 no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic. ……………………………………………………… (Mr Justice Lawrence Collins) /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr Mr Justice Lawrence Collins: I 1. 2. 3. 4. 5. 6. 7. 8. Introduction This is an application by the claimants to restrain the use of e-mail correspondence which the defendants have obtained from a person (whose identity is, apparently, not known to either party) with whom the claimants say that they have been conducting privileged communications with a view to obtaining evidence for use in the action. It raises a novel point on the extent to which remedies are available to a party to restrain the use of privileged communications with a witness, or potential witness, when the latter chooses to disclose them to the opposing party. The claimants are part of the ISTIL group, which principally carries on business in steel trading and manufacturing and stevedoring operations. Two directors of the claimants are Mr Sohail Masood (“Mr Masood”), and Win Viriayprapaikit. The latter represents the shareholder (a Hong Kong company) of 36.7% of the shares in ISTIL Guernsey. Mr Masood owns (or claims to own) a small shareholding in ISTIL Guernsey. The first defendant (“Mr Zahoor”) was the other director of both claimants. He is, through a BVI company owned by his family trust, a 49% shareholder in ISTIL Guernsey, but in de facto control through his control of nominee shareholdings. The second defendant (“Reventox”) was incorporated in Cyprus in February 2002. Mr Zahoor is the beneficial owner of Reventox through a nominee company. The second claimant (“MCL”) had the benefit of a contract dated October 19, 2001 with an entity owned by the Ukrainian Government, the State Enterprise Specialized Foreign Trade Firm (“Progress”). The agreement was to last until at least June 30, 2002 and MCL was to receive varying amounts of commission on sales by Progress to Pakistan of military equipment manufactured in the Ukraine. In return MCL was to provide what were described as consultancy services. The claimants say that this contract (under which the claimants say that they would, or could, have earned many millions of dollars) was diverted to Reventox by Mr Zahoor. The claimants claim relief against both defendants on the basis of the alleged breaches of Mr Zahoor’s contractual and fiduciary duties to the claimants. On September 20, 2002, I made a worldwide freezing and asset disclosure order against the defendants upon the without notice application of the claimants, which has been continued on agreed terms by other judges of this Division. The contested application for continuance of the order was originally due to be heard in early December 2002, but is now due to be heard at the end of this month. The defendants deny diversion, and maintain that Mr Zahoor and Mr Masood (and also MCL’s Chief Financial Officer) orally agreed that MCL would be moved out of the ISTIL group so that the group’s core business would not be affected by the stigma of arms dealing; that Mr Zahoor has fully and properly accounted to the claimants in respect of the Reventox agreement with Progress; that no further commissions have been paid by Progress to Reventox or to Mr Zahoor or otherwise to their order pursuant to the Reventox agreement with Progress; and that it is very unlikely that any further payments will become due to Reventox or be paid to Reventox or Mr Zahoor. /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr II 9. 10. 11. 12. 13. The state of the evidence as at November 29, 2002 The importance of the date of November 29, 2002 is that this was the date on which the claimants produced important evidence in support of their contention that Mr Zahoor had diverted significant business to Reventox. One of the crucial issues which has emerged is whether the Reventox/Progress agreement encompassed commission arrangements for the sale of power-packs (ie engines) by Progress to the Pakistani Government for Al-Khalid tanks at a commission of 14% (as the claimants contend) or whether it related to hulls for the tanks at a rate of 10% (as the defendants contend). The practical point is that it is accepted (at least for the purposes of this application) that there was a contract between Progress and the Pakistani Government for the sale of power-packs at a price of about $93 million, and therefore if there was a commission arrangement between Progress and Reventox which encompassed these products, very substantial commission would have been due to Reventox. The defendants say that there was no such commission arrangement for power-packs. There was a commission arrangement for hulls between Progress and Reventox, but there was no contract between Progress and the Pakistani Government for the sale of hulls: the only contract on which commission was payable related to equipment, spare parts etc. for the establishment of base repair facilities for tanks, on which the only commission payable was 1%, for which Mr Zahoor has accounted to the claimants. On September 20, 2002 (in support of their application for a freezing order) the claimants relied upon, amongst other documents, a draft Services Agreement between Progress and Reventox (acting through Mr Zahoor), which had been obtained by the claimants from a computer in the Ukraine in mid May 2002, together with numerous draft Appendices to the Agreement. The first of these draft unexecuted Appendices (“the draft Appendix 1”) related specifically to power-packs for Al-Khalid tanks. On that day Mr Masood swore his first affidavit in support of the application for a worldwide freezing order and a disclosure order. He claimed that Mr Zahoor succeeded in getting Progress to sign at least one agreement with Reventox, but stated that the claimants did not have a copy of any signed agreement between Progress and Reventox. But he exhibited the draft Services Agreement between Progress and Reventox and stated that the draft Appendix 1 to that Agreement appeared to relate to power-packs for Al-Khalid tanks, related spare parts, tools etc, and said that in section 3 the draftsman had provided for the Services Cost amount to be 14% of the cost of the contract. 14. Mr Masood explained that he believed that a substantial letter of credit (for $93.435 million) had been opened by Progress in favour of the Pakistani government relating to Al-Khalid tanks. In that affidavit Mr Masood also attached a list of assets of Mr Zahoor which he said had been sent to his e-mail account anonymously, and unsolicited, by somebody signing himself or herself “ISTIL Friend”. 15. 16. On the same day (September 20, 2002) I made the freezing and disclosure orders on the without notice application. On September 30, 2002, Mr Zahoor swore his first affidavit in compliance with the disclosure order. In that affidavit, in response to the order to provide particulars of all agreements under which military equipment had been supplied to Pakistan, he /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr 17. 18. 19. 20. 21. disclosed a Services Agreement dated April 1, 2002 between Progress and Reventox together with 13 appendices and a protocol. The Services Agreement provided that the subject matter of the agreement was the provision by Reventox of the services specified in section 1.2, which were various marketing and consulting services, and section 1.5 provided that a description of each separate lot of goods, sale of which required the services, would be given in a relevant appendix. The signed and dated Appendix 1 is expressed to be in respect of hulls for Al-Khalid tanks, and not to power-packs (“the Zahoor Appendix 1”). Section 3 provided that the services cost amount would be 10% of the amount of the cost of the contract. The appendix was to be valid until April 1, 2003. Appendix 3 related to equipment, spare parts etc. for the establishment of base repair facilities for tanks, and section 3 provided that the services cost amount would be 1% of the cost. In the same Affidavit, Mr Zahoor asserted that only Appendix 3 (base repair workshop facilities) had been fulfilled and that the money received by Reventox was in relation this Appendix. In each of his affidavits Mr Zahoor has stated that there is no agreement between Progress and Reventox in relation to power-packs for Al-Khalid tanks. He says that what Mr Masood found in May 2002 in relation to Al Khalid tanks was a draft appendix relating to tank power-packs which he had prepared in or around mid-March 2002 in the hope of reaching an agreement with Progress that Reventox would be the agent for Progress in the negotiation of such a contract. But he says that no agreement was in fact reached. On October 9, 2002 Mr Masood swore his second affidavit in support of an application for cross-examination of Mr Zahoor on his affidavit. In that affidavit Mr Masood maintained his position that an agreement had been signed between Progress and Pakistan in relation to power-packs for the Al-Khalid tanks, and exhibited a letter of credit dated June 17, 2002 from the National Bank of Pakistan to the First Ukrainian International Bank in the amount of US$93,435,000 relating to power-packs. He said that Mr Zahoor had provided untrue and incomplete information. He also said that on about October 8 he received a fax with details of the letter of credit from the anonymous source “ISTIL Friend”. On November 29, 2002, Mr Masood swore a third affidavit in support of the claimants’ application to continue the freezing order, and answered Mr Zahoor’s statement that there was no agreement between Progress and Reventox in relation to power-packs. Mr Masood exhibited what he stated he believed to be the true Appendix 1 to the Reventox/Progress consultancy agreement (“the Masood Appendix 1”). The Masood Appendix 1, which is executed by both Progress and Reventox, is in respect of 1200 HP power-packs with multiple reverse speed transmission for Al-Khalid tanks. 22. What he said in that affidavit was this (para 9): “In fact a copy of what I believe to be the true Appendix 1 to the Reventox/Progress contract is exhibited at Tab 1 of ‘SM3’. A copy of the true Appendix 2 for base repair facilities for T-80UD tanks is at Tab2 of ‘SM3’. Copies of the primary contracts between HIT of Pakistan and Progress concerning the actual supply of the goods to which these Appendices refer are at Tab 3 of ‘SM3’. These two Appendices were /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr faxed by ISTIL Friend at 15:13 on 28th November 2002 to my solicitors, Schillings. The contracts were sent by e-mail by ISTIL Friend on 17th November 2002.” 23. 24. 25. 26. The claimants have refused to disclose the opening pages of the fax of November 28, 2002 from ISTIL Friend on the ground that it is privileged. The claimants have amended their Particulars of Claim to include the allegation that Mr Zahoor lied on oath when stating that no agreement had ever been concluded between Reventox and Progress in relation to power-packs for Al-Khalid tanks. The claimants also allege that Mr Zahoor has conspired with Progress to deceive the claimants and the court in presenting as genuine the Zahoor Appendix 1 which refers to Al-Khalid hulls rather than power-packs. The application for the continuation of the freezing order was scheduled for December 6, 2002. As at November 29, 2002 the state of the evidence was that the claimants had produced a draft Appendix 1, and the executed Masood Appendix 1, each indicating a commission arrangement for power-packs, and the defendants had produced the Zahoor Appendix 1 which related only to hulls, which they said had never become operative because there never was a contract for the sale of hulls on which commission was payable. There was therefore an acute conflict of evidence as to the genuineness of the Zahoor Appendix 1. III The defendants obtain the ISTIL Friend e-mails 27. Mr Cruddace, a partner in Schillings, the claimants’ solicitors, has given evidence that Mr Masood’s unequivocal instructions are that he does not know ISTIL Friend’s identity. On November 15, 2002, Schillings provided Stephenson Harwood, the solicitors for the defendants, with the e-mail address of ISTIL Friend. 28. 29. On November 19, 2002 Mr Zahoor sent an e-mail to this address: “Dear Sergei, our friend Sohail is trying to pose that you are culprit although he is the one. He even does not know the correct spelling of your name.” The evidence of Stephenson Harwood is that Mr Zahoor has told them that, having seen the e-mail address, he believed that it was from an e-mail account that had been set up to look as if it belonged to a former executive of Donetsk Steel Works (DMZ), which was managed by the ISTIL group, who had been sacked from his position by Mr Zahoor in January 1998. Mr Zahoor’s reason for believing that the account had been set up to give this impression was that the stem of the e-mail address is an incorrect spelling of that individual’s surname. On December 5, 2002, Stephenson Harwood informed Schillings that Mr Zahoor had sent an e-mail to the e-mail address with which they had been provided in correspondence, and that in consequence Mr Zahoor had been sent by ISTIL Friend a series of copy e-mails, which Stephenson Harwood attached to their letter. They asked Schillings whether it was contended that the documents were privileged and if so, on what basis. They stated that they thought that “for obvious reasons, we do not believe that any privilege ought to attach to these documents”. 30. Schillings replied that the documents were clearly protected by litigation privilege, and required the documents to be handed over. On the same day Stephenson /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr Harwood replied to say that their clients disputed the genuineness of the copy documentation produced from anonymous sources. It was suggested that the creation of the documents, whether known to Schillings or otherwise, was for the purpose of assisting their clients in obtaining forged documents for the purposes of advancing their case, and in those circumstances, the documentation would fall into the “fraud” exception to the privilege rule. In relation to one of the e-mails (to which I will refer later) Stephenson Harwood said that it was self-evident that it was strongly suggestive of a fraudulent purpose, and that it appeared from the e-mail that both Schillings and their clients were in possession of a further faxed version of Appendix 1 which was different to the Masood Appendix 1 exhibited to Mr Masood’s third affidavit. Schillings appeared to have two different faxed versions of Appendix 1 and that their clients had sought to hide this fact from the court. They envisaged no other explanation than fraud and asked for an explanation. IV 31. The ISTIL Friend e-mails The ISTIL Friend e-mails are copies of e-mail correspondence between either Mr Masood, Mr Axelrod (a United States lawyer acting for the ISTIL group) or Mr Cruddace of Schillings on the one hand, and ISTIL Friend on the other hand. 32. The e-mails are as follows: October 9 Mr Masood sent an e-mail to the e-mail address serdea@ukr.net, addressing the recipient as “Dear Friend” and stating: “Need info and papers and name of the new company they formed to replace Reventox.” November 3 Mr Masood wrote again addressing the recipient as “Dear ISTIL friend” and stating: “You have been of a great deal of help in the past, and it is much appreciated. To go forward, we need to have lawyers ask you some questions. Are you willing to help us further?” November 8 On this date Mr Masood sent an e-mail to the same e-mail address, but Mr Masood has sworn an affidavit to the effect that it was intended for his lawyer, Mr David Axelrod, of Schwab, Williamson and Wyatt (Portland, Oregon). The e-mail stated “Do not keep any of this information. Delete everything. I am faxing you the path. I will keep the original here. The fax of the path is on its way. Figure out what to do with it.” November 17 The addressee of the previous e-mails wrote as “istil friend” stating “here are the others,” and attaching the underlying Progress/Pakistan contracts. November 18 Mr Cruddace of Messrs Schillings, sent an e-mail to ISTIL Friend: “Dear Istil friend, as you may know I am Istil’s lawyer in the UK proceedings against Zahoor. Can I thank you for your help which has been invaluable. However, as I am sure that you appreciate it is difficult dealing with someone like Zahoor whose account of events changes constantly. /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr Anyway I just wanted you to know that we have had to disclose certain documents to his lawyers that have your email address (this one) on them. We could protect your anonymity if we knew your identity on safety grounds but cannot argue that point where it is just an email address. Also you certainly seem one step ahead and I am sure that your email address cannot lead to your identification. I just thought I’d let you know in any event. Please email anytime if you have any concerns or queries.” November 19 Mr Masood wrote: “Dear Istil Friend, It seems like you have a lot of information available for us, but you are very scared of Mr. Zahoor. To be very honest, we cannot really protect you in Ukraine or Russia if you are in one of those countries. We have this contract with Progress and Reventox. One of them has to do with Al-Khalid hulls. We think that this is a dummy contract. Have you seen this contract somewhere while you have been looking at other papers? There should be contract somewhere dated April 1st (or some other date) between Reventox and Progress regarding power packs. It might be in some kind of a file as an active contract since our understanding is that some money has been paid on that contract. This is a very important contract for us. Can you try to find it?” November 25 Mr Cruddace wrote: “Hello ISTIL friend, Can I thank you very much for sending a copy of the Reventox/Progress power pack contract to me. I think that it will prove to be very helpful indeed. We have been looking at the contract very carefully and we think it is clearly the correct Appendix 1. However we are worried because it looks as though the signatures on the fake Appendix 1 (Al Khalid Hulls) and those on our Appendix one are completely the same. By this I mean that one set of the signatures has been used for both contracts (the measurement of each letter of Zahoor and Morotzov’s name as signed are exactly the same and it is impossible for anyone to sign their name in such an exact identical way two times). Zahoor will try and claim that ours is fake. We believe all his appendices are fake. However we only have a fax so it is very difficult for us to prove ours is genuine. I know the great risk you are taking and am very very grateful. But can I ask whether it is possible to have copies of other appendices that you have access to, especially Appendix 3? Better still, and I know I may be asking the impossible, but you [l]et me have the original Reventox/Progress powerpack agreement? /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr All I can offer is that if we ever get it Mr Zahoor could very well end up in jail for a long time (between 5 and 10 years)” November 27 Mr Cruddace wrote: “Hello ISTIL friend, As you may guess Zahoor is up to all sorts of tricks. It may be that there are two versions of the Reventox/Progress power pack agreement. Your version may not actually be the one giving rise to the 14% commission. It would be great if you could send me any contracts (originals if possible) to help us. I know that I am asking a lot and we are grateful for your assistance as always. I look forward to hearing from you.” November 27 Mr Masood wrote: “Dear ISTIL Friend, I am sure we have confused you in the last few days but we are looking for the working document between Progress and Mr. Zahoor, the one he already got some money paid. Can you look around and see if any such documents exist? Fax or e-mail that to me” December 3 Mr Masood thanked the addressee for a fax (to which I shall refer below) and asked “Is there anything we can do for you?” December 7 Mr Axelrod assured ISTIL Friend: “We will not do anything to expose you to danger. If you can arrange to meet with one of us, it will be more helpful and may be easier for you. Let me know if you have other questions.” December 13 Mr Axelrod e-mailed the address to say: “Please send me a fax that will let me know whether you are ISTIL Friend or Mr Zahoor.” The bogus Appendix 1 The appendix referred to in Mr Cruddace’s e-mail of November 25, 2002 is accepted by the claimants to be bogus, and I shall refer to it as “the bogus Appendix 1.” It was faxed to Schillings’ office on November 23, 2002. It was disclosed by Schillings only in Mr Cruddace’s affidavit of December 16, 2002, which was sworn in support of this application. The Masood Appendix 1 which was exhibited to Mr Masood’s affidavit sworn on November 29, 2002 was faxed to Schillings’ office on November 28, 2002. The bogus Appendix 1 purports to relate to power-packs for Al-Khalid tanks, and refers to the contract number between Progress and Pakistan, and provides for a services cost amount of 14%. The signatures and the stamps bear a precise correlation with those on Zahoor Appendix 1 which was provided to the claimants in this action on September 30, and the defendants’ case is that the signatures and stamps on that document have been scanned and then added to the bogus Appendix 1. V 33. 34. 35. /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr 36. 37. VI 38. 39. 40. 41. The defendants also say that the Masood Appendix 1 is a forgery. Their evidence is that the signatures over the company seals in the Masood Appendix 1 look remarkably similar to those on the original of Appendix 7, and the initialling looks exactly the same as that on page 3 of the original Services Agreement. This is obviously a matter for expert evidence (although it does seem to the untrained eye that the defendants’ position is by no means fanciful) and the defendants have instructed an expert forensic examiner on the point who has yet to report. Consequently there is not only a conflict of evidence as to the genuineness of the Zahoor Appendix 1, but also as to the genuineness of the Masood Appendix 1. The defendants wish to put the e-mail correspondence in evidence and to cross-examine Mr Masood on it, in order to show that his affidavit was highly misleading, and that he must have known that the Masood Appendix 1 was likely to have been a forgery, or perhaps even encouraged its creation, since they had received the bogus Appendix 1 from the same source and plainly made no enquiries as to why they had been sent a forged document. The contentions of the parties The position of the parties at the first hearing of this application was as follows. The claimants’ position was that all of the documents (except for the e-mail of November 8, which they say was intended for Mr Axelrod, and is therefore covered in addition by legal advice privilege) are covered by litigation privilege, since they came into existence for the purposes of evidence gathering. They apply for a final negative and mandatory injunction for restraint of use and delivery up of the documents in the possession of the defendants and their solicitors. All communications between a solicitor (or his client) and a potential witness for the purpose of evidence gathering in the course of litigation are self-evidently confidential. There is no need for an agreement between ISTIL Friend and the claimants in order for their communications to have the requisite quality of confidence: Coco v. A N Clark (Engineers) Ltd [1969] RPC 41, at 69. They say that a privileged communication with a witness cannot be disclosed to or used by the other party unless the party in whom privilege resides waives that privilege. Privilege exists even if the communications are with an anonymous party. The defendants resisted the injunction on these grounds. First, they said that so far as concerns the e-mails from Mr Masood to ISTIL Friend, there is nothing on the face of the e-mails to indicate that they were confidential. Mr Cruddace’s e-mails do have a standard confidentiality message, but he could not unilaterally impose an obligation of confidentiality. There is no evidence that ISTIL Friend undertook to the claimants to keep their contents confidential, and by forwarding the e-mails to Mr Zahoor, ISTIL Friend demonstrated that he did not regard himself as being under any duty of confidentiality to the claimants. The documents printed out by Mr Zahoor and/or Stephenson Harwood were not brought into existence by or at the direction of the claimants for the dominant purpose of use in the litigation, and the defendants are in a position to give secondary evidence of the contents of the communications from the claimants and Schillings to ISTIL Friend: Calcraft v Guest [1898] 1 QB 759 (C. A.). 42. Even if privilege might otherwise exist, the defendants rely on the principle that privilege does not protect documents which come into existence in furtherance of /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr fraudulent conduct. Steps taken by or on behalf of the claimants in order to place a false case before the court cannot be the proper subject matter of a claim to privilege: R v Cox & Railton (1884) 14 QBD 153; Dubai Bank Limited v Galidari (No 6), The Times, April 22, 1991. Next the defendants submit that by disclosing and seeking to rely upon documents emanating from an undisclosed and anonymous source (in particular the Masood Appendix 1) the claimants must be taken to have waived any privilege otherwise applicable in relation to the correspondence between them, their solicitors and ISTIL Friend relating to the supply by ISTIL Friend of the documents in question. By referring to the fax from ISTIL Friend on November 28, 2002 in Mr Masood’s third affidavit, the claimants waived privilege in respect of the whole of that fax, and also pursuant to CPR Rule 31.14 the defendants have an absolute right to inspect the fax. On the basis that the claimants have waived privilege in relation to the fax from ISTIL Friend, fairness requires the application of the principle that the opposing party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question: Nea Karteria Maritime Co Limited v Atlantic & Great Lakes Steamship Corporation [1981] Com LR 139, approved in Great Atlantic Insurance v Home Insurance [1981] 1 WLR 529, 538 (C. A.). The final principal argument of the defendants is that, even if the documents are confidential, the public interest requires their disclosure, because they indicate “iniquity” and the balancing exercise in the enforcement of confidentiality requires their use not to be suppressed. They rely on a number of factors, including (a) the documents had a very important bearing on the application to continue the injunction; (b) the documents were relevant to the authenticity of Zahoor Appendix 1 and Masood Appendix 1 and raised real doubts as to the reliability of the claimants’ evidence; (c) Mr Masood’s third affidavit was misleading and should not have been sworn in an unqualified form; (d) the public interest required disclosure, since there was no confidence in iniquity, and a public interest in the court not being misled. At the hearing the defendants relied on Webster v. James Chapman & Co [1989] 3 All ER 940, a decision of Scott J, for the proposition that the court conducts a balancing exercise where privileged documents come into the hands of the opposing party and an injunction is sought to prevent their use on the basis of a breach of confidence. In the course of preparation of this judgment, I found that this decision had been subsequently disapproved by the Court of Appeal in Pizzey v Ford Motor Co. Limited, The Times, March 8, 1993 and I therefore invited further submissions in writing. In their further submissions the claimants maintain that on an application for an injunction, if the court decides that the communication with ISTIL Friend is privileged, the court has no discretion and is compelled to grant an injunction restraining the other side from making use of that communication, unless privilege has been waived. The approach advocated by the defendants of a balancing exercise, based on the judgment of Scott J in Webster v. James Chapman & Co, is inconsistent with authority. The defendants continued to maintain that that Webster v James Chapman & Co is still good law, and applies in the circumstances of this case. Litigants and their advisers have a duty not to mislead the court or their opponents, and no legal adviser properly instructed as to the underlying facts revealed by the disputed e-mails could 43. 44. 45. 46. 47. 48. /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr properly have advised that Mr Masood’s Third Affidavit should have been put forward in the form that it was put forward. The claimants were seeking to use the cloak of privilege in order to cover up and to perpetuate the highly misleading impression created by Mr Masood’s Third Affidavit, and accordingly, in seeking relief from the court the claimants did not come with clean hands and, on general equitable principles, should be denied relief: Snell’s Equity, 30th ed 2000, p. 723. I circulated a draft judgment on February 10, 2003, in which I made adverse findings concerning the honesty of the conduct of the claimants (and their solicitor Mr Cruddace) in the way in which they put the Masood Appendix 1 in evidence. As a result, the claimants, through Mr Ian Mill QC, asked for permission to address me further on the matter and sought to adduce fresh evidence. The application was based (among other grounds) on the ground that the defendants had not advanced a positive case that Mr Cruddace had acted dishonestly, and that he had not therefore dealt with it in evidence. In fact it seems to me clear that the defendants had made their case plain. In their evidence (the first affidavit of Mr Baker) they had drawn attention to the failure to disclose the existence of the bogus Appendix 1 and to their unanswered request to Mr Cruddace for an explanation, and concluded that it would be unjust for the claimants to hide behind privilege in the face of what appeared prima facie to be an attempt by them to procure documentation and then mislead the court as to the circumstances in which the documents came into their possession. 49. 50. 51. Nevertheless I decided to admit the fresh evidence in view of the serious nature of the conclusions to which I had come, and this judgment therefore takes that evidence into account, and I will refer to it below. VII Litigation privilege 52. 53. 54. Although there are obvious cases of overlap, a distinction is normally drawn between legal advice privilege (sometimes called simply legal professional privilege) and litigation privilege. The former extends to all communications between the client and the client’s legal adviser for the purpose of obtaining or giving legal advice. The privilege exists whether litigation is anticipated or not. Litigation privilege attaches to communications which come into existence with the dominant purpose of being used in aid of pending or contemplated litigation. See Buttes Gas & Oil Co v. Hammer (No.3) [1981] QB 223, 243, per Lord Denning MR. The policy reason behind the first category of privilege, legal advice privilege, is that it is “necessary, to use a vulgar phrase, that [the client] should be able to make a clean breast of it to the gentleman whom he consults with a view to the prosecution of his claim, or the substantiality of his defence against the claim of others”: Anderson v. Bank of British Columbia (1876) 2 Ch. D 644, 649, per Sir George Jessel MR. In Ventouris v. Mountain [1991] 1 WLR 607, 611 Bingham LJ referred to the public interest in clients being “free to unburden themselves without reserve to their legal advisers” and their legal advisers being “free to give honest and candid advice on a sound factual basis, without fear that these communications may be relied on by an opposing party if the dispute comes before the court for decision.” He went on: “ It is the protection of confidential communications between client and legal adviser which lies at the heart of legal professional privilege, as is clear from the classical exposition of the law of Sir George Jessel MR in Anderson v. Bank of British Columbia.” In R v. /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr 55. 56. 57. Derby Magistrates’ Court, ex parte B [1996] AC 487, 507 Lord Taylor of Gosforth CJ said that legal professional privilege is “much more than an ordinary rule of evidence …. It is a fundamental condition on which the administration of justice as a whole rests.” The second category, litigation privilege, was classically described as documents which come into existence for obtaining evidence to be used in litigation, or for obtaining information which might lead to the obtaining of evidence: see Wheeler v. Le Marchant (1881) 17 Ch. D 675, 681 (Sir George Jessel MR), 684-5 (Cotton LJ). But information obtained by the legal adviser for litigation may also be information to be used to advise the client whether he ought to defend or prosecute the action: Anderson v. Bank of British Columbia (1876) 2 Ch. D 644, 649-650, per Sir George Jessel MR. The rationale for litigation privilege was said to be that “… the solicitor is preparing for the defence or for bringing the action, and all communications he makes for that purpose, and the communications made to him for the purpose of giving him the information, are, in fact, the brief in the action, and ought to be protected” (Wheeler v. Le Marchant (1881) 17 Ch. D 675, 684-5, per Cotton LJ) or “… as you have no right to see your adversary’s brief, you have no right to see that which comes into existence merely as materials for the brief” (Anderson v. Bank of British Columbia (1876) 2 Ch. D 644 at 656, per James LJ, cited with approval by Lord Simon of Glaisdale in Waugh v. British Railways Board [1980] AC 521, 537). That rationale is not very attractive, and is perhaps ripe for reconsideration in the light of reforms which are designed to make litigation more open and less like a game of poker. More attractive as a rationale is the consideration that preparation of a case is inextricably linked with the advice to the client on whether to fight or to settle, and if so, on what terms. As Sir Richard Scott V-C said in Re Barings plc [1988] 1 All ER 673, 681: “… documents brought into being by solicitors for the purposes of litigation were afforded privilege because of the light they might cast on the client’s instructions to the solicitor or the solicitor’s advice to the client regarding the conduct of the case or on the client’s prospects. There was no general privilege that attached to documents brought into existence for the purposes of litigation independent of the need to keep inviolate communications between client and legal adviser. If documents for which privilege was sought did not relate in some fashion to communications between client and legal adviser, there was no element of public interest that could override the ordinary rights of discovery and no privilege. So, for example, an unsolicited communication from a third party, a potential witness, about the facts of the case would not, on this view, have been privileged. And why should it be? What public interest is served by according privilege to such a communication?” 58. So also in Ventouris v. Mountain [1991] 1 WLR 607, at 612 Bingham LJ said: “The courts must not in any way encroach on the right of a litigant or potential litigant to seek and obtain legal advice on his prospects and the conduct of proceedings under the seal of confidence nor on the right of such a litigant and his legal adviser to prepare for and conduct his case without, directly or indirectly, revealing the effect of that advice. In /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr recognition of these rights, perhaps generously interpreted, proofs of witnesses, whether factual or expert, and communications with potential witnesses, have been held immune from production.” 59. The privilege is that of the client, and may of course be waived. 60. Where privileged communications are in the hands of a third party on a confidential basis, the court has power to protect the litigant’s privilege and right to have the documents kept confidential. This applies even if the third party is a witness. Although there is no property in a witness, the court may prevent the disclosure by the witness of information imparted to the witness in confidence by or on behalf of the litigant. I have already expressed the view that it does not necessarily follow from the fact that a communication with a witness is privileged in the hands of the client or the lawyer that it is a confidential communication in the hands of the witness. But it will often be so. 61. The classic statement of the principle that there is no property in a witness is that of Lord Denning MR in Harmony Shipping Co v. Saudi Europe [1979] 1 WLR 1380, 1384-5 (C. A.): “So far as witnesses of fact are concerned, the law is as plain as can be. There is no property in a witness. The reason is because the court has a right to every man’s evidence. Its primary duty is to ascertain the truth. Neither one side nor the other can debar the court from ascertaining the truth either by seeing a witness beforehand or by purchasing his evidence or by making communication to him. In no way can one side prohibit the other side from seeing a witness of fact, from getting facts from him and from calling him to give evidence or from issuing him with a subpoena.” 62. In that case the Court of Appeal held that the same principle applied to expert witnesses. But that did not mean that the witness could reveal the communications which he had had with a party: “Many of the communications between the solicitor and the expert witness will be privileged. They are protected by legal professional privilege. They cannot be communicated to the court except with the consent of the party concerned. That means that a great deal of the communications between the expert witness and the lawyer cannot be given in evidence to the court. If questions were asked about it, then it would be the duty of the judge to protect the witness (and he would) by disallowing any questions which infringed the rule about legal professional privilege or the rule protecting information given in confidence – unless, of course, it was one of those rare cases which come before the courts from time to time where in spite of privilege or confidence the court does order a witness to give further evidence.” 63. I do not doubt that in the hands of the claimants and Schillings all of the relevant e- mails were covered by litigation privilege. All of them obviously came into existence for the purpose of the preparation of these proceedings. The claimants and Schillings would plainly not, in the ordinary course, be required to produce them, and they would not normally come to the attention of the defendants. I do not consider that for this purpose (whatever may be the position in relation to an application for an /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr 64. 65. 66. injunction to restrain the use of material disclosed by the witness, to which I shall revert) it is not a condition of privilege that the witness or proposed witness expressly (or perhaps even impliedly) agrees to keep the communication in confidence. An unsolicited letter from a solicitor to a witness to a traffic accident asking him whether he saw the accident, and asking him to give evidence, would undoubtedly be privileged from production, but I doubt whether the witness would be under any obligation of confidentiality. I do not consider that, to the extent that the documents were or are privileged in the hands of the claimants or Schillings, the privilege could be disregarded on the basis of the fraud exception as it has hitherto been applied. For the exception to apply there must be a definite charge of fraud or illegality, support by prima facie evidence and not merely an allegation of fraud: O’Rourke v Darbishire [1920] AC 581 at 604; Bankers Trust v Shapira [1980] 1 WLR 1274 at 1283; Buttes Gas and Oil Co v Hammer (No 3) [1981] QB 223 at 246, 252 and Derby & Co v Weldon (No.7) [1990] 1 WLR 1156. The defendants accept that the fraud must be that of the client or the solicitor, and in the event, while not abandoning reliance on the fraud exception, they did not press it hard. In my judgment the e-mails do raise a number of questions, which (if their use is not ultimately restrained) will have to be answered. They show that Mr Cruddace and his clients suspected (at the very least) that the bogus Appendix 1 might be a forgery, and yet they asked for further documents from ISTIL Friend, including a request from Mr Masood for documents showing contracts under which Mr Zahoor was receiving money. The evidence now before the court shows that Mr Cruddace knew by November 25, 2002, that the bogus Appendix 1 might be a forgery, and that by November 27 he and Mr Masood knew it was a forgery. It is also extraordinary that a solicitor should say: “All I can offer is that if we ever get [the Appendix] Mr Zahoor could very well end up in jail for a long time (between 5 and 10 years).” But the defendants are not in a position to identify the person who forged the bogus Appendix 1 or procured its forgery, or that the effect of the e-mails (especially the e- mail of November 27, 2002 in which Mr Masood asked ISTIL Friend to look around for documents under which Mr Zahoor was paid) is to ask for a better forgery. Nor do I see any basis for the application of the waiver exception on the facts. In particular there is no basis in law for the proposition that reliance on documents from an anonymous source results in a waiver of communications with that source. Nor does the statement by Mr Masood that documents were faxed to him mean that the defendants have a right to inspect the fax under CPR 31.14. That rule requires the document to be “mentioned” and there was no such mention. Accordingly there is no basis for the further submission that fairness requires the disclosure of all of the rest of the communications with ISTIL Friend. VIII Lord Ashburton v. Pape and the modern law 67. That leaves, therefore, the substantial question on this application, which relates to the exercise of the equitable jurisdiction to restrain the use of privileged documents which come into the hands of the opposing party. I was not referred either at the hearing or subsequently to the academic literature on the use of equitable remedies in this context, and the difficult issue of the relationship between legal professional privilege and the law relating to confidentiality: see, especially Matthews, Breach of Confidence and Legal Privilege (1981) 1 Legal Studies 77; Andrews, The Influence of Equity upon the Doctrine of Legal Professional Privilege (1989) 105 LQR 608; /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr 68. 69. 70. Newbold, Inadvertent Disclosure in Civil Proceedings (1991) 107 LQR 99; and Auburn, Legal Professional Privilege: Law and Theory (2000), Chapter 12. In Calcraft v. Guest [1898] 1 QB 759 (C. A.) a trial had taken place in which the principal issue was the upper boundary of the plaintiff’s fishery. On appeal the defendant proposed to rely on new evidence discovered among the papers in another action tried over a hundred years before. The papers included proofs of witnesses. The papers had been prepared on behalf of John Calcraft, a predecessor in title of the plaintiff. The defendant was allowed to inspect them and copies were handed to the defendant by the grandson of the late Mr Calcraft’s solicitor, in each case without any authority. On the appeal, there were two questions: first, whether the documents were privileged, and, second, whether the appellant could give secondary evidence of their contents. It was held that they remained privileged: “once privileged always privileged” (at 761). It was also held that, notwithstanding the privilege, the appellant could give secondary evidence of their contents. The decision has been much criticised in the academic literature (see Toulson and Phipps, Confidentiality, 1996, pp 202-203, and literature cited there) and in English & American Insurance Co. Ltd. v. Herbert Smith & Co. [1988] FSR 232, 236-7, Sir Nicolas Browne-Wilkinson V-C said: “I think that when this or some other case reaches the House of Lords it may well be that the absolute rule laid down in Calcraft v. Guest is the suspect decision.” The Vice Chancellor was referring to Lord Ashburton v. Pape [1913] 2 Ch 469. Pape was a bankrupt and his discharge was opposed by, among others, Lord Ashburton. Pape served a subpoena on Brooks, a clerk to Lord Ashburton’s solicitor, Mr Nocton, and thereby obtained privileged letters written by Lord Ashburton to Mr Nocton, which Pape proposed to use. Pape and Brooks had colluded in the exercise. But, it was accepted, there was no direct confidential relation between Pape and Lord Ashburton. It was held that Lord Ashburton was entitled to an injunction. Sir Herbert Cozens-Hardy MR relied on cases (Morison v. Moat (1851) 9 Hare 241, affd. (1852) 21 L. J. Ch. (N. S.) 248; Lamb v. Evans [1893] 1 Ch 218) on the obligation of confidentiality owed by employees, and distinguished Calcraft v. Guest as follows (at 473): “The rule of evidence as explained in Calcraft v. Guest merely amounts to this, that if a litigant wants to prove a particular document which by reason of privilege or some circumstance he cannot furnish by the production of the original, he may produce a copy as secondary evidence although that copy has been obtained by improper means, and even, it may be, by criminal means … But that does not seem to me to have any bearing upon a case where the whole subject-matter of the action is the right to retain the originals or copies of certain documents which are privileged. It seems to me that, … there is no ground whatever in principle why we should decline to give the plaintiff the protection which in my view is his right as between him and Pape, and that there is no reason whatever why we should not say to Pape in pending or future proceedings, ‘You shall not produce these documents which you have acquired from the plaintiff surreptitiously, or from his solicitor, who plainly stood to him in a confidential relation.’ ” 71. Swinfen Eady LJ said (at 475-7): /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr “The principle upon which the Court of Chancery has acted for many years has been to restrain the publication of confidential information improperly or surreptitiously obtained or of information imparted in confidence which ought not to be divulged. Injunctions have been granted to give effectual relief, that is not only to restrain the disclosure of confidential information, but to prevent copies being made of any record of that information, and, if copies have already been made, to restrain them from being further copied, and to restrain persons into whose possession that confidential information has come from themselves in turn divulging or propagating it. … Then objection was raised in the present case by reason of the fact that it is said that Pape, who now has copies of the letters, might wish to give them in evidence in certain bankruptcy proceedings, and although the original letters are privileged from production he has possession of the copies and could give them as secondary evidence of the contents of the letters, and, therefore, ought not to be ordered either to give them up or to be restrained from divulging their contents. There is here a confusion between the right to restrain a person from divulging confidential information and the right to give secondary evidence of documents where the originals are privileged from production, if the party has such secondary evidence in his possession. … The fact …. that a document, whether original or copy, is admissible in evidence is no answer to the demand of the lawful owner for the delivery up of the document, and no answer to an application by the lawful owner of confidential information to restrain it from being published or copied.” 72. 73. 74. The modern decisions all involve factual situations where privileged documents have come directly from the solicitors for one party into the hands of the solicitor for the other party. The combination of the increase in heavy litigation conducted by large teams of lawyers of varying experience and the indiscriminate use of photocopying has increased the risk of privileged documents being disclosed by mistake, and the consequences of these mistakes have been the subject of several decisions in the Court of Appeal. Thus, in Guinness Peat Properties Ltd v. Fitzroy Robinson Partnership [1987] 1 WLR 1027 a privileged letter was included in a list of the defendants’ documents. The plaintiffs obtained a copy, and the letter was referred to in their experts’ report. The defendants obtained an order restraining use of the privileged document. In Derby & Co Ltd v. Weldon (No. 8) [1997] 1 WLR 73 privileged documents were mistakenly made available for inspection and copying, and an injunction was granted for delivery up. In Pizzey v. Ford Motor Co Ltd, The Times, March 8, 1993, an expert medical report was mistakenly provided by the plaintiffs’ solicitors pursuant to an order which required production of medical notes and records, and an injunction was refused. The position on the authorities is this. First, it is clear that the jurisdiction to restrain the use of privileged documents is based on the equitable jurisdiction to restrain breach of confidence. The citation of the cases on the duty of confidentiality of an employees makes it plain that what the Court of Appeal was doing in Lord Ashburton v. Pape was applying the law of confidentiality in order to prevent disclosure of documents which would otherwise have been privileged, and were and remained confidential. Second, after a privileged document has been seen by the opposing party, the court may intervene by way of injunction in exercise of the equitable /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr jurisdiction if the circumstances warrant such intervention on equitable grounds. Third, if the party in whose hands the document has come (or his solicitor) either (a) has procured inspection of the document by fraud or (b) on inspection, realises that he has been permitted to see the document only by reason of an obvious mistake, the court has the power to intervene by the grant of an injunction in exercise of the equitable jurisdiction. Fourth, in such cases the court should ordinarily intervene, unless the case is one where the injunction can properly be refused on the general principles affecting the grant of a discretionary remedy, e.g. on the ground of delay. 75. 76. The controversial question in the present case relates to the extent of the discretion to make the order, and in particular, the extent to which the court may conduct a balancing exercise in the interests of justice and the truth. Goddard v. Nationwide Building Society [1987] 1 QB 670 was an action by home- owners against a building society based on the alleged negligence of its surveyor, and on misrepresentations by the building society’s manager. The solicitor who had acted for the plaintiffs on the house purchase also acted for the building society. The solicitor sent to the building society a copy of an attendance note which recorded advice given to the plaintiffs, on which the building society relied in its defence. The plaintiffs applied successfully to strike out the relevant passages in the defence, on the basis (inter alia) that they were confidential and privileged. The defendant had argued that the court should undertake a discretionary balancing exercise. 77. The order was plainly based on the Ashburton v. Pape jurisdiction. May LJ said (at 680- 683): “… I think that the ratio of the decision in Lord Ashburton v. Pape was founded upon the confidential nature of the content of the letters written by Lord Ashburton to Nocton. The Court of Appeal was concerned to protect that confidence, in the same way for instance, as the courts protect the trade secrets of an employer against the unauthorised use of them by an employee, both while he remains such as well as after he has left the employment. …. I confess that I do not find the decision in Lord Ashburton v. Pape logically satisfactory, depending as it does upon the order in which applications are made in litigation. Nevertheless I think that it and Calcraft v. Guest [1898] 1 Q. B. 759 are good authority for the following proposition. If a litigant has in his possession copies of documents to which legal professional privilege attaches he may nevertheless use such copies as secondary evidence in his litigation: however, if he has not yet used the documents in that way, the mere fact that he intends to do so is no answer to a claim against him by the person in whom the privilege is vested for delivery up of the copies or to restrain him from disclosing or making any use of any information contained in them.” 78. Nourse LJ said (at 684-5): “The second question has confronted us, in a simple and straightforward manner, with the task of reconciling the decisions of this court in Calcraft v. Guest [1898] 1 Q. B. 759 and Lord Ashburton v. Pape [1913] 2 Ch. 469. I agree that those decisions are authority for the proposition which May /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr L. J. has stated. However unsatisfactory its results may be thought to be, that proposition must hold sway unless and until it is revised by higher authority. …. Although, for the reasons given by May L. J., I am in no doubt that our decision must be governed by Lord Ashburton v. Pape [1913] 2 Ch. 469, the confusion which the existing authorities have caused in this case and are liable to cause in others has prompted me to deal with the matter at somewhat greater length than would otherwise have been necessary. … [O]nce it is established that a case is governed by Lord Ashburton v. Pape [1913] 2 Ch. 469 there is no discretion in the court to refuse to exercise the equitable jurisdiction according to its view of the materiality of the communication, the justice of admitting or excluding it or the like. The injunction is granted in aid of the privilege which, unless and until it is waived, is absolute. In saying this, I do not intend to suggest that there may not be cases where an injunction can properly be refused on general principles affecting the grant of a discretionary remedy, for example on the ground of inordinate delay. … [I]n a case to which Lord Ashburton v. Pape can no longer apply, public policy may nevertheless preclude a party who has acted improperly in the proceedings from invoking the rule of evidence: see I. T. C. Film Distributors Ltd. v. Video Exchange Ltd. [1982] Ch. 431, where the defendant had at an earlier hearing obtained some of the plaintiff’s privileged documents by a trick.” 79. 80. 81. 82. This was a two member Court of Appeal, and May LJ expressed no view on the extent of the discretion. In Guinness Peat Properties Ltd v. Fitzroy Robinson Partnership [1987] 1 WLR 1027, 1046 Slade LJ referred to Nourse LJ’s judgment, and said that the court “should ordinarily intervene in such cases, unless the case is one where the injunction can properly be refused on the general principles affecting the grant of a discretionary remedy….” In Webster v. James Chapman & Co [1989] 3 All ER 939 Scott J (as he then was) was concerned with a case where an expert’s report intended for the plaintiff was enclosed with a letter to the defendant’s solicitors. When informed of the mistake the plaintiff’s solicitors sought the return of the copy inadvertently sent and an undertaking that they would make no use of it. The plaintiff’s solicitors subsequently received a revised report which was more favourable to his position, which was disclosed to the defendant’s solicitors as being a report which would be relied on at trial. It was held that once a privileged document or a copy passed into the hands of another party, prima facie the benefit of the privilege was lost and the party who had obtained the document then had in his hands evidence which could be used at trial. But if the privileged document was also a confidential document, it was as such eligible for protection against unauthorised disclosure or use. Where protection of confidential information was sought the court was required to exercise its discretion by balancing the legitimate interests of the plaintiff in seeking to keep the confidential information suppressed and the legitimate interests of the defendant in seeking to make use of it. In carrying out that balancing exercise the circumstances in which the information /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr came into the hands of the defendant, the issues in the action, the relevance of the document and whether it would in one way or another have to be disclosed, together with the privileged nature of the document, were all highly relevant. Since the conduct of the defendant’s case would be seriously embarrassed if the defendant was not able to make use of the report, since it had come into the possession of its solicitors through no fault of theirs and since there would be no injustice to the plaintiff if the report were in evidence, together with the revised report, the plaintiff would be refused relief. 83. Scott J said (at 945): “The law regarding confidential information is … now relatively well settled. The court must, in each case where protection of confidential information is sought, balance on the one hand the legitimate interests of the plaintiff in seeking to keep the confidential information suppressed and on the other hand the legitimate interests of the defendant in seeking to make use of the information. There is never any question of an absolute right to have confidential information protected…Whether the unauthorised use of confidential information or of confidential documents will be restrained is essentially discretionary and must … be dependent on the particular circumstances of the particular case. The privileged nature of the document in question is bound to be a highly material factor but would not … exclude from the scales other material factors.” 84. 85. In so holding Scott J refused to follow Nourse LJ’s view in Goddard v. Nationwide Building Society [1987] QB 670, 685, that once it is established that confidentiality is established, there is no discretion in the court to refuse to exercise the equitable jurisdiction according to its view of the materiality of the communication, the justice of admitting or excluding it or the like. Scott J said that he did not think that statement represented the ratio of the case. In Derby v. Weldon (No. 8) [1991] 1 WLR 73, 84 Vinelott J disagreed. He considered that both May LJ and Nourse LJ had based themselves on Lord Ashburton v. Pape, and that that decision was not based solely on the ground that the information had been imparted in confidence; where an injunction was sought in aid of legal professional privilege, no balancing act was called for, since the balance between conflicting policy considerations (completeness of evidence before the court and the protection of legal professional privilege) had been already struck by the making of the rule of legal professional privilege. Dillon LJ said (at 99) “I see no reason why any such balancing exercise should be carried out. The court does not, so far as privileged documents are concerned, weigh the privilege and consider whether the privilege should outweigh the importance that the document should be before the court at the trial, or the importance that possession of the document and the ability to use it might have for the advocate; and, again, where the privilege is being restored because the inspection was obtained by fraud or by taking advantage of a known mistake, there is to my mind no logic at all in qualifying the restoration of the status quo by reference to the importance of the document. ‘You have taken advantage of an obvious mistake to obtain copies of documents; we will order you to return all the ones that are unimportant but you can keep the ones that are important’ would be a nonsensical attitude for the court to adopt.” /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr 86. In Pizzey v. Ford Motor Co Ltd, The Times, March 8, 1993, in which it was conceded by counsel that a balancing exercise was inappropriate, Mann LJ referred to the fact that Vinelott J in Derby v. Weldon (No.8) had considered that Webster was inconsistent with Goddard, and that the Court of Appeal had rejected the idea of a balancing exercise. He went on: “Dillon LJ did not in terms refer to Webster’s case, but I regard the decision as having been disapproved by the court even although Webster was not a case of discovery. If my regard had been otherwise then I would respectfully have held that the decision in Webster ought to be disapproved now.” 87. In the context of an application for an order for disclosure of privileged documents, the House of Lords in R v. Derby Magistrates’ Court, ex parte B [1996] AC 487 rejected the use of a balancing exercise between the public interest in securing the availability of all relevant evidence and the public interest in upholding legal professional privilege. 88. What, then, is the extent of the discretion in the exercise of the Lord Ashburton v. Pape line of authorities to restrain breach of confidence in relation to documents which have already been disclosed, but which would otherwise be privileged? In particular, can the court conduct a balancing exercise, and if so, on the basis of what factors? In the light of the apparent difference of view between Nourse LJ in Goddard and Scott J in Webster, and the subsequent decisions in Derby v. Weldon (No. 8) and Pizzey v. Ford Motor Co. Ltd, in my judgment the position is as follows. 89. 90. 91. 92. First, the starting point is that the essence of legal professional privilege is that it entitles the client to refuse to produce documents which are covered by the privilege, or to answer questions about privileged matters. But it has been said that once a privileged document is disclosed, the privilege itself is lost: see Guinness Peat Properties Ltd v. Fitzroy Robinson Partnership [1987] 1 WLR 1027, 1044, per Slade LJ accepting argument to this effect. In Black & Decker Inc v. Flymo Ltd [1991] 1 WLR 753 Hoffmann J said that once a privileged document was disclosed the question was one of admissibility, and not privilege. Second, since the decisions from Lord Ashburton v. Pape to the modern decisions involve the equitable jurisdiction to grant injunctions to protect breach of confidence, it follows that the normal rules relating to the grant of equitable remedies apply. In Goddard Nourse LJ expressly mentioned (at 685) delay as a factor (and this was repeated by Slade LJ in Guinness Peat, at 1046). It must also follow that other equitable principles on the grant of injunctions apply, such as consideration of the conduct of the party seeking the injunction, including the clean hands principle. Third, in such cases the court should “ordinarily” intervene: Guinness Peat at 1046. Fourth, Nourse LJ was not saying in Goddard that the court should never apply the general principles relating to confidential information. What he was saying was that in this context (protection of privileged documents under the Lord Ashburton v. Pape principle) the court was not concerned with weighing the materiality of the document and the justice of admitting it. That was also the view of Vinelott J and Dillon LJ in Derby v. Weldon (No. 8) and of Mann LJ in Pizzey v. Ford Motor Co. Ltd. /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr 93. 94. IX 95. 96. 97. Fifth, there is nothing in the authorities which would prevent the application of the rule that confidentiality is subject to the public interest. In this context, the emergence of the truth is not of itself a sufficient public interest. The reason why the balancing exercise is not appropriate is because the balance between privilege and truth has already been struck in favour of the former by the establishment of the rules concerning legal professional privilege: see The Aegis Blaze [1986] 1 Lloyd’s Rep 203, 211; R v. Derby Magistrates Court, ex parte B [1996] AC 487, 508. Sixth, other public interest factors may still apply. So there is no reason in principle why the court should not apply the rule that the court will not restrain publication of material in relation to misconduct of such a nature that it ought in the public interest to be disclosed to others: Initial Services Ltd v. Putterill [1968] 1 QB 396, 405 per Lord Denning MR, who quoted Wood V-C in Gartside v. Outram (1856) 26 LJ Ch 113, 114: “There is no confidence as to the disclosure of iniquity”. But the defence of public interest is not limited to “iniquity”: Lion Laboratories Ltd v. Evans [1985] 1 QB 526, applying Fraser v. Evans [1969] 1 QB 349, 362, where Lord Denning MR said that iniquity is merely an instance of just cause or excuse for breaking confidence. See also Attorney General v Guardian Newspapers (No.2) [1990] 1 AC 109, at 268-269, per Lord Griffiths; and Ashdown v. Telegraph Group Ltd [2002] Ch 149, approving Hyde Park Residence Ltd v. Yelland [2001] Ch 143, 172, per Mance LJ. Conclusions I accept that the communications to ISTIL Friend were intended to be confidential (as is obvious) and that the circumstances would have made ISTIL Friend aware of that. The claimants invited me to take account of the fact that Mr Zahoor procured their production by a trick. But the point was only taken in argument, and the allegation was not made in any affidavit. Mr Zahoor did not therefore have an opportunity of explaining what he meant by his e-mail to ISTIL Friend, to which I refer in paragraph 28. It is now clear that when Mr Masood swore his affidavit on November 29, 2002, the claimants had in their possession two versions of Appendix 1, the bogus Appendix 1 and the Masood Appendix 1, and that they had reason to believe from at the latest November 25 (when Mr Cruddace took advice from a forensic expert, to which I shall refer, and when Mr Cruddace sent his e-mail) that the bogus Appendix 1 sent to them on November 23 might be a forgery, and their evidence now is that by November 27 they were satisfied that it was a forgery. Yet they exhibited only the Masood Appendix 1, which was sent to them on November 28 by the same source. The claimants accept in Mr Cruddace’s evidence that there is a fundamental issue as to whether the Zahoor Appendix 1 or the Masood Appendix 1 is genuine; and that this is an issue for the trial judge after cross-examination and the appropriate independent and properly qualified expert forensic evidence. They do not deny the relevance of the bogus Appendix 1 to this issue, but in relation to Mr Masood’s affidavit they say that the most that the defendants can complain of (although it is not accepted that it would be a legitimate complaint) is that Mr Masood did not disclose the existence and a copy of the bogus Appendix 1 in his affidavit. Mr Cruddace said in his third affidavit that it was not disclosed because it was not being relied upon, since it was not believed to be genuine and it would have been disclosed in due course in any event. /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr 98. At this point I repeat what Mr Masood said in his affidavit: “In fact a copy of what I believe to be the true Appendix 1 to the Reventox/Progress contract is exhibited at Tab 1 of ‘SM3’. A copy of the true Appendix 2 for base repair facilities for T-80UD tanks is at Tab2 of ‘SM3’. Copies of the primary contracts between HIT of Pakistan and Progress concerning the actual supply of the goods to which these Appendices refer are at Tab 3 of ‘SM3’. These two Appendices were faxed by ISTIL Friend at 15:13 on 28th November 2002 to my solicitors, Schillings. The contracts were sent by e-mail by ISTIL Friend on 17th November 2002.” 99. 100. 101. It is plain on the evidence of the claimants that a deliberate decision was taken on behalf of the claimants not to refer in that affidavit to the bogus Appendix 1. Paragraph 8 of Mr Masood’s affidavit accuses Mr Zahoor of a “wilfully false attempt to mislead the Court” by denying the existence of a power-pack agreement, and in the following paragraph Mr Masood produces the Masood Appendix 1 (and Appendix 2) and says that they were faxed by ISTIL Friend “at 15:13 on 28 th November 2002 to my solicitors, Schillings.” The context of the reference to the precise timing of the receipt of the Masood Appendix 1 is plainly intended to give the impression of a dramatic (and unexpected) transmission of a vital document. The bogus Appendix 1 had been sent to them about 6 days before Mr Masood swore his third affidavit by the same anonymous source. The application for the continuation of the freezing order was scheduled for December 6. There was no order for disclosure at that time. Had matters progressed, the defendants would not have known that Mr Masood’s third affidavit had been drafted (by Mr Cruddace) and had been sworn, notwithstanding the knowledge of Mr Masood and Mr Cruddace that the Masood Appendix 1 came from the same source which had previously supplied a false document. 102. Mr Cruddace deposed (in his affidavit of December 16) that the Masood Appendix 1 was believed by the claimants, and by Mr Cruddace, to be genuine. The bogus Appendix 1 to which he referred in his e-mail of November 25, 2002 was not believed to be so, and had not at any stage been relied upon by the claimants in this action. He said that, even if that document was not genuine, it by no means followed that it was forged by ISTIL Friend or by, or on behalf of, the claimants. 103. He denied any suggestion that he or his firm had been involved in any exercise of assisting the claimants to obtain forged documents for the purposes of advancing their case. He said there was nothing in his e-mail of November 25 which supported the allegation. Far from seeking forged documents to assist the claimants’ case, they were above all anxious to ensure that they were receiving genuine documents from ISTIL Friend. The claimants and his firm had not sought to hide anything, and it would have been disclosable in due course in any event and would have been disclosed. 104. Mr Masood says that he had never sought to persuade ISTIL Friend to create any fictitious documents and it will be the claimants’ case at trial that the Appendices 1 and 2 exhibited to his third affidavit were the true appendices to the original /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr Reventox/Progress contract. He had not, nor authorised anyone, to supply ISTIL Friend with copies of the signatures which appeared on Zahoor Appendix 1. 105. It is apparent that at least some of the e-mails have a direct and important bearing upon the authenticity of the Masood Appendix 1, and the honesty of Mr Masood. But on the authorities it is not a sufficient basis for refusing an injunction that the documents have an important bearing on the application to continue the injunction, and on the issues at trial, including the authenticity of Masood Appendix 1 and the veracity of Mr Masood. 106. But in this case the relevant e-mails show not only that the claimants’ account of their acquisition of the Masood Appendix 1 was incomplete and misleading, but also that they knew that there had been a forgery of the bogus Appendix 1 by an unknown person or persons. As I develop below, the evidence now adduced by the claimants shows that they knew, following advice from a forensic expert, that the bogus Appendix 1 was a forgery before the affidavit of Mr Masood was sworn. 107. 108. The timing of the production of the bogus Appendix 1, and its terms, would suggest that it was produced to create a case against Mr Zahoor and to deceive this court. If the claimants are right, and the Masood Appendix 1 is genuine, it is difficult to conceive of any reason why Mr Zahoor should forge another version of a power- packs Appendix. I came to the conclusion that the account in Mr Masood’s affidavit of the acquisition of the Masood Appendix 1 from the same source was incomplete and misleading, and also dishonest. It was because of that conclusion that Mr Ian Mill QC sought to adduce the further evidence of Mr Cruddace. He accepts that the court is entitled to conclude that Mr Cruddace made a serious misjudgment in not disclosing the rogue Appendix 1, but denies dishonesty. What Mr Cruddace now says as to the state of his knowledge on November 29, 2002, when Mr Masood’s affidavit was sworn, is this: First, Mr Masood had told him that Mr Zahoor and/or Mr Morotzov had an interest in creating forgeries to show to the persons to whom they were paying commissions, so that the latter could satisfy themselves that they were being paid the correct commission. Second, he wrongly thought that the bogus Appendix 1 provided for a commission rate of 10%, rather than 14%. I add at this point that this is an important point for him to make if he is to support his case that he thought that Mr Zahoor was the author of the forgery, because it made no sense for Mr Zahoor to forge an Appendix showing the same rate as the genuine Appendix. Third, after he received the bogus Appendix 1 on November 23, he instructed a forensic expert to examine it, and the examination took place on November 25, the same day on which he sent his e-mail to ISTIL Friend. Fourth, the expert had confirmed that the signatures on the bogus Appendix 1 and the Zahoor Appendix 1 were identical and could be superimposed if held to the light, but also that it would be difficult to prepare a forgery without access to the original template. Fifth, an assistant in his office had compared the signatures on the Masood Appendix 1 with all the defendants’ Appendices, and they had concluded that the signatures on the Masood Appendix 1 and the defendants’ Appendix 7 were different. Sixth, he says that he suspected that the defendants’ Appendices were fraudulent. 109. Mr Cruddace says that, after inspecting the originals of the defendants’ Appendices on November 27, 2002, he discussed the question of disclosure of the bogus Appendix 1 with his senior partner, Mr Keith Schilling, and they decided that it should not be disclosed at that stage, but in the normal course of standard disclosure. /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr The reason, he says, is that they thought that the document could help their clients’ case as possibly demonstrating that Mr Zahoor had forged it. But they did not feel that they could then make that allegation “as it may have been professionally improper.” He says that this approach was then endorsed by Mr Masood, Mr Axelrod, and Mr Ian Mill QC. I add at this point that, although Mr Schilling has approved the relevant part of Mr Cruddace’s affidavit, there is no evidence as to the level of detail provided to the others who participated in the decision not to disclose the bogus Appendix 1. 110. The defendants say that Mr Cruddace’s account of why he considered that the bogus Appendix 1 may have been forged by Mr Zahoor is incredible (particularly his incomprehensible error that the bogus Appendix 1 had a commission rate of 10%), but also that his evidence makes the non-disclosure even more culpable, since the claimants accepted from ISTIL Friend, and adduced in evidence, the Masood Appendix 1, when a few days earlier they had received from the same source a document which, it is now clear, they knew (and not merely suspected) was a forgery. 111. Whether what Mr Cruddace says about his state of mind when Mr Masood swore his affidavit is credible cannot be resolved now. But I am satisfied that the strong probability is that the bogus Appendix 1 was created for the purposes of this litigation, and that no credible alternative has been put forward. 112. 113. In my judgment this is a case in which, in the exercise of the Lord Ashburton v. Pape jurisdiction, the court is entitled to balance the public interest in supporting legal professional privilege on the one hand, and the public interest in the proper administration of justice on the other hand. This is a case where there has on any view been forgery, and where there was a deliberate decision not to adduce evidence in a context which made the evidence which was put forward misleading. Although the decision not to refer to the bogus Appendix 1 was deliberate, I make no finding that there was a deliberate attempt to mislead the court. I have already stated my conclusion that on the material before me it is likely that the forgery was produced for the purpose of this litigation. In my judgment the combination of forgery and misleading evidence make this a case where the equitable jurisdiction to restrain breach of confidence gives way to the public interest in the proper administration of justice. The claimants, having disclosed the bogus Appendix 1, have to accept that the case would go forward on a wholly false basis if the fact that they were in possession of it before Mr Masood swore his third affidavit and exhibited Masood Appendix 1 were suppressed. They have therefore offered the following concessions: first, that prior to serving Mr Masood’s third affidavit, the claimants had received from Istil Friend a copy of the bogus Appendix 1 (which they describe as the “Rogue” Appendix 1); and (b) prior to serving Mr Masood’s third affidavit, but only after inspecting the original of Zahoor Appendix 1 on November 27, 2002) the claimants and Schillings had formed the view that “Rogue” Appendix 1 was not a genuine contractual document (although they did not believe that ISTIL Friend was responsible for creating that document). 114. I do not consider that the offer of concessions by the claimants makes any difference. In my judgment, the defendants are right to say that the fact that the claimants are prepared to make concessions at all, as the price of obtaining the relief which they seek, illustrates the artificiality of the approach that they wish the court to adopt. By making concessions concerning facts of which the defendants would have had no /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx Judgment of Mr Justice Lawrence Collins (February 14, 2003) Approved by the Court for handing down HC 02 C 02711 ISTIL Group Inc & anr v. Zahoor & anr 115. 116. knowledge but for their receipt of the forwarded e-mails from ISTIL Friend, the claimants effectively acknowledge that it would be unsatisfactory for the court to proceed on the basis of paragraph 9 of Mr Masood’s third affidavit without reference to at least some of the matters revealed by the e-mails. However, rather than allow the defendants and the court to proceed on the basis of what the e-mails actually reveal, the claimants wish to present the court with a partial version of what the e- mails reveal, which the defendants will not be able to challenge by reference to the e- mails. I consider therefore that the injunction should be refused in relation to the e-mails with which this application is primarily concerned, namely the e-mails of November 18, November 25, and November 27 from Mr Cruddace, and of November 19 and November 27 from Mr Masood, on the ground that the public interest in the disclosure of wrongdoing and the proper administration of justice requires that no injunction be granted to prevent reliance on them by the defendants. But I also reject the application with regard to all (other than the one intended for Mr Axelrod) of the e-mails between ISTIL Friend and the claimants and their advisers on the discretionary ground that the claimants have misled the court in a material respect connected with the documents for which the remedy is claimed. I would add this. I granted a freezing injunction on September 20, 2002, and it was (as I have said) continued by other judges of this Division. Neither Mr Masood nor Mr Zahoor has been very forthcoming about the services which MCL and/or Reventox were actually to provide, or did actually provide (as distinct from what the relevant contracts said were their consultancy obligations). In his first affidavit Mr Masood says that Mr Zahoor told him that there might be a couple of million dollars in the trading opportunity, but it could not be audited because of all the commissions they had had to pay. In Mr Cruddace’s latest affidavit he says that Mr Masood informed him that commissions were payable to the manager of the Ukrainian Bank, to individuals within Progress, and “of course, all those ‘Partners’ in Pakistan.” 117. I do not think that the court should shut its eyes to the likely nature of the services involved, and unless the parties are more forthcoming about the nature of the business (and that may be in neither side’s interest) it may be that the judge hearing the substantive application will have to consider whether it is appropriate on public policy grounds for the equitable jurisdiction of the court to be exercised in aid of “trading opportunities” of this kind. /tmp/4386cd62f2eeb8eeedd0bc6c366f0b48.docx