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England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Tchenguiz & Ors v The Serious Fraud Office (SFO)  EWHC 1578 (QB) (14 June 2013)
Cite as:  EWHC 1578 (QB),  Lloyd's Rep FC 535
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QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
|(1) ROBERT TCHENGUIZ|
|(2) R20 LTD||Claimants in HQ12X05106 and HQ13X00672|
|(1) RAWLINSON AND HUNTER TRUSTEES SA|
|(2) VINCOS LTD|
|(3) EURO INVESTMENTS OVERSEAS INC|
|(4) VINCENT TCHENGUIZ|
|(5) AMORA INVESTMENTS LTD||Claimants in HQ12X05082 and HQ13X00414|
|- and -|
|THE DIRECTOR OF THE SERIOUS FRAUD OFFICE||Defendant to all claims|
Mr Joe Smouha QC, Mr Alex Bailin QC, Ms Alison Macdonald and Mr Anton Dudnikov (instructed by Shearman & Sterling (London) LLP) for the RT Claimants.
Mr Dominic Dowley QC, Mr James Eadie QC, Mr Simon Colton and Mr James Segan (instructed by Slaughter and May) for the Defendant
Hearing dates: 4 and 5 June 2013
Crown Copyright ©
"285. There are consequential claims.
286. The claimants sought a declaration that the warrants and searches and seizures consequent upon them were unlawful; they relied on decisions to the effect that this was relief that could be granted. Their entitlement to a declaration was accepted by the SFO.
287. It will be necessary for that declaration to be drafted by the parties with care so that no misunderstandings arise in any other proceedings.
(ii) Further conduct of the action
288. It was common ground that this court should transfer the action to the ordinary list of the Queen's Bench Division under CPR Part 54.20 for any civil claims for damages to be pleaded and determined by a judge of the Division.
289. The action will be assigned to a judge who will manage the case, calling upon the assistance of a Master, if necessary, but under the direction of the judge. It may be of assistance if we make agreed directions on the handing down of this judgment for a timetable for pleadings."
"1. QUASHES the search warrant issued by HHJ Worsley QC on 7 March 2011 to enter and search [the premises] (hereinafter "the Warrant") on the grounds set out in the judgment, and consequently:
2. DECLARES the entries, searches and seizures conducted pursuant to the Warrant to be unlawful on the grounds set out in the judgment; [ ]
4. TRANSFERS, pursuant to CPR Part 54.20, any actions by the Claimants and the Interested Party for damages to a judge to be assigned of the Queen Bench's Division;
5. ORDERS that there should be a directions hearing for the further conduct of the action before the assigned judge, such hearing shall be listed in the usual way during the Michaelmas Term 2012, and the Claimants and the Interested Party shall serve heads of claim (so far as they are known) and proposed directions 21 days in advance of the hearing, and the Second Defendant shall serve his response to those heads of claim and proposed direction seven days in advance of the hearing."
The SFO's "admission" of liability for trespass
The SFO's volte face
"Reason for the application to withdraw the admission
31. I have raised the circumstances of the making of the admission quoted above with the Treasury Solicitor's Department, counsel acting for the Defendant at the time and representatives of the Defendant. Without waiving privilege in the relevant communications, I understand that at the time that the Response was drafted and served in November 2012, the Defendant was of the opinion, having taken legal advice, that liability in trespass followed automatically from the Divisional Court's findings and quashing of the warrants. Therefore, the SFO was of the view, at that time, that making the admission was the proper approach to take.
32. However, as the Court will be aware, since the Response was drafted and served, there have been changes to the legal team representing the Defendant in this matter. Without waiving privilege in such matters, it is the case that, as a result of advice received from this new legal team, coming to the matter afresh, the Defendant took the different view that there was, in fact, a legitimate point to take on liability in trespass and that it has good prospects of success. I am satisfied, having made enquiries, that this is the only reason for the Defendant's application to withdraw the admission. The Defendant respectfully requests that it be granted permission to withdraw its admission."
The SFO's grounds for denying liability in trespass
i) It is a defence to any claim for a trespassory tort, such as trespass to land or false imprisonment, to show a "lawful justification" for what would otherwise be a trespass. A judicial order authorising the relevant act is a classic example of such a lawful justification.
ii) The searches which are impugned in the trespass claims in the present case were conducted in accordance with judicial warrants. The fact that those warrants were subsequently quashed, and the consequent entries, searches and seizures declared unlawful in public law proceedings, does not deprive the SFO of the defence of lawful justification in respect of any tortious claims. On the contrary, as the Court of Appeal held in Percy v Hall  QB 924, a case concerning arrests under a byelaw which had been declared unlawful in a previous decision (emphasis added):
"The central question raised here is whether these constables were acting tortiously in arresting the plaintiffs or whether instead they enjoy at common law a defence of lawful justification. This question, as it seems to me, falls to be answered as at the time of the events complained of. At that time these byelaws were apparently valid; they were in law to be presumed valid; in the public interest, moreover, they needed to be enforced. It seems to me one thing to accept, as readily I do, that a subsequent declaration as to their invalidity operates retrospectively to entitle a person convicted of their breach to have that conviction set aside; quite another to hold that it transforms what, judged at the time, was to be regarded as the lawful discharge of the constables' duty into what must later be found actionably tortious conduct." (see 947-948 per Simon Brown LJ, with whom Peter Gibson and Schiemann LJJ agreed).
iii) It follows that an arrest and conviction under an invalid byelaw may be unlawful as a matter of public law, entitling the person convicted to have their conviction set aside, but the byelaw will still afford the defence of lawful justification in respect of any tortious claims in private law. The law treats the availability of public law relief, such as the quashing of a conviction or administrative decision, quite separately from the availability of private law damages.
iv) Indeed, employing the same reasoning, the Court of Appeal has also held, in Olotu v Home Office  1 WLR 328, that a prison governor was not liable for the tort of false imprisonment even where the detention of a prisoner exceeded the custody time limit and was therefore unlawful as a matter of public law, because the original judicial warrant of committal required the prison governor to continue to imprison: see 335 per Lord Bingham CJ (emphasis added):
"The plaintiff was in the custody of the Crown Court. Only by order of the court could that period of custody be brought to an end. ... Once the custody time limit had expired, the plaintiff was in my view unlawfully detained, and an order which would have led to her release could have been obtained either from the Crown Court or from the Divisional Court; but it does not follow that in the absence of any such order the governor was guilty of falsely imprisoning the plaintiff and in my view he was neither entitled nor bound to release her."
v) Lord Bingham CJ held that the false imprisonment claim against the prison governor was therefore "unsustainable in law" (see 336B-C). Auld LJ agreed with him (see 337H). It is at the very heart of the Court of Appeal's reasoning that (i) the plaintiff had been " unlawfully detained, and an order which would have led to her release could have been obtained either from the Crown Court or from the Divisional Court"; but nevertheless (ii) the judicial warrant of commitment afforded a defence of lawful justification in respect of a private law claim for the tort of false imprisonment.
vi) In R v Governor of Brockhill Prison, ex parte Evans (No 2)  2 AC 19, the Appellate Committee of the House of Lords considered a false imprisonment claim against a prison governor who had wrongly calculated a prisoner's release date relying upon Home Office guidance. The governor relied, by analogy, upon the Percy and Olotu cases. Those cases were referred to without disapproval by Lord Hope of Craighead (see 34C-35C), with whom Lord Browne-Wilkinson agreed, and Lord Hobhouse stated that Olotu was in line with the earlier authorities (see 44A-46D).
vii) Lord Hope, however, distinguished the Evans case from the Percy and Olotu cases on the basis that (35A-C, emphasis added):
" relying upon guidance is not the same thing as complying with the terms of a court order. It is no answer to a claim based on a tort of strict liability to say that the governor took reasonable care or that he acted in good faith when he made the calculation. Nor can he say, as in the case of the constables who were seeking to enforce the byelaws in the reasonable belief that a byelaw offence was being committed, that he had a lawful justification for doing what he did. His position would have been different if he had been able to show that he was acting throughout within the four corners of an order which had been made by the court for the applicant's detention. The justification for the continued detention would then have been that he was doing what the court had ordered him to do."
viii) It follows from this reasoning, and from the Percy and Olotu cases, that acts done within the four corners of an order of the Court will benefit from the defence of lawful justification in a private law claim for a trespassory tort even if that judicial order is subsequently quashed for public law errors. As the Court of Appeal held in R (Lunn) v Governor of Moorland Prison  1 WLR 2870, after a discussion of the Olotu and Evans decisions (2876H per Moore-Bick LJ):
" The authorities to which we have referred draw a distinction between the intrinsic lawfulness of the continued detention (in the sense that it could be successfully challenged in the courts) and the liability of the prison governor for the tort of false imprisonment. As far as the governor's position is concerned, it is clear that he is entitled, and indeed bound, to comply with the order of the court and does not incur any liability for false imprisonment provided he has properly done so.
It is an important principle of the administration of justice that an order of a court of competent jurisdiction made in the exercise of that jurisdiction, as it was in this case, is valid and binding until it is varied or set aside, either on appeal or in the proper exercise of the court's own jurisdiction. It is necessary that that should be the case, both in order to preserve the authority of the courts and thereby the orderly administration of justice and to ensure that those who have to take action on the basis of the court's orders may be confident that they can lawfully do so."
ix) A warrant is, of course, a judicial order as much as any other: see McGrath v RUC  2 AC 731 at - per Lord Clyde:
" the person executing a warrant should follow and be entitled to rely on the face of the warrant. He may not act outside the terms of the warrant. ... But he should not be held to have acted unlawfully if he carries out the instruction which appears from the face of the warrant. It is not for him to question that instruction if it is clear. Warrants issued by a court of law require to be treated with the same respect as must be accorded to any order of the court."
x) In the present case, the City of London Police constables executing the warrants, and the officers of the SFO who assisted them, acted at all times within the four corners of the warrants. Thus even though the relevant warrants were subsequently quashed, with the result that the entries, searches and seizures pursuant to them were unlawful as a matter of public law, the warrants nevertheless afford a defence of lawful justification in private law proceedings for any trespassory tort.
xi) None of these matters was debated before the Administrative Court for the obvious reason that they were irrelevant to the matters of public law under consideration in the judicial review proceedings.
i) Further, even if the Percy v Hall defence were not available to the SFO, section 6 of the 1750 Act provides as follows (emphasis added):
"No action shall be brought against any constable, headborough, or other officer, or against any person or persons acting by his order and in his aid, for any thing done in obedience to any warrant under the hand or seal of any justice of the peace, until demand hath been made or left at the usual place of his abode by the party or parties intending to bring such action, or by his, her, or their attorney or agent, in writing signed by the party demanding the same, of the perusal and copy of such warrant, and the same hath been refused or neglected for the space of six days after such demand; and in case after such demand and compliance therewith, by showing the said warrant to and permitting a copy to be taken thereof by the party demanding the same, any action shall be brought against such constable, headborough, or other officer, or against such person or persons acting in his aid for any such cause as aforesaid, without making the justice or justices who signed or sealed the said warrant defendant or defendants, that on producing and proving such warrant at the trial of such action the jury shall give their verdict for the defendant or defendants, notwithstanding any defect of jurisdiction in such justice or justices; and if such action be brought jointly against such justice or justices and also against such constable, headborough, or other officer or person or persons acting in his or their aid as aforesaid, then, on proof of such warrant, the jury shall find for such constable, headborough, or other officer, and for such person and persons so acting as aforesaid, notwithstanding such defect of jurisdiction as aforesaid; and if the verdict shall be given against the justice or justices, that in such case the plaintiff or plaintiffs shall recover his, her, or their costs against him or them, to be taxed in such manner by the proper officer as to include such costs as such plaintiff or plaintiffs are liable to pay to such defendant or defendants for whom such verdict shall be found as aforesaid."
ii) The effect of this provision is that " if the constable acts in obedience to the warrant, then, though the warrant be an unlawful warrant, he is protected by the Statute of 1750": Horsfield v Brown  1 KB 355 per Macnaghten J; cited with approval in McGrath (cited above) at  per Lord Clyde. The leading textbook in this area states that "Even if a warrant is, in fact, invalid the police will have a statutory defence under the Constables Protection Act 1750 provided they act "in obedience" to it": Civil Actions Against the Police, Clayton & Tomlinson, 3rd Ed, 2004 at §1-029.
iii) Section 6 of the 1750 Act has remained on the statute book for over 262 years without any amendment, despite the remainder of the Act having been long ago repealed. It is not a dusty relic but a constitutionally important provision routinely cited as affording protection to police constables and to Chief Constables who are vicariously liable for such constables' actions: see e.g. Bell v Chief Constable of Greater Manchester  EWCA Civ 902 at - per Sir Mark Potter P; Fitzpatrick v Commissioner of Police of the Metropolis  EWHC 12 (Admin) at - per Globe J.
iv) The 1750 Act was passed some eighty years or so before the development of an organised police force. The words " constable, headborough, or other officer, or any person or persons acting by his order and in his aid" would have referred, in 1750, to unpaid parish officers and other persons who were not part of any organised police force. As Lord Goddard CJ observed in R v Onufrejczyk  1 QB 388 at 396, speaking of the situation around 1700, " there was no police force; there was nothing but a watchman in a town, and a parish constable who might have been an old infirm man of 70 or 80 in the country. There was no police force at all."
v) The 1750 Act must be construed, however, in accordance with the "always speaking" approach recognised by the Appellate Committee of the House of Lords in R (Quintavalle) v Health Secretary  2 AC 687. In that case, Lord Bingham of Cornhill approved guidance to the effect that (see ):
"...when a new state of affairs, or a fresh set of facts bearing on policy, comes into existence, the courts have to consider whether they fall within the parliamentary intention. They may be held to do so, if they fall within the same genus of facts as those to which the expressed policy has been formulated. They may also be held to do so if there can be detected a clear purpose in the legislation which can only be fulfilled if the extension is made."
vi) The clear purpose of the 1750 Act is to protect public officers from civil actions for acts undertaken in obedience to a judicial warrant. This underlying purpose has meant that the Courts have found no difficulty, in modern times, in applying the words " constable, headborough, or other officer, or any person or persons acting by his order and in his aid" so as to include the paid police constables of an organised police force, and to Chief Constables who answer, by way of vicarious liability, for the actions of such constables: see the cases cited above.
vii) The protection of the 1750 Act is not, however, and never has been, restricted to police officers. On the contrary, the Courts have expressly rejected the argument that the 1750 Act protects only "officers of the peace" (Harper v Carr 101 ER 970; (1797) 7 Term Rep 270 at 274 per Lord Kenyon CJ); and have instead recognised that it protects a very broad range of public officers acting in obedience to judicial warrants, including churchwardens, surveyors of the highway, overseers of the poor and bailiffs. Indeed, having cited many of the relevant cases, Halsbury's Laws concludes that the 1750 Act protects (quite generally) " persons other than constables to whom a warrant is addressed": Halsbury's Laws, Vol 36(1), Police, §523 fn 6.
viii) The SFO submits that, taking the correct "always speaking" approach to section 6 of the 1750 Act, it is clear that the words " constable, headborough, or other officer, or any person or persons acting by his order and in his aid" must logically include not merely the COLP constables who took part in the entries, searches and seizures, but also the members of the SFO and the Director of the SFO who would otherwise be vicariously liable for their actions. The purpose of the 1750 Act is to protect public officers from civil actions for acts undertaken in obedience to a judicial warrant. The words "other officer" are entirely wide and clearly encompass, as a matter of ordinary language, members of the SFO and the Director thereof, who are clearly public officers. Alternatively, such persons were clearly "persons acting by his order and in his aid" in relation to the COLP constables and so are entitled to the protection of the 1750 Act even if not in themselves "officers".
ix) It is important in that regard that the warrants in the present case were granted under section 2 of the Criminal Justice Act 1987 (the "1987 Act"), which positively required officers of the SFO to be in attendance: see section 5(6)-(7) (emphasis added):
"(6) Unless it is not practicable in the circumstances, a constable executing a warrant issued under subsection (4) above shall be accompanied by an appropriate person.
(6A) Where an appropriate person accompanies a constable, he may exercise the powers conferred by subsection (5) but only in the company, and under the supervision, of the constable.
(7) In this section "appropriate person" means
(a) a member of the Serious Fraud Office; or
(b) some person who is not a member of that Office but whom the Director has authorised to accompany the constable."
x) It would be inconsistent with the policy of the 1750 Act, and with the broad approach taken by the Courts to the protections thereof, if the 1987 Act could positively require members of the SFO to attend the execution of a search warrant, along with police constables, without enjoying the same protection as those constables.
xi) Section 6 of the 1750 Act thus provides a complete defence to the trespass claims in this case. Again, the 1750 Act was not the subject of debate before the Administrative Court because its provisions were irrelevant to the issues which arose in the judicial review proceedings.
The present application: questions to be determined
i) Do the DC Orders preclude the SFO from disputing liability for trespass?
ii) If not, should the SFO be permitted to withdraw the admission of liability made in paragraph 2 of its Response to Heads of Claim dated 22 November 2012 in relation to the aforementioned claims?
Issue 1: Do the Orders of the Divisional Court sealed on 20 September 2012 preclude the SFO from disputing liability for trespass?
Res judicata the relevant principles
i) A res judicata estoppel arises in order to protect the principle of finality in litigation. Where an issue has been determined by a final decision on the merits by a court with jurisdiction over the parties and the subject matter, that issue is determined definitively as between those parties and they will not be allowed a second bite of the cherry.
ii) Res judicata estoppel can take two forms: cause of action estoppel and issue estoppel.
iii) Cause of action estoppel arises where the 'cause of action' in the later proceedings is the same as that adjudicated in the earlier proceedings. This form of estoppel provides an absolute bar to re-litigation in respect of all points decided in the earlier proceedings: see, for example, Arnold v National Westminster Bank Plc  2 A.C. 93, and in particular per Lord Keith at 104. A 'cause of action' is the set of material facts, or core factual matrix, which support a recognised legal ground of claim.
iv) Issue estoppel concerns the prior adjudication of a discrete 'issue' in the course of proceedings. A party is not entitled to advance an argument of fact or of law which conflicts with a court determination of the same issue in earlier proceedings between the same parties. Unlike cause of action estoppel, issue estoppel can be relaxed in special circumstances, but essentially where there has been a supervening change in the law or where there is new evidence which was not available at the time of the earlier proceedings or could not have been obtained with reasonable diligence.
v) A judgment (or order) by consent is a res judicata. Judgments, orders and awards by consent are as efficacious as those pronounced after a contest in creating cause of action or issue estoppels: see Re South American and Mexican Co, ex p. Bank of England  1 Ch 37; Khan v Golechha International Ltd  1 WLR 1482; Spencer, Bower and Handley 'Res Judicata', 4th Ed. Para 2.16.
Res judicata? The case advanced by the SFO
i) The only issue which was determined by the declarations contained in para 2 of the DC Orders was that the entries, searches and seizures pursuant to the relevant warrants were " unlawful on the grounds set out in the judgment", which were only public law grounds.
ii) Neither the DC Judgment nor the declarations said anything about whether, if private law claims were issued and properly pleaded, the SFO would be able (i) to advance a defence of lawful justification under the Percy v Hall principle, or (ii) to rely upon the 1750 Act. It is hardly surprising that neither the DC Judgment nor the declarations dealt with these issues, because the proceedings at that point were concerned entirely with the public law challenges, and the private law claims had in many cases not even been issued, let alone pleaded. VT was indeed not even a claimant in the judicial review proceedings at all. As submitted above, questions of liability in private law (concerning the Percy v Hall principle and the 1750 Act) were not debated before the Administrative Court because such matters were irrelevant to the issues before that Court.
iii) For this reason, there was no obligation to take the point because it is a defence to private law tort claims which were not being heard or disposed of in the Judgment or the Orders. Furthermore, the 1750 Act does not render an unlawful search anything other than that; it simply prevents a civil action for damages against persons conducting such a search in obedience to a judicial warrant.
Res judicata? The claimants' case
i) Trespass to land is constituted by the unjustifiable interference with the possession of land.
ii) The DC Orders determined every aspect of the liability for the cause of action of trespass. The entries, searches and seizures constituted the interference by the SFO with the claimants' premises as listed in the DC Orders.
iii) It is a defence to trespass if the interference is justified by law. By declaring that the entries, searches and seizures were "unlawful" in addition to quashing the warrants, the Divisional Court determined that there was no lawful justification for the interference.
i) First, it is agreed between the parties that (save for Human Rights Act 1998 damages) there is no concept of "public law damages" i.e. damages for unlawful administrative action. It must follow that the claimants' claim for damages in the judicial review claim form and grounds can only have been private law damages. It was open to the claimants, for example, only to seek relief quashing the warrant that would have been a classic judicial review remedy. But they also sought (as is clear from the claim form and grounds) and obtained a declaration that the entries searches and seizures were unlawful and damages for the latter. The distinction is important the quashing relief was sought in respect of the warrant and was relief against the Central Criminal Court (the First Defendant in the judicial review), whereas the declaration was relief sought in respect of the entry, search and seizures and was relief against the SFO (the Second Defendant in the judicial review).
ii) There is no CPR or other requirement that such damages are labelled as "private law damages" or identified as such in the judicial review claim form. It is entirely permissible to claim private law damages as part of a judicial review claim which seeks other public law relief (e.g. a quashing order). The White Book 2013 at 54.3.8 and 54.20.1 make the position clear and the reasons why this hybrid procedure is positively encouraged. That is what occurred in this case, in relation to the tort of trespass (being the private law claim consequent upon an unlawfully obtained search warrant).
iii) The correct position is further re-enforced by the fourth provision of the Order which specifically ordered the transfer out "pursuant to CPR 54.20 any actions for damages by the Claimants to a judge to be assigned on the QBD". If, as the SFO maintains, the claimants had never brought any private law claim for trespass there was nothing at all to be transferred to the QBD. On any objective view, the Divisional Court would not have made a nugatory provision in its own Order.
iv) This hearing is not the appropriate forum in which to rehearse or ventilate the merits of the 1750 Act defence (which raises questions such as: Whether that defence is Article 8 ECHR compliant if it is as broad as the SFO contends? To whom does it apply?) or the 'lawful justification' defence (e.g. does it apply to a situation where the procurer of the unlawful warrant is the same legal person who then seeks to rely upon the warrant?). This hearing is only about whether the SFO are now permitted to advance these defences. But it is important to understand that both defences are inconsistent with the terms of the Declaration. The SFO has accepted in argument that the Declaration is binding on this Court (albeit with a different construction than that for which the claimants contend). Both defences should have been raised before the Divisional Court if they were to be raised (the only alternative would have been to ask the Divisional Court to transfer also the question as to the private law effect of the quashing of the warrant, but plainly it was more appropriate for that to be considered by the Divisional Court). The suggestion made that it would be completely inappropriate to seek determination of, for example, the 1750 Act point before the Divisional Court is quite incorrect.
v) The 1750 Act provides that "no action shall be brought " against a person to whom it properly applies. A defence which provides that "no [private law] action shall be brought" must, if made out, necessarily extinguish private law liability. The 1750 Act defence, if made out (and the claimants contend that it does not apply to the circumstances of this case), is not inconsistent with a declaration of the unlawfulness of the warrant but it is inconsistent with a declaration that the entries, searches and seizures were unlawful. If the SFO is correct, the 1750 Act defence is a defence to liability for trespass. A complete defence to liability for trespass is inconsistent with a declaration that the entries, searches and seizures were unlawful. The Declaration necessarily excluded such a defence and it cannot be the case that it does not do so merely because the Declaration does not say, expressly, "and the 1750 Act defence is not open to the Defendants".
vi) Likewise the 'lawful justification' defence is a tortious defence. In the cases where it has been successfully relied upon it has extinguished liability for the strict liability tort of false imprisonment: Percy v Hall at p948A "[no] actionably tortious conduct". It is therefore, if made out, a complete defence to liability in a private law claim. Here the SFO's contention is that the SFO can defend the case on the basis that it was lawfully justified in entering the claimants' premises even though the SFO obtained a warrant which was later found to be unlawful as a result of serious fault on the part of the SFO. Whether the lawful justification defence is capable of applying in such a situation or not (and the claimants contend it does not), the Declaration necessarily excluded such a defence and it cannot be the case that it does not merely because the Declaration does not say, expressly, "and the lawful justification defence is not open to the Defendants".
vii) The correct starting and finishing point is the terms of the Declaration. It is difficult to see what the Declaration adds to the quashing order unless it addresses liability for trespass the quashing order addresses the warrant, the Declaration addresses the entry, search and seizures. If the Court looks to the background to the making of the order, the bottom line is that the Declaration was sought for the specific purpose of addressing liability for trespass and the SFO eventually conceded that it would not oppose such a Declaration without at any point stating in terms that it did not accept liability for trespass.
viii) The failure of the SFO to raise the defences either in its pleadings (e.g. in its Detailed Grounds of Defence) or to object to the granting of the Declaration (e.g. by contending that the only relief which should be granted to the claimants was a quashing of the warrants) coupled with the terms of the Declaration mean that liability for trespass has already been determined. The Divisional Court left no gap between the quashing of the warrant and the determination of the lawfulness of the entries, searches and seizures. The defences which the SFO now seek to advance require such a gap. This Court has no power to amend or to re-interpret the Divisional Court Order and the Divisional Court is no longer seised of the matter.
Res judicata? Discussion and conclusion
"MR KEITH: Lastly, in relation to the directions hearing, this is an issue which has caused my learned friends' feathers to flutter in the past. The simple point is this: the public law issues are now live and must be resolved in terms of whatever damages flow from them. That is a matter for the commercial
THE PRESIDENT: All they are arguing about is it is very simple do you put a piece of paper in first, and you then have a directions hearing with the benefit of that piece of paper, or do you do nothing until the directions hearing?
MR KEITH: It is the latter, my Lord, because the civil claims have not yet been instituted, and no court can have, with respect, the power to order that they be instituted, given the statute of limitations. The only live issue are the public law damages, for what they are worth, that flow from these public law proceedings, which are to be joined up.
THE PRESIDENT: You have to be very, very careful of all the cases on which we heard Mr Eadie recently on the ability to bring private law claims when you have got a public law remedy
MR KEITH: My Lord, it will be no exaggeration to say that the private law claims, if and when they are instituted, will not be straightforward " (emphasis added).
The proper scope of the enquiry?
The narrow enquiry - the DC Orders, the DC Judgment and Claim Forms
The wider enquiry
The Claim Forms
The initial skeleton arguments
The List of Issues
The further skeleton arguments
"The [SFO] has simply stated that such a 'declaration adds nothing'... The [SFO] is mistaken. It is necessary to have a declaration that the entries, searches and seizures were unlawful, otherwise the [SFO] is protected from suit for trespass to land and goods, unless it can be proved, in a lengthy private law action, possibly years hence, either malice in the obtaining of the warrant, or that the seizures were so grossly in excess of those permitted by the warrant."
"3.3 Properly to reflect that concession, the Director would propose that alongside quashing the warrants, a declaration be made along the following lines. [ ]
"the High Court declares that: The warrants issued by the Central Criminal Court on 7 March 2011 [ ] were unlawfully obtained because the Information filed on behalf of the Director contained material errors of fact."
3.4 The Director notes that the Interested Party [VT] now seeks a declaration that, in addition, the searches and seizures on the Claimants' premises on 7 March 2011 were unlawful. While the Director does not consider that such a further declaration is strictly necessary, again to seek to resolve matters expeditiously and proportionately, if the Court were to consider that to be appropriate, then the Director would not object to such a declaration on the basis that it flows directly from his original concession."
"In light of that relief, following the Court's judgment in these proceedings, all aspects of the substantive claim for damages should be transferred to be heard as civil claims in the QBD in accordance with CPR Part 54.20. It is unquestionably the case that the remaining issues of causation and quantum are not appropriate to be determined in judicial review proceedings."
This last passage was the subject of some debate before me. In particular, Mr Dowley submitted that the word "all" in the first sentence necessarily embraced all questions of liability including liability for trespass; and that this conclusion was unaffected by the second sentence referring to "the remaining issues of causation and quantum". In contrast, Mr Thanki submitted that the effect of the second sentence was to make plain that civil (or private law) liability was, in effect, being conceded and that it was only causation and quantum which remained outstanding and required to be transferred and determined. In the event, the point is perhaps not absolutely clear-cut but, viewed at this point in time, it seems to me that Mr Thanki had the much better argument.
The JR hearing
"[The SFO] also concede that if the Court thinks it appropriate, they say they wouldn't object to a declaration that the searches and seizures themselves were unlawful. That's a very, very substantial concession. First, they concede, though my learned friend Mr Keith will deal with the detail of this, that the claim for damages which has been intimated by the Vincent Tchenguiz side, a very substantial claim for damages for the enormous damage to the business caused by this blaze of publicity to an ongoing business, that that should be transferred to the Queen's Bench Division to be heard as a civil claim. So it would follow from what I've said on the first head that the liability to pay those damages must be conceded. The quantum will no doubt, of course, have to be carefully considered in the Queen's Bench Division."
"May I very briefly explain why a declaration that the search and seizures should be unlawful should also be made.
Firstly, contrary to the suggestion in the skeleton argument that this is remedy that was sought only by the claimants two weeks ago, in fact it was in the original claim form dated 9 May 2011
Secondly, sections 15 and 16 of the Police and Criminal Evidence Act, which my Lords will recall set out safeguards in relation to the issue and execution of search warrants expressly envisaged that if the terms of those sections are violated, then the entry on or search of premises under that warrant is unlawful. My Lords, the case law plainly indicates that illegality of a warrant through violation of those sections will render the entry and search unlawful as well as the warrant. We would suggest that it would be extraordinary, given the misrepresentations that have occurred in this case, and where we suggest the errors are more serious than in the norm of challenge warrants for the same consequences not to follow.
Thirdly, my Lords will have in the bundles of authorities, and I needn't take the court to them, a number of cases in which a declaration that the search and seizure is unlawful has been made by the court following findings that the warrant was unlawful ....
Fourthly, even the narrow concession made by the Serious Fraud Office to the effect the warrant is unlawful because it contained or was brought about by errors of fact, vitiated the issue of the warrant. This was not an error that came about as a result of a minor flaw in the execution of the warrant. The concession went to the way in which the warrant [was] obtained. Therefore, we say there should be a public declaration that the consequent search was unlawful as well. If the warrant was unlawful, the search and seizure could have had no proper lawful authority.
Fifthly, in relation to declarations, my Lords will know well that although they're a matter entirely for the discretion of the court, they will generally be made where it is just and convenient to do so and in particular whether they will serve some useful purpose. There are two reasons why we suggest a useful purpose would be served here. Firstly, there are practical consequences. As Mr Jones in the summary grounds set out -- and I am grateful to him for his arguments and I adopt them -- it's a defence to a private law action for trespass to and if the person, the defendant, is acting in obedience to a lawful warrant. That is why, of course, it's necessary to have a warrant quashed. Equally, it may be a defence to a claim for trespass to goods if the search was not after all illegal. So a declaration of unlawfulness of search and seizure will make it absolutely clear that all the steps pursuant to the search and seizure had no lawful authority and that will assist in clarifying the scope of the claim for damages to which I will turn when I address you in relation to remedy. Secondly, we suggest that there would be a further indirect purpose in the public interest. The courts have often stated that the maintenance of standards is of the first importance in relation to the issue of warrants, not only for the obvious reason that the ordinary citizen is entitled to enjoy his privacy but because of the proper co-operation between the court and the police.
We suggest that the behaviour here has imperilled that trust and that there should be a clear indication of the consequences of the unlawfulness of the warrant. So for all those reasons, we invite my Lords to grant a declaration, not just that the warrants were unlawful but the search and seizures were as well. May I then turn to the other public law heads of illegality, which are grounds 1, 2, 3 and 4 in that list of issues.
THE PRESIDENT: Yes.
MR KEITH: My Lords, very briefly, because it may be that my Lords are prepared to hear -- and you indicated that you're prepared to hear substantive argument on those heads, that there are a number of reasons why we suggest that resolution of those arguments matter, notwithstanding that my Lords will in any event quash the warrants. They are these -- they are as follows. The Serious Fraud Office concede now that all aspects of the substantive claim for damages should be transferred under Part 54(20) of the Civil Procedure Rules for causation and quantum to be determined, liability no longer now being in issue. They contend, however, that that is all that should be done. It is right insofar as it goes but it doesn't deal with the fact that the claimant has in fact pleaded claims for aggravated and exemplary damages. The claims for special damages will, of course, result from the quashing of the warrants, subject to proper causation and quantum. But what won't necessarily follow from the warrants being quashed are the claims for aggravated and exemplary damages " (emphasis added).
"MR EADIE: .We don't think [the declaration] is necessary, but if the court wishes to, we're not going to stand in its way, extend that to cover the searches and seizures the only note of caution I would introduce in relation to that is that you will be aware that there are a series of live issues that may or may not have to be determined when one gets into a damages claim about the precise manner in which the searches were in fact conducted. It drifts into the LPP issues I'm going to come in to a moment. What we would respectfully submit, given that those are going off, and given that there is at least scope for misunderstanding, is that if you were persuaded that searches and seizures should be included in the declaration, the wording that should be added at the end of the declaration, we suggest in 3.3, should link, as it were, the searches and seizures aspect back to the information and its errors. So you would add words that went something along the lines of at the end of the declaration we suggest, "and consequently the searches and seizures were unlawful".
THE PRESIDENT: Would that allow them to argue in the civil proceedings that there were other issues to the searches and seizures which could be gone into?
MR EADIE: My Lord, yes, we wouldn't quibble with that if they became live issues in those proceedings and I think it's
THE PRESIDENT: What you don't want us to do is inadvertently to expand the scope of what the consequences of our decision were. You leave the aspect of the way in which it was carried out to evidence if it's in issue; is that right?
MR EADIE: Yes, it is. That's exactly it. That's why we suggest the form of words we do.
MR EADIE: The second aspect then, moving from quashing and declaration to damages. My Lords, we are a little concerned about one issue in relation to this. We're all agreed that damages should be hived off to be determined in the proper form by way of a pleaded case in the Queen's Bench Division. My submission is, and it may be that here I part company with Mr Keith, my submission is that that case should be hived off, transferred, in its entirety, by which I mean liability and quantum, including the necessity, therefore, to plead out whatever causes of action may be relied upon by Mr Vincent Tchenguiz to sustain his claim for damages. This isn't here, in these proceedings, a summary judgment application on a properly pleaded claim for trespass to goods. There are no private law causes of action pleaded or brought in this judicial review. There is, as my Lords will be well aware authority perhaps isn't needed for this proposition, but if it is needed and anyone wants me to produce it I will there is no cause of action for damages for breach of public law. There is no cause of action for pure administrative wrongdoing. That's Quark Fishing 1 AC, Baroness Hale at paragraph 96. But there are a myriad other cases establishing that proposition and principle. And the concern that we have is that the attempt that appears to be being made at the moment by Mr Vincent Tchenguiz's legal team is, as it were, to say let's just transfer everything over. And it's only causation and quantum thereby, as it were, blurring the damages that might be said to flow from the particular cause of action that is pleaded, because one can quite see a sensible argument, I don't know whether it would work or not, but one can see a sensible argument that says if your cause of action is purely trespass to property or to goods, the damages that you're entitled to as a result of that cause of action are minimal/zero because you really have no damage that flows from that cause of action. If on the other hand, what you're trying to do is to say: we want all the consequences of all the publicity and everything else that flowed from it, which appears to be what they want to do, then it may well be that you to have plead a very different cause of action, for example in misfeasance, or you have to try and attempt, perhaps improbably given cases like Al Kazuli Daf(?), to get a duty of care off the ground in relation to the Serious Fraud Office. But the only reason I raise them is not to seek the determination of the court but to indicate that what we don't want, as it were, is to drift into the position where in essence what is going to be said in the Queen's Bench Division action is: you've determined all the liability issues, don't worry about how the cause of action works, don't worry about time or damage to that, you can just look at all the consequences and then just say, how much loss do those consequences cause? That, in my respectful submission, would be an entirely wrong approach in principle.
THE PRESIDENT: Okay. Then what they will face is an issue estoppel on what we determine in the judgment.
MR EADIE: Well, yes, whatever is live there can be argued about in the civil action.
THE PRESIDENT: You say the consequences that it gives rise to various issues will be determined in these proceedings and those will, therefore, amount to an issue estoppel, but as we're not determining any private law proceedings, the consequences of our determination have to be worked in the private law proceedings.
MR EADIE: My Lord, that's exactly the point, and what I don't want, as it were, is to fall into a trap on behalf of the government, as it were, so as to expose them to, as it were, a claim that has in some shape or form bypassed a perfectly legitimate point, which on mature reflection the government could properly take in a claim for hundreds of millions of pounds worth of damages in the civil action. So we respectfully submit that the right and proper course --
THE PRESIDENT: Would be an order that the civil claim be pleaded.
MR EADIE: Exactly.
THE PRESIDENT: Defence in a hearing before the judge who is to hear the case for directions.
MR EADIE: Exactly so. Then whatever points my learned friend can properly rely upon by way of my Lords' judgment can properly be relied upon. No one is prejudiced thereby. I just don't want to be -- I just got a kind of ghastly sense at midnight last night that we were falling into a trap if one simply said "Transfer over solely causation and quantum". So I really want the position preserved.
THE PRESIDENT: Yes, your position being that you dissect each cause of action that may be available on the basis of our determination in these proceedings and the government may turn round and say "Ah, each fails for different technical reasons."
MR EADIE: It might do. Or that you need to link, as it were, the claims for damages to the specific cause of action. Some causes of action may be more difficult than others. One envisages that a pure cause of action not requiring damage or trespass may be easier to establish. But the question then would be, what damages may flow from that, non sequitur that you can just muddle everything up together and say consequence is X, therefore quantum Y. That's the concern " (emphasis added).
"MR KEITH: My Lords, in relation to the declaration --
THE PRESIDENT: Yes.
MR KEITH: -- we're grateful for what I think was [a?] concession by my learned friend that provided the court does not stand in our way they have no opposition to the application for a declaration that the search and seizure was unlawful. It is difficult to know whether that was proffered in a concessional moment or a combative moment, but for our part we would suggest that for all reasons that I invited the court to have regard to in my opening submissions it must follow.
In relation to damages, we're also grateful that there appears to be no objection to the transfer of the claim under Part 54.20 that concession was made in relation to ground 5, but it must also follow in relation to the other public law heads, grounds 1, 2, 3 and 4.
My Lords, there's no trap here. What we suggest is a sensible and proportionate course, which is this, ground 5 being plainly before the court and conceded and a matter on which my Lord is plainly seized, it makes no sense to put over the other public law heads grounds, 1, 2, 3 and 4. Grounds 1 and 2 are intimately connected to ground 5 and to the whole history of this sorry affair, in relation to which my Lords have heard two days of argument. They are all public law heads of argument in relation to which this court is particularly well suited to resolve, and it simply makes no sense for these public law issues to be transferred, along with questions of remoteness and quantum on damages.
THE PRESIDENT: To the extent that there may be a claim, say for wrongful imprisonment or anything of that kind, those haven't yet been formulated --
MR KEITH: Of course.
THE PRESIDENT: -- and, therefore, to the extent that there may be damages for the public law remedies, for any public law breaches, all we would do is find breaches and refer the questions of damages, if any. If they are private law claims, there will have to be a statement of claim. And to the extent to which we've made any decisions which are binding for the future, they are binding for the future. But whether there are any technical defences is for a future --
MR KEITH: My Lord, has it absolutely.
THE PRESIDENT: I don't think there's any difference between you.
MR KEITH: Indeed, my Lord has it absolutely. Of course, my Lords' rulings in relation to the public law heads cannot be dispositive of civil law liability, but it plainly makes sense, given that we are here before my Lords to argue the points --
THE PRESIDENT: They will take place as an issue estoppel.
MR KEITH: They are resolved. It is certainly open to them to take issue on the civil law liability, but we're not here to determine that issue.
THE PRESIDENT: Okay." (emphasis added).
Conclusion on Issue 1
Issue 2: Should the SFO be permitted to withdraw the admission of liability made in paragraph 2 of its Response to Heads of Claim dated 22 November 2012 in relation to the aforementioned claim?
i) The grounds upon which the SFO seeks to withdraw the admission: The only ground advanced by the SFO in its witness evidence in support of its application is the change in legal advice (see paragraphs 31 to 32 of the second witness statement of Mr Cotton). Mr Cotton explains that an initial view was taken by the legal team that the liability for trespass "followed automatically from the Divisional Court's findings and the quashing of the warrants". (It is noted that Mr Cotton here does not refer to the second declaration that the entries, searches and seizures were unlawful.) He then says that, following changes to the legal team, this "new legal team" looked at the matter afresh and formed a different view. This does not provide a compelling or even a sufficient ground for allowing the withdrawal of the admission, especially in circumstances in which it relates to the SFO's conduct before the JR hearing as described above.
a) First, while there were some changes in personnel in the SFO's legal team, the SFO's Leading Counsel, Mr Eadie, was instructed at the time of the JR and formulation of the Order, and was later also instructed to settle the SFO's Defence and his name appears on its skeleton for this very application.
b) Secondly, the SFO has not provided any detail as to the reasoning behind the change of position, as privilege has not been waived. It is accepted that the SFO is entitled to assert legal professional privilege, but in circumstances where it relies on privileged communications to explain or justify its change of position without waiving privilege, the SFO cannot expect the Court to attach great weight to this factor.
ii) The conduct of the parties that led to the making of the admission: As set out above, the SFO's admission is properly traced back to the conduct of the JR and the declaration of unlawfulness. The declaration, and the admission in turn, were made in order to act proportionately in respect of claims brought by claimants whose premises had been very publically raided against the backdrop of an unlawful warrant. The SFO was, at all times, represented by Leading Counsel and junior counsel and to allow a change of position now would undermine the entire rationale of the declaration and concession.
iii) Prejudice caused to the Claimants: The prejudice to the VT Claimants is that, even if (contrary to the claimants' case) the SFO's concession as to the unlawfulness of the entries is not technically res judicata, they will be forced to re-litigate the trespass issues contrary to all expectations. Further, had the SFO's position at the JR been the position which it seeks to adopt now, the claimants could have sought an order from the Divisional Court in different terms. The claimants have been prevented from obtaining certainty at the JR Proceedings when considerable costs had already been incurred in relation to the trespass issue: see, for example, the submissions on trespass, including reference to various authorities, at paragraphs 49 to 55 of the VT Claimants' skeleton argument for the JR hearing. Furthermore, this litigation has proceeded for months on the basis that liability for trespass was not in issue, and the claimants relied on this in the formulation of their respective Particulars of Claim.
iv) Prejudice caused to the SFO and the prospects of success on the issue: The SFO would no doubt be inconvenienced by being unable to contest liability for one of the causes of action. However, this factor needs to be viewed in the context that the SFO confidently asserts that only nominal damages are available for trespass. Further, this factor needs to be weighed together with an assessment of the prospects of the SFO succeeding at trial on the trespass liability issue. For the reasons set out in summary at paragraph 102 of the VT Claimants' Response to the SFO's Legal Submissions, it is respectfully submitted that the SFO's legal arguments on liability are in any event without merit.
v) The stage of the proceedings: Given the tight timetable to trial, it is not accepted that the proceedings are at a relatively early stage, but rather are relatively advanced, with pleadings having closed.
vi) The interests of the administration of justice: These QBD proceedings have commenced on the basis that liability for trespass was not disputed. Accordingly, the claimants proceeded on the basis that they had at least one unanswerable claim, with the quantum of that claim (including causation) the only issue to be decided. If the SFO is allowed to withdraw its admission, the shape of these proceedings will have altered markedly, the parties will be put to greater costs, and all this against the backdrop of a tight timetable to trial. Further, this latest SFO change of position needs to be seen in the context of its conduct of this litigation to date. The SFO first vigorously sought to defend various aspects of the JR proceedings, which were launched on 9 May 2011, before finally conceding that the warrants should be quashed on 22 December 2011. Despite this concession, the SFO then refused to drop its investigation into the VT Claimants, and continued to defend aspects of its continuing investigation before the Divisional Court, only to drop the investigation into the VT Claimants shortly before the Judgment. The about-turn in relation to trespass is just the latest stance taken by the SFO which will cause the Claimants to waste further costs and time. The concession was made by a sophisticated litigant with access to highly skilled legal advice in order to streamline proceedings, and it is not in the overall interests of justice to allow that position to be resiled from simply on the basis of a bare assertion of a change in legal advice.