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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Dadourian Group International Inc & Ors v Simms & Ors [2008] EWHC 1784 (Ch) (25 July 2008) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2008/1784.html Cite as: [2008] EWHC 1784 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
(1) DADOURIAN GROUP INTERNATIONAL INC (a company incorporated under the Laws of the State of New York) (2) ALEX DADOURIAN (3) HAIG DADOURIAN |
Claimants |
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- and - |
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(1) PAUL FRANCIS SIMMS & ORS |
Defendants |
____________________
Mr Stuart Cakebread (instructed by David Wyld & Co.) for the 3rd & 4th Defendants
Miss Juliette Levy (instructed by Robert Cook & Co.) for the Corporate Defendants
Hearing dates: 28,29,30 April, 1,2,5,11 June 2008
____________________
Crown Copyright ©
Mr Justice Patten :
Introduction
"…For the purpose of this order the Respondent's assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own, and the Respondent is to be regarded as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions.
…"
"..My understanding of the trust is that there is no person who is entitled as a beneficiary of the trust. Payments by the trust are at the discretion of the trustees. They have a list of potential discretionary beneficiaries including myself, my brother, his children and grandchildren and my husband's children, grandchildren and great grandchildren. I am entitled to give my suggestions to the trustees as to the manner in which they may confer benefits but my requests in this respect have no legal effect. I have no access to the bank account of the trust or any of its assets. The trustees are free to agree or not with my suggestions, as they think fit. I have never regarded myself as being able to compel the trustees to use the trust assets as I want them to be used, nor do I regard the assets of the trust as being 'my' assets. I believe that it is precisely because the assets are not my assets that, for example, tax advantages can be obtained.
..."
"..
The trust arrangements affecting Azuri, Ardales, Libourne and Brinton have been in existence for over 5 years. As far as I am aware, no change has been made to them whatsoever and neither my husband nor myself have attempted to procure any change to the arrangements. The legal and beneficial ownership has not changed and nothing has been done to reduce the value of any of the assets owned by Ardales, Libourne and Azuri Limited.
… "
"..
68 I understand that the statutes of this establishment were registered in January 2003. I do not know why there was such a delay in registering the statutes. I have never been given a copy of the statutes or by-laws of the Trust. The Trust is based in Liechtenstein and Dr Peter Marxer of Marxer & Partners is one of the Directors. I believe that there are other Directors, but I do not recall any of their names. Neither Jack nor I are or ever have been Directors of the Trust.
69 My understanding of the Trust is that no single person is entitled as a beneficiary of the Trust. Payments by the Trust are at the discretion of the Directors. The Directors have a list of potential discretionary beneficiaries which includes me, my brother, his children and grandchildren and my husband's children and great grandchildren. I am entitled to give my suggestions to the Directors as to the manner in which they may confer benefits, but my recommendations in this respect have no legally binding effect on the Directors; they are free to agree or not with my suggestions, as they think fit. I have no access to the bank account of the Trust, nor do I own any of its assets. I do not regard the assets of the Trust as being 'my' assets. I believe that it is precisely because the assets are not my assets that, for example, tax advantages can be obtained.
70 I therefore remain of the belief that I am a potential discretionary beneficiary of the trust. The fact that I am named as a "principal beneficiary" in the by-laws of the Trust does not, I believe, affect the position. The by-laws seem to make it clear that I have no legal entitlement to any assets of the Trust."
"MR JUSTICE WARREN: Your summary judgment claim is asserted on the basis that the assets of the corporate defendants are the assets of Jack and Helga, correct?
MR SAMEK: That there is no real prospect of them successfully imposing that conclusion, yes. Exactly.
MR JUSTICE WARREN: That is not something which I have decided.
MR SAMEK: It is not something which you have decided directly so far.
MR JUSTICE WARREN: Or indirectly. If I can just say this: The action which I was dealing with was not about the ownership of assets by the corporate defendants. The only reason we looked at Brinton's structure was in order -- because it was alleged by the defendants that Ancon and Charlton were within that structure. What was important to me was to discover the control or, whatever you like to call it, influence, that Jack and Helga had over Charlton directly or indirectly. My decision was on the evidence before me that Ancon Charlton were not within the structure so I made no decisions about the structure at all, so it seems to me very difficult for you to say on a summary judgment application that anything that Warren J said is of relevance."
"They do not have to show that they are in the Brinton structure. What evidence are you going to rely on to show that -- what we do know is that the companies, as structures, where under Republic. Whether Republic is in Brinton or not is a different issue because we know there has been a declaration of trust, but we also know that Brinton never accept that declaration. There will be a question, which I have not decided, of the Liechtenstein/BVI law about what the legal effect of that declaration of trust is, but either Republic is or is not within Brinton. If it is not it does not follow the Jack and Helga own its assets, let alone any of the assets of the companies underneath. I would have thought that it was quite important to bear in mind my findings in relation to Charlton and Ancon where I decided that it was not appropriate to lift the corporate veil. I have not said anything about the other companies because I did not receive any evidence about how they are conducted."
"It was my intention that the properties should be owned by the Corporate Defendants and that the Corporate Defendants should be ultimately owned by the trust in the sense that their shareholdings should be owned by it. I have of course always relied upon my lawyers to ensure that my wishes were put into effect."
The Brinton by-laws
"…
During the lifetime of Helga Dadourian and of Jack Dadourian, Helga and Jack Dadourian shall be the principal beneficiaries of the Establishment and all distributions of income or capital shall be made to Helga and/or Jack Dadourian and no other beneficiary shall benefit unless Helga Dadourian so approves in writing and no consent of the Protector shall be required for such a distribution.
.."
There has already been disclosure of a letter from Mr Simms to Mr and Mrs Dadourian dated 26 November 1996 in which Mr Simms refers to a meeting with them following which he has revised the Wildhorse resolutions and asks them to sign the revised by-laws "if you are happy that they now represent what you wish".
"The situation on the by-laws is not satisfactory. It seems that Marxer & Partners have not implemented changes which occur from time to time and I have a number of by-laws on my file which they obviously have never implemented.
In view of the evidence already filed it seems to me important that the position is corrected and Mr and Mrs Dadourian have initialled two additional by-laws, copies of which are attached. I have not sent these to Marxer & Partners at the present time. The purpose of the first is obvious namely to cancel the existing by-laws. The second is to substitute by-laws which represent what the parties have intended. I am sending the originals of these to you by post.
Normally the question of the implementation of changes to the by-laws have been dealt with by your office. It seems to me that we do not want any potential suggestions that the description of the Trust in earlier evidence was incorrect based on what was actually implemented by Marxer & Partners. If these are now implemented, the trust will be in a position that the parties thought it was already in."
"…
Sometime ago various changes were made, or so Mrs Dadourian thought, to the beneficial interest but they do not appear to have reach you from Geneva. In order to put matters right, I attach drafts of two prospective changes to the bylaws which were signed by Mr and Mrs Dadourian, the first being the revocation of the existing bylaws and the second setting out a discretionary situation. Whether this is in correct Liechtenstein format I do not know but it is intended to follow the general way in which bylaws appear to be prepared in Liechtenstein.
Since these were signed it has come to light, according to Dr Schreiber that Domar is no longer the Bearer of the Founders Rights and that any changes to the bylaws would be instituted by the directors and not by Domar. Clearly, that would therefore need to be changed.
However, before involving the clients in any changes to their instructions in order to satisfy proper legal requirements, it would seem sensible to ensure that the totality of the documents is correct.
Perhaps you could therefore look at this carefully and let me have your views.
…"
The documents referred to are almost certainly those sent to Maitre Croisier with the letter of 6 May 2005.
"I have had a further very lengthy telephone conversation with Martina Zarn. It is difficult to get any urgency into this situation and it is clear that they would prefer that the problem did not exist and that they were not involved with it. Before we can get them to make any final decision, they want a definitive answer to the question of whether there are any other participations additional to those already mentioned. In that context, there is Dunmurry but it may be that this is now a write-off. However, the position is that whatever is crystallised now, will not be alterable and therefore you should be clear as to what is and what is not within the Trust."
"..It is also the case that Maitre Croisier has confirmed the existence of the trust structure. It is therefore very much in the interest of all parties that the structure should be as disclosed and as the parties thought and if Republic Investment Company Limited were not held by the Trust, then the question is how the Republic Investment Company is held and that could then create total confusion since Mrs Dadourian would not wish to claim ownership having made a declaration to the contrary and there would then be problems with the directors of Republic Investment Company since they regard the company as being held by Brinton. It does seem very much the best thing to regularise matters and proceed from there.
…."
"…I signed this because Paul Simms told me that it would look as if Jack had always been a beneficiary unless this change was made. I did not believe that Jack had been a beneficiary of the trust and so I signed it."
"15 I should lastly state that I was not told by Paul Simms during 2005 that he was making any attempt to change the by laws as now appears to be the case. I knew nothing of this, was not consulted about it and did not instruct or authorise any such steps to be taken. I was not privy to the communications which went between Maitre Croisier and Paul Simms or Paul Simms and Dr Marxer. I should also point out that Maitre Croisier confirmed my understanding of the nature of the trust in the evidence he put before this court in 2004. I was not responsible for seeking or obtaining that evidence.
16 I am very disturbed by all that I have now seen and simply cannot understand how and why we were so misled. I have throughout in my evidence to this court stated what I believed to be true. In doing so I have been almost totally reliant upon what I was told by Paul Simms. Clearly much has been done in my name about which I knew very little or nothing. "
The legal issues
"…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.
.."
"…although the equitable jurisdiction is of much wider application, I have little doubt that it can prevail over the rule of evidence only in cases where privilege can be claimed. The equitable jurisdiction is well able to extend, for example, to the grant of an injunction to restrain an unauthorised disclosure of confidential communications between priest and penitent or doctor and patient. But those communications are not privileged in legal proceedings and I do not believe that equity would restrain a litigant who already had a record of such a communication in his possession from using it for the purposes of his litigation. It cannot be the function of equity to accord a de facto privilege to communications in respect of which no privilege can be claimed. Equity follows the law.
…"
Privilege
(i) Legal advice privilege
"…legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context.
…"
But that:
"…to extend privilege without limit to all solicitor and client communication upon matters within the ordinary business of a solicitor and referable to that relationship are too wide. …"
"…If a solicitor becomes the client's "man of business", and some solicitors do, responsible for advising the client on all matters of business, including investment policy, finance policy and other business matters, the advice may lack a relevant legal context. There is, in my opinion, no way of avoiding difficulty in deciding in marginal cases whether the seeking of advice from or the giving of advice by lawyers does or does not take place in a relevant legal context so as to attract legal advice privilege. In cases of doubt the judge called upon to make the decision should ask whether the advice relates to the rights, liabilities, obligations or remedies of the client either under private law or under public law. If it does not, then, in my opinion, legal advice privilege would not apply. If it does so relate then, in my opinion, the judge should ask himself whether the communication falls within the policy underlying the justification for legal advice privilege in our law. Is the occasion on which the communication takes place and is the purpose for which it takes place such as to make it reasonable to expect the privilege to apply? The criterion must, in my opinion, be an objective one. …"
"…all communications between a solicitor and his client relating to a transaction in which the solicitor has been instructed for the purpose of obtaining legal advice will be privileged, notwithstanding that they do not contain advice on matters of law or construction, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser of his client. …"
(ii) Litigation privilege
(iii) Common interest privilege
"…if two parties with a common interest and a common solicitor exchange information for the dominant purpose of informing each other of the facts, or the issues, or advice received, or of obtaining legal advice in respect of contemplated or pending litigation, the documents or copies containing that information are privileged from production in the hands of each. …"
Are the Eagle documents privileged?
i) Brinton documents;
ii) Documents relating to the beneficial ownership of the assets of the corporate Defendants;
iii) Libourne documents; and
iv) Documents allegedly showing breaches of the freezing orders.
The Brinton documents
i) Letter:19 May 2005 to Marxer & Partners: pages 69-71
(ii) Letter: 2August 2005 to Mr and Mrs Dadourian (pages 76 – 78)
(iii) Letter: 5 August 2005 to Marxer & Partners (pages 79- 80).
(iv) Letters: 16 August and 23 August 2005 to Marxer & Partners (pages 85 and 86)
(v) Letter: 30 September 2005 to Marxer & Partners (page 91)
Documents referring to the assets of the Corporate Defendants
i) Letter: 26 May 2005 to BNP Paribas, Geneva (page 72);
ii) Letter: 7 June 2005 to Mr and Mrs Dadourian (page 73);
iii) Letter: 7 June 2005 to BNP Paribas, Geneva (page 74);
iv) Letter: 8 September 2005 to Dexia Private Bank, Zurich (page 88 – 9);
v) Letter: (undated): Mr and Mrs Dadourian to Basil Zarour (page 90);
vi) Letter: 19 October 2005 to Societe General, Paris (page 92)
vii) Letter: (undated) to Mr and Mrs Dadourian (page 68)
The Libourne documents (pages 93 – 98)
Documents relevant to the freezing orders
i) Letter:16 February 2005 to Maitre Croisier (page 63)
ii) Letter: (undated) to Mr and Mrs Dadourian (page 64)
iii) Minutes of a meeting of the Board of Directors of Azuri Ltd 18 March 2005 (page 65)
iv) Letter: 20 April 2005 to Maitre Croisier (pages 59 – 60)
v) Letter: (undated) to Mr and Mrs Dadourian (pages 66 – 67)
vi) Letter: 19 July 2006 to Mrs Dadourian (page 57)
Other documents
The status of Mr Simms
"…there is a more fundamental reason for not affording privilege to these documents. That is because in our opinion the privilege should be strictly confined to legal advisers such as solicitors and counsel, who are professionally qualified, who are members of professional bodies, who are subject to the rules and etiquette of their professions, and who owe a duty to the Court. This is a clearly defined and easily identifiable qualification for the attachment of privilege. To extend the privilege to unqualified advisers such as personnel consultants is in our opinion unnecessary and undesirable. …"
The fraud exception
"…for my part, I would allow that appeal on a second, and additional, ground. I adopt, as a general principle, the observations of Mr Justice Millett in Logicrose Ltd v Southend United Football Club Limited (The Times, 5 March 1988) that the object of the rules as to discovery is to secure the fair trial of the action in accordance with the due process of the Court; and that, accordingly, a party is not to be deprived of his right to a proper trial as a penalty for disobedience of those rules - even if such disobedience amounts to contempt for or defiance of the court - if that object is ultimately secured, by (for example) the late production of a document which has been withheld. But where a litigant's conduct puts the fairness of the trial in jeopardy, where it is such that any judgment in favour of the litigant would have to be regarded as unsafe, or where it amounts to such an abuse of the process of the court as to render further proceedings unsatisfactory and to prevent the court from doing justice, the court is entitled - indeed, I would hold bound - to refuse to allow that litigant to take further part in the proceedings and (where appropriate) to determine the proceedings against him. The reason, as it seems to me, is that it is no part of the court's function to proceed to trial if to do so would give rise to a substantial risk of injustice. The function of the court is to do justice between the parties; not to allow its process to be used as a means of achieving injustice. A litigant who has demonstrated that he is determined to pursue proceedings with the object of preventing a fair trial has forfeited his right to take part in a trial. His object is inimical to the process which he purports to invoke. …"
"…No one doubts that the claim for professional privilege does not apply to documents which have been brought into existence in the course of or in furtherance of a fraud to which both solicitor and client are parties. To consult a solicitor about an intended course of action, in order to be advised whether it is legitimate or not, or to lay before a solicitor the facts relating to a charge of fraud, actually made or anticipated, and make a clean breast of it with the object of being advised about the best way in which to meet it, is a very different thing from consulting him in order to learn how to plan, execute, or stifle an actual fraud. …"
"…"Where . . . there is evidence of specific agreement to pervert the course of justice, which is freestanding and independent, in the sense that it does not require any judgment to be reached in relation to the issues to be tried, the court may well be in a position to evaluate whether what has occurred falls within or out with the protection of legal professional privilege as explained in R v Cox and Railton 14 QBD 153."…."
"…34 This is an authority directly contrary to Mr Hildyard's submission that once litigation privilege has commenced, the fraud exception no longer applies. He submitted that the case had gone too far and was wrongly decided. He pointed out that Rix J appeared to have thought he should balance the interest of maintaining legal privilege as against the need for the court to obtain the truth which was contrary to R v Derby Magistrates Court, ex parte B in which Lord Taylor said there was no question of balancing one interest against the other since legal professional privilege must always win; the balancing act had been "performed once and for all in the 16th century". Mr Hildyard also pointed out that Rix J derived some comfort for his extension of the previous law from the fact that the documents sought would have been disclosable in the hands of the defendant in any event. I do not think that either of these considerations shows that Rix J was wrong. He did not purport to perform a balancing exercise; he merely observed that there were conflicting interests; he followed the principles stated in Cox and Railton and, in my judgment, he was correct to do so since it would be illogical to say that the fraud exception can never apply once the litigation has begun. The fact that the relevant documents were, in theory, disclosable by the defendant as well as by the claimant cannot make any difference to the principle of the matter. I would respectfully approve Rix J's decision.
35 In fact Rix J was not ploughing quite such a novel furrow as counsel before him suggested. In Chandler v Church (1987) 177 NLJ 451 a similar proposition, about the fraud exception applying to fraud in litigation which had been begun, had been put to Hoffmann J. He initially found the proposition a startling one but, in due course, he accepted, as Jacob J put it in (the antecedent transaction case) Omar's Trustees v Omar (2000) BCC 434,
"that in principle the existence or absence of privilege is not affected by whether the fraud concerns an earlier transaction or the conduct of the proceedings themselves".
Hoffmann J did not in fact order disclosure in the case before him because he considered that disclosure at an interlocutory stage based upon prima facie evidence of fraud in the conduct of the proceedings carried a far greater risk of injustice to the defendant, if he should turn out to have been innocent, than disclosure of advice concerning an earlier non-contentious transaction.
36 These two cases (together with the Hallinan case) show that the fraud exception can in principle apply even when litigation has begun with the result that privilege will not attach to documents which further the fraud or the criminal purpose. They also show that courts will be cautious about ordering disclosure or inspection of such documents. That caution has two aspects
(1) it may be unfair to a defendant to make such an order if all that is shown on the evidence is a prima facie case which may turn out on full investigation to be incorrect;
(2) it may be unfair in what Glidewell LJ in Snaresbrook called the ordinary run of cases (such as cross-allegations of assault or drivers falsely saying they were driving on the correct side of the road) to order disclosure and inspection merely because communications with a party's solicitors "are untrue and would, if acted upon, lead to the commission of the crime of perjury" (per Lord Goff of Chieveley in Francis).
37 These two reasons for caution are, of course, somewhat interdependent. If all one has is disputed versions of events, it will be difficult to say that there is even a prima facie case of fraud. This will be particularly so, if the disputed version of events is the very same issue that is to be tried in the proceedings. If, however, the evidence of crime or fraud is free-standing and independent and particularly if its evaluation "does not require any judgment to be reached in relation to the issues to be tried" (per Rose LJ in Hallinan) it may be perfectly possible, even on a prima facie case basis, to decide whether the fraud exception applies.
…
41 If the fraud exception cannot be relied on where there has been a final decision of the court that an earlier decision of the court has been procured by fraud, perjury and a conspiracy to pervert the course of justice, it would be difficult to think of any circumstances where it could be relied on once litigation was contemplated or begun. Once it is established (as I would hold) that the fraud exception can, in law, apply in such circumstances, it would be a travesty if it did not apply in the present case. Mr Hildyard argued that even if there was no privilege in relation to documents coming into existence for the purpose of the main action, there should still be privilege for the documents coming into existence for the purpose of the Perjury I action. But I can see no justification for that distinction since the fraud and perjury continued in Perjury I in an effort to ensure that the original forgery, perjury and fraud did not come to light. …"
Relief
The other applications
i) An application dated 14 December 2007 for specific disclosure of documents relating to the Brinton by-laws;
ii) An application dated 21 December 2007 for further information about the source of legal funding of the Corporate Defendants; and
iii) An application dated 23 April 2008 for letters of authority to obtain disclosure of details of the bank account of Cooke Investments Limited and a life management agreement made between Mrs Dadourian and Republic.
"(1) This Order does not prohibit each Respondent from spending up to the sum of £20,000 or such greater sum as is reasonable on legal advice and representation. But before spending any money the Respondent must tell the Applicant's legal representatives where the money is to come from.
…"
" a. all the Respondent's assets whether or not they are in its own name and whether they are solely or jointly owned;
b. any asset which it has the power, directly or indirectly, to dispose of or deal with as if it were his own, and the Respondent is to be regarded as having such power if a third party holds or controls the asset in accordance with its direct or indirect instructions;
c. any asset in the name of the Respondent and whether held for its own benefit or for the benefit of others;
…… "
Conclusion