Dechert LLP v Eurasian Natural Resources Corporation Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Justice Gloster,Lady Justice King,Lord Justice David Richards |
| Judgment Date | 19 April 2016 |
| Neutral Citation | [2016] EWCA Civ 375 |
| Docket Number | Case No: A3/2014/3702 |
| Court | Court of Appeal (Civil Division) |
[2016] EWCA Civ 375
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
THE HONOURABLE MR JUSTICE ROTH
CH/2014/0273
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Gloster
Lady Justice King
and
Lord Justice David Richards
Case No: A3/2014/3702
Mark Howard QC, Simon BrowneQC andTony Singla (instructed by Clyde & Co LLP) for the Appellant
Lord Pannick QC, Richard LissackQC, Benjamin WilliamsQC andTamara Oppenheimer (instructed by Signature Litigation LLP) for the Respondent
Hearing date: Thursday 17 December 2015
Introduction
This is an appeal by the appellant, Dechert LLP ("Dechert"), against a decision of Roth J, whereby he ordered that the application by the respondent, Eurasian Natural Resources Corporation Limited ("ENRC"), for a detailed assessment of the bills of its former solicitors, Dechert, pursuant to section 70 of the Solicitors Act 1974 ("the 1974 Act"), should be held in private.
Roth J allowed ENRC's appeal against the previous order of the costs judge, Master Haworth, dated 24 April 2014, in which the master dismissed an application by ENRC for an order under CPR 39.2(3) that the costs assessment proceedings should be heard in private. Roth J held that the effective protection of ENRC's right to legal professional privilege ("LPP") required the matter to be heard in private, pursuant to CPR rule 39.2(3).
The main dispute between the parties on this appeal is the extent of the waiver of LPP by ENRC by reason of its commencement of assessment proceedings under section 70 of the 1974 Act.
The issue is clearly of importance for both parties. On the hearing of this appeal, Dechert was represented by Mark Howard QC, Simon Browne QC leading Tony Singla, and ENRC was represented by Lord Pannick QC, leading Richard Lissack QC, Benjamin Williams QC and Tamara Oppenheimer.
Factual background
The relevant background to this appeal is set out in the judgment of Roth J at paragraphs 3 to 9, which I set out below:
"The factual background
3. In December 2010, ENRC received a report from a whistleblower indicating that there may have been fraud involving some of its overseas operations. ENRC was at that time listed on the London Stock Exchange and it instructed outside lawyers to conduct an investigation. Initially, DLA Piper UK LLP was instructed but in April 2011 the partner there with conduct of the matter moved to Dechert and ENRC instructed Dechert to take over the investigation.
4. Following a leak of the whistleblower report and resulting articles in the press, the Serious Fraud Office ("SFO") contacted ENRC and reminded it of the so-called self-reporting process which they operate in such circumstances. ENRC and Dechert, together with ENRC's general corporate law advisors, Jones Day, held meetings with the SFO in late 2011, and ENRC thereafter agreed to a considerable expansion of the scope of Dechert's investigation as part of a possible self-reporting process. ENRC entered into a formal written retainer with Dechert in April 2011.
5. The scale and range of the expanded investigation is apparent from the level of Dechert's fees. In total, Dechert has billed ENRC over £16.3 million, of which some £11.7 million was invoiced in the period from 23 July 2012 to 11 April 2013. ENRC became increasingly concerned about the level of Dechert's fees and what it perceived to be serious over-charging. On 27 March 2013, ENRC terminated Dechert's retainer and instructed other lawyers. It is unnecessary to decide to what extent the decision to terminate Dechert's retainer was due to the level of its fees or made for other reasons.
6. Subsequent to termination of its retainer, Dechert submitted invoices in the total amount of some £5.1 million. ENRC agreed to pay those invoices in order to obtain a release of Dechert's lien over its files, in return for the express agreement by Dechert that it would not object to a detailed assessment of those costs. The balance of the £11.7 million had been paid prior to ending the retainer, and Mr Ehrensberger, the General Counsel of ENRC, explains in his witness statement that this was because the company was concerned not to do anything that might delay or jeopardise the self-reporting process with the SFO, or be perceived to be obstructing that process.
7. ENRC's application under sect 70 SA 1974 was issued on 18 October 2013. In opposition to that application, Dechert served in February 2014 detailed evidence from two partners and two associate solicitors employed by the firm. Those four witness statements, which in themselves exceed 220 pages, are accompanied by 13 lever arch files of exhibits. Altogether, Dechert's evidence gives what purports to be a very full account of the various practices at ENRC being investigated, identifying many of the individuals involved and describing the way they conducted themselves in response to Dechert's investigations.
8. It is not in dispute that much of Dechert's evidence comprises a mass of otherwise confidential and sensitive information which had come into its hands only as a result of its instruction by ENRC and the work done on ENRC's behalf. Subject to the considerations discussed below, this is information and comprises documents that would be covered by legal professional privilege ("LPP").
9. The SFO investigation has since developed into an active criminal inquiry. It is clear that if ENRC's application for taxation, and the detailed evidence served, were heard in public, the SFO would attend that hearing in order to glean information of assistance to its inquiry. For present purposes it can be assumed, and Dechert does not seriously dispute, that at least some of the material set out in Dechert's evidence could potentially and significantly prejudice the interests of ENRC in the SFO inquiry. Indeed, so concerned is ENRC about the disclosure of this information that it has made clear that if its application for taxation is not heard in private it will rather withdraw the application than proceed."
Dechert submits that the following additional facts, or alleged facts, are also relevant:
i) The report received by ENRC in December 2010 from a whistleblower indicated possible wrongdoing on the part of its executive management in Kazakhstan.
ii) ENRC delegated the authority and power in respect of the investigation of the whistleblower complaint to a Special Investigations Committee ("SIC") which was comprised of independent board members.
iii) In April 2011, Dechert was retained by ENRC to conduct an investigation into that complaint. As a consequence of the delegation of authority to the SIC, Dechert's instructions were provided by the SIC at all times throughout its retainer.
iv) In August 2011, following a leak of the whistleblower report, ENRC initiated a possible self-reporting process to the SFO.
v) On 27 March 2013 Dechert's retainer was orally terminated. The termination was confirmed in writing on 1 April 2013.
vi) Immediately subsequent to Dechert's termination, the SFO instituted a formal criminal investigation into ENRC's affairs. That investigation continues.
vii) On 22 October 2013, ENRC issued a detailed assessment application under section 70(3) of the Solicitors Act 1974.
viii) Mr Ehrensberger, whose first witness statement supports the application, was not a member of the SIC after 9 July 2012 (at the latest) and he was not privy to its workings as he was identified as having been personally involved in transactions in Africa then being investigated. Despite this, Mr Ehrensberger was responsible for the filing of the section 70 proceedings and, as explained below, in his evidence filed on behalf of ENRC, Mr Ehrensberger makes a number of very serious allegations against Dechert.
It is clear that the allegations made by ENRC, through Mr Ehrensberger, against Dechert, are very serious. I would not regard them as "unexceptional in the context of a section 70 assessment" as described by ENRC in its skeleton argument on this appeal. Master Haworth described them as being "serious, even put at its lowest". By way of example, Mr Ehrensberger's first witness statement makes allegations of "systematic and gross overcharging" and of costs having been incurred by Dechert unreasonably; it also includes an allegation that Dechert failed to comply with its professional obligations. Mr Ehrensberger's first witness statement concludes as follows:
"… Dechert made decisions regarding the methods and scope of the investigation for the principal purpose of expanding the work to generate higher fees rather than to serve the interests of the investigation, or indeed ENRC as Dechert's client."
Mr Ehrensberger's second witness statement lists nine new allegations of overcharging not made in his first witness statement. Mr Ehrensberger also alleges that individuals reported to him that, during the time the SFO first contacted ENRC, Mr Neil Gerrard said that he was " in rape mode" in respect of fee charging.' It is also of relevance that Mr Ehrensberger makes clear in his witness statements that ENRC is actively considering whether to bring professional negligence proceedings against Dechert.
On 14 February 2014, Dechert served four witness statements in response to ENRC's evidence. Dechert contends that, in order for it properly to defend the section 70 proceedings and to rebut the very serious allegations made against it by ENRC, it was necessary for it to refer to documents and information belonging to ENRC, some of which were, at least...
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