Mahon v Rahn

JurisdictionEngland & Wales
Judgment Date23 May 1997
Judgment citation (vLex)[1997] EWCA Civ J0523-10
Docket NumberQBENI 96/0933/E
CourtCourt of Appeal (Civil Division)
Date23 May 1997
(1) Patrick Mahon
(2) Andrew Leslie Kent
(1) Dr Christian Mahon
(2) Hans-jakob Biedermann
(3) Martin Haab-biedermann
(4) Frank Bodmer

[1997] EWCA Civ J0523-10


Lord Justice Staughton

Lord Justice Otton

Lord Justice Schiemann

QBENI 96/0933/E




(Mr Justice Brooke)

Royal Courts of Justice


London WC2

MR C GREY and MISS V SHARP (Instructed by Sheridans, London WC1R 0DY) appeared on behalf of the Appellant

MR P MALONEY and MISS C ADDY (Instructed by Bircham & Co, London SW1H 0DY) appeared on behalf of the Respondent


( )


Friday 23rd May, 1997


This is an appeal from the orders of Brooke J made on 19 June 1996 in which he struck out the appellant's action for libel pursuant to RSC O.18 r.19 and the Inherent Jurisdiction of the Court on the ground that it constitutes an abuse of process of the Court.




At all material times the plaintiffs were the Managing Director and the Corporate Development Manager of TC Coombs a firm of Stockbrokers in the City of London. The defendants are the partners in a private Swiss Bank in Zurich known as Rahn and Bodmer Banquiers. In the late 1980's the bank, acting as agents, placed a purchase order with the stockbrokers for the purchase of shares in a Canadian Company called Coastline Resources for C$5million. In September 1988 the bank paid C$3million but did not pay the balance of C$2million despite a number of requests from the stockbrokers. Towards the end of 1990 the stockbrokers came under investigation by the Serious Fraud Office and the bank furnished a number of documents to the SFO at their request for the purposes of their enquiries. In late 1990 The Securities Association (TSA) also got in touch with the bank. On 20 December 1990 Dr Paltzer a partner in a Swiss law firm wrote a letter to Mrs Rose Wright of TSA setting out information and enclosing documents which related to the dealings in connection with the Coastline Shares. The letter stated :

"I rely on your assurances of complete confidentiality with respect to the following information and documentation provided to you by our client, Rahn and Bodmer, Zurich. Since Mr M Kaiser who was responsible for the TC Coombs—Coastline transaction is not with the bank any more, it is difficult for Rahn and Bodmer to piece together with certainty the relevant facts. Therefore, the following outline is, to a large extent, based on presumptions and retrospective assessments of documents and information obtained by the bank. The bank does not warrant the accuracy and completeness of the following outlines. We, however, hope that the information and the documents we are providing to you will be helpful in your proceedings."


At the same time Dr Paltzer wrote to the SFO attaching a copy of that letter without the enclosures. The original letter was passed by TSA to the SFO under S.2 Criminal Justice Act 1987 in the course of criminal proceedings for fraud instituted by the SFO against the plaintiffs in connection with their dealings with the bank.


The plaintiff was duly arraigned at Middlesex Guildhall on an indictment containing two counts of conspiracy to defraud against both defendants and attempting dishonestly to obtain property by deception against the first defendant alone.


Two days prior to the pre-trial review the SFO disclosed to the defence a copy of the letter to TSA. The letter was produced as part of the exhibits to the Witness Statements. When giving evidence Ms Garlick of the SFO produced the letter during her evidence in chief. It was read in open court and defence counsel cross-examined her and Dr Rahn (first defendant) upon it when he gave evidence. No application was made either on behalf of the defendants or the prosecution before, during or after the criminal trial for any order restricting the use for which the letter could be put. After several weeks, at the end of the prosecution case, counsel for the plaintiffs submitted that there was no case to answer. The submission was upheld by the trial judge and verdicts of not guilty were recorded against both plaintiffs.


The SFA (the successor to TSA) acknowledge that the SFO did not seek or obtain the consent of Dr Paltzer to disclose voluntarily to a third party his letter to Mrs Wright. During the pre-trial procedures the Crown made a claim of public interest immunity in respect of confidential information in the SFO's possession which included correspondence between Rahn and Bodmer and their legal advisor and TSA. No order was made in relation to "discovery" of correspondence between Rahn and Bodmer and TSA. In giving his ruling the trial judge said: :

"It is urged in favour of the immunity claim that disclosure would result in publication of sources of information and informants, which would inhibit the provision of a lot of such information in the future and so restrict the ability of the authority to discharge its duties—statutory duties—adequately. I ask myself: is immunity essentially necessary for the proper functioning of the public service which the authority is discharging? One must bear in mind that these documents are contemporary material (they were in some cases subsequent material) with the events which are complained of by both sides, and hence may prove of some value in helping the defence in seeking to ascertain the true attitudes and influences exerting themselves on the decisions and requirements of the Securities & Futures Authority. I therefore hold that in general (I am generalising because I have not seen the documents) documents in classes 1 to 4 should be disclosed to the defence, but I would qualify that by saying that there may well be some instances where the document itself discloses a particularly sensitive source which perhaps ought not to be disclosed in the particular circumstances of the case. If agreement on any such document's disclosure cannot be reached by the parties, it may well be that the matter will have to be returned to the court and I will have to peruse the document and perhaps modify this decision in relation to that document."


The Proceedings


The plaintiffs claim damages for libel published or caused to be published by the defendants in the letter sent to Rosalind Wright of TSA. It is the plaintiffs' case that the letter contained an entirely inaccurate and misleading account of the defendant's dealing with TCC, that the defendants deliberately misled TSA and the SFO in order to avoid payment of C$2million to TC Coombs and dishonestly withheld crucial documents from the TSA and SFO in order to allege that the entire agreement for the sale of the Coastline Resources shares was fraudulent. The action was started by writ issued on 17 December 1993 in which the plaintiffs claim damages for libel in the letter to TSA. The statement of claim was served on 8 December 1994. The defence served on the 26 February 1996 includes a claim for qualified (but not absolute) privilege and an assertion that the plaintiffs claim is vexatious and an abuse of process. The defendants issued a summons seeking to strike out the action on the grounds that the documents sued on was obtained by the plaintiffs by way of disclosure in criminal proceedings against them.


The Issues


Before Brooke J it was agreed between Counsel that there were five issues :

(1) Is there an implied undertaking in criminal discovery as there is in civil ?

(2) Does it apply to all documents disclosed by the Crown without regard to the question whether the Crown obtained them voluntarily or by compulsion ?

(3) Does it apply to documents disclosed by the Crown both as "used" and "unused" documents ?

(4) Does it continue to apply after the relevant document has been read or referred to in open court in the criminal proceedings ?

(5) If the undertaking continues to apply, and a libel action is commenced in breach of the undertaking, does the court have any discretion not to strike it out as an abuse of process ?


It must be emphasised that from the outset it was common ground between the parties that the letter and documents in question were not disclosed subject to any undertaking of confidentiality.


The learned judge answered all five questions in the affirmative and concluded:

"It follows, therefore, that in the present case the undertaking continues to apply, and these proceedings have been commenced in breach of it. While I would not wish to lay down any absolute rule, I can see no reason in the present context why this court should be willing to entertain proceedings based on a document that the plaintiffs had no business to be using without the consent of the Crown Court : as the Vice-Chancellor said in Derby v Weldon (supra), its use in such circumstances would prima facie constitute a contempt of court. For these reasons, therefore, I am of the opinion that these proceedings constitute an abuse of this court and that they should be struck out on these grounds.

Miss Sharp submitted that if I came to this conclusion innocent plaintiffs might be bereft of a remedy even though they had suffered grievously at the hands of a malicious complainant who for some technical reason could not be sued for damages for malicious prosecution notwithstanding the recent liberalising decision of the House of Lords in Martin v Watson (The Times, 14 July 1995). It may be that in such circumstances the Crown Court might be willing to exercise its discretion in favour of varying the undertaking, on an application made in due time, in order to permit justice to be done, for reasons similar to those which influenced the Court of Appeal in ...

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34 cases
  • Taylor v Director of the Serious Fraud Office
    • United Kingdom
    • House of Lords
    • 29 October 1998
    ...ground on which Sir Michael Davies decided the case, correctly in my view. He was following the closely reasoned judgment of Brooke J. in Mahon v. Rahn [1998] Q.B. 424. Unfortunately Brooke J.'s judgment was reversed on appeal. This provided Mr. Leolin Price Q.C. with the ammunition which h......
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  • Mahon and Another v Rahn and Others (No 2)
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    • Court of Appeal (Civil Division)
    • 8 June 2000
    ...I upheld that plea in June 1996 and directed that the action be struck out. I was subsequently overruled by the Court of Appeal: see Mahon v Rahn [1998] QB 424. The defendants did not appeal to the House of Lords (although they were given permission to do so) but in a later case called Tayl......
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3 books & journal articles
  • Public Interest Immunity and Disclosure of Unused Materials in Criminal Proceedings
    • United Kingdom
    • Emerald Journal of Financial Crime No. 7-4, February 2000
    • 1 February 2000
    ...obtainable from its website at (47) Agreeing with the judge in the first instance in the case of Mahon v Rahn [1998] QB 424. (48) This principle was extended by the House of Lords to state-ments made by the witness to a party and his legal advisers with a view to ......
  • House of Lords
    • United Kingdom
    • Sage Journal of Criminal Law, The No. 63-3, June 1999
    • 1 June 1999
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  • Mahon and another v Rahn and others. High Court, Queen's Bench Division: Eady J
    • United Kingdom
    • Emerald Journal of Financial Regulation and Compliance No. 8-1, January 2000
    • 1 January 2000
    ...(such as libel proceedings) without the con-sent of the court. The Court of Appeal in 1997 in Mahon and another v Rahn and others [1997] 3 All ER 687 reversed that decision (so the proceedings could con-tinue) but the House of Lords in the 1998 decision (which did not involve these pro-ceed......

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