Marlwood Commercial Inc. v Kozeny [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Moore-Bick,MR. JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 16 June 2008 |
| Neutral Citation | [2007] EWHC 950 (Comm),[2008] EWHC 1538 (Comm),[2004] EWHC 189 (Comm) |
| Docket Number | Case No: 1999 Folio 1515,No. 1999 Folio 1515/ |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 June 2008 |
[2004] EWHC 189 (Comm)
The Honourable Mr. Justice Moore-Bick
Case No: 1999 Folio 1515
Case No: 2000 Folio 199
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Dominic Dowley, Q.C. (instructed by Macfarlanes) for the claimants
Mr. Khawar Qureshi for the Director of the Serious Fraud Office
Mr. Richard Slowe (Solicitor advocate) (instructed by S J Berwin) for the first defendant
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version may be treated as authentic.
The Hon. Mr. Justice Moore-Bick
Before the court are two applications relating to certain documents that have been disclosed by the defendants in these proceedings. They relate to notices issued by the Serious Fraud Office to the claimants' solicitor, Mr. Charles Lloyd of Macfarlanes, and the defendants' solicitor, Ms Catherine Bailey of S J Berwin, to produce copies of the documents disclosed by the first, third and fourth defendants in the actions. By his application Mr. Lloyd asks the court for permission pursuant to rule 31.22(1)(b) of the Civil Procedure Rules to make the documents available to the S.F.O. pursuant to that notice. By their application the first, third and fourth defendants seek an order directing that neither Mr. Lloyd nor Ms Bailey is to comply with the notices issued to them.
The actions have their origins in the privatisation by the Republic of Azerbaijan of its state-owned oil and gas industry. In order to distribute the benefits of privatisation to the population at large the government issued vouchers to its own nationals entitling them to bid for shares in the state companies being offered for sale. The vouchers were freely transferable and it was therefore open to individuals and organisations to amass the ability to acquire substantial shareholdings in the companies in question. Foreign nationals who wished to buy vouchers from Azeris were required to purchase options from the State Property Committee entitling them to purchase a corresponding number of vouchers in the market.
The claimants are all companies incorporated in the British Virgin Islands which act as vehicles for various investment funds based in New York. The third defendant is a company said to be controlled by Mr. Kozeny; the fourth defendant is a company said to be controlled by Mr. Kozeny and the second defendant, Mr. Towers-Clark. In 1998 the claimants entered into agreements with the third and fourth defendants to acquire certain options and vouchers with a view to amassing substantial holdings in companies formed by the break up of the State Oil Company which was then subject to the privatisation programme. Pursuant to that agreement the claimants paid the defendants sums totalling about US$180 million for the purposes of purchasing options and vouchers.
The claimants allege that they were induced to enter into the agreement and to transfer the funds to the defendants by various fraudulent statements. They say that some of the funds remitted to the defendants have been misappropriated and that, insofar as funds were used for the purchase of options and vouchers, the vouchers are worthless. They say that as a result they have lost the whole of their investment.
The agreement between the claimants and the defendants was expressed to be governed by English law. On 17 th December 1999 Marlwood Commercial Inc obtained a worldwide freezing order against Mr. Kozeny and started proceedings against him and the other defendants in this country. On 17 th February 2000 Omega Group Holdings Ltd and the other claimants in action 2000 Folio 199 obtained a worldwide freezing order against Mr. Kozeny and started proceedings against him in this country as well. On 19 th April 2000 Thomas J. ordered that the two actions be managed and heard together.
On 6 th March 2001 the defendants served an amended defence in which they alleged, among other things, that the agreements were unenforceable for illegality. They said that it had been necessary to bribe certain officials and members of the Azeri government in order to obtain options and vouchers for the claimants and that that had been done with the full knowledge and consent of the claimants. The claimants deny that they knew about any bribery and say that, if the defendants did give bribes, that is an additional reason why they are liable. The action against the second defendant was settled in November 2001.
Between November 2000 and March 2001 the defendants disclosed 82 files of documents pursuant to their obligations under C.P.R. Part 31. Another file was disclosed in August 2001. In July 2001 the New York District Attorney began an investigation into the affairs of Mr. Kozeny which eventually led to the preferment by the Grand Jury in October 2003 of an indictment charging him with 15 counts of grand larceny and 2 counts of possessing stolen property. These charges all relate to his dealings with the claimants in relation to the oil and gas privatisation in Azerbaijan. Mr. Kozeny currently resides in the Bahamas and is not therefore personally amenable to criminal proceedings in New York, but I am told that the District Attorney is considering an application for his extradition. For completeness I should mention that the District Attorney for the Southern District of New York has carried out a separate investigation into the activities of a Swiss lawyer, Mr. Hans Bodmer, in connection with the same oil and gas privatisation. That resulted in the preferment in July 2003 of an indictment against Mr. Bodmer in the United States District Court charging him with conspiracy to violate the Foreign Corrupt Practices Act.
On 18 th December 2002 the New York District Attorney made a formal request to the Home Office for assistance in connection with his investigation into Mr. Kozeny's affairs. Pursuant to that request the Secretary of State, acting under section 4(2A) of the Criminal Justice (International Co-operation) Act 1990 ("the 1990 Act") requested the Director of the S.F.O. to exercise her powers under section 2 of the Criminal Justice Act 1987 ("the 1987 Act") to obtain evidence requested by the authorities in the United States. As a result, on 5 th March 2003 a member of the S.F.O. acting on behalf of the Director served a notice on Mr. Lloyd to produce copies of any documents (other than those to which legal professional privilege attached) disclosed by the first, third and fourth defendants in these proceedings. On 4 th April 2003 the S.F.O. served a similar notice on Ms Bailey.
On 7 th March 2003 Mr. Lloyd applied to the court under rule 31.22 for permission to produce the documents referred to in the notice. The matter came on for hearing before me on 28 th March when it became clear that Mr. Kozeny wished to contest the application and that the real dispute lay between him and the S.F.O. I therefore gave the Director permission to intervene and gave directions for the service of evidence with a view to a hearing taking place in early June. In the event, the matter has been delayed by an application on the part of Mr. Kozeny (ultimately unsuccessful) for legal assistance. In January this year, after his appeal against the refusal of the Legal Services Commission to grant him legal assistance had been dismissed, Mr. Kozeny was able to obtain sufficient funds from other sources to instruct solicitors to act on his behalf. On 21 st January 2004 he issued an application seeking an order directing both Mr. Lloyd and Ms Bailey not to comply with the notices served on them by the S.F.O.
Mr. Slowe, who appeared on behalf of the defendants on these applications, submitted that although the powers of the Director under section 2 of the 1987 Act are very wide, they are nonetheless subject to certain exceptions dictated by considerations of public policy. In support of that submission he relied on a passage in the judgment of Hoffmann J. in In re Arrows Ltd [1992] Ch. 545, subsequently approved by the House of Lords in Hamilton v Naviede [1995] 2 A.C. 75. He submitted that the importance of preserving the confidentiality of documents disclosed under compulsion in the course of proceedings was sufficient to outweigh the importance of providing information in furtherance of investigations into serious fraud and that therefore considerations of public policy demanded that the notices served on Mr. Lloyd and Ms Bailey should not be complied with. He did not suggest, however, that the requirements of the 1990 Act or the 1987 Act were not fully satisfied and the validity of the notices is therefore not in issue.
The provisions of the 1987 Act that are most relevant to the present case are subsections (3), (9), (10) and (13) of section 2 and subsection (3) of section 3. These provide as follows:
" 2 Director's investigation powers
(3) The Director may by notice in writing require the person under investigation or any other person to produce …… . . any specified documents which appear to the Director to relate to any matter relevant to the investigation or any documents of a specified description which appear to him so to relate.
(9) A person shall not under this section be required to disclose any information or produce any document which he would be entitled to refuse to disclose or produce on...
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