Wallace Smith Trust Company Ltd ((in Liquidation)) v Delloitte Haskins & Sells (A Firm) and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE NEILL,LORD JUSTICE SIMON BROWN,LORD JUSTICE WAITE |
| Judgment Date | 10 July 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0710-5 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | CHANI 95/0561/B |
| Date | 10 July 1996 |
and
[1996] EWCA Civ J0710-5
Lord Justice Neill
Lord Justice Simon Brown
Lord Justice Waite
CHANI 95/0561/B
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(Mr Justice Carnwath)
Royal Courts of Justice
Strand
London WC2
MR M HAPGOOD QC and MR P SALES (Instructed by Allen & Overy, EC4M 9QQ) appeared on behalf of the Appellant
MR A ONSLOW (Instructed by Barlow Lyde & Gilbert, London) appeared on behalf of the Respondents
( )
Wednesday, 10th July 1996
INTRODUCTION
This appeal relates to an application by the liquidators of a company in liquidation for the production for inspection of certain tapes and transcripts of interviews which took place in February 1992 when the affairs of the company were being investigated by the Serious Fraud Office (the SFO).
The application, which was brought pursuant to RSC Order 24 Rule 13, was dismissed by Carnwath J. on 21 December 1994 on the ground that he was not satisfied that the production of the documents was necessary for the "fair disposal of the cause". In the course of his judgment, however, he rejected an alternative argument advanced on behalf of the defendants to the effect that the documents were protected from production by the rules of public interest immunity. The respondents to the appeal seek, if necessary, to challenge the judge's ruling on public interest immunity.
I propose to deal first with the issue arising under RSC Order 24 Rule 13, as I am satisfied that it is right to consider this issue before the issue relating to public interest immunity: see R. v. Chief Constable of West Midlands Police, ex parte Wiley [1995] 1 AC 274, 280 per Lord Templeman. I must start, however, by giving some account of the facts.
THE FACTS
Until about 30 April 1991 Wallace Smith Trust Co. Ltd. (WSTC) carried on business as a bank authorised and regulated by the Bank of England under the Banking Acts 1979 and 1987. WSTC's banking business consisted of, inter alia, the taking of and making of deposits from and to other banks and trading in financial instruments, namely certificates of deposit, bills of exchange and bankers' acceptances.
At all material times the chairman and managing director of WSTC was Mr. Wallace Duncan Smith (Mr. Smith).
From about 1976 until about April 1990 Deloitte Haskins & Sells (Deloitte), a firm of chartered accountants, acted as auditors of the accounts produced each year by WSTC. In particular they acted as auditors of the accounts for the financial years 1984/85 to 1988/89. In about April 1990 Deloitte merged with another firm of chartered accountants. The merged firm subsequently in 1992 changed its name to Coopers and Lybrand (Coopers). After the merger Coopers acted as auditors of the accounts produced by WSTC for the financial year 1989/90. In each of the financial years between 1984/85 and 1989/90 the end of WSTC's financial year was 30 April.
On 28 April 1991 Mr. Smith informed the Bank of England that WSTC had a deficiency of about £70,000,000. On 30 April 1991 Mr. Christopher Hayward and Mr. William Radford were appointed by the Companies Court as joint provisional liquidators of WSTC. On 12 June 1991 it was ordered by the court that WSTC should be wound up and Mr. Hayward and Mr. Radford were appointed as joint liquidators. On 23 February 1993 Mr. Radford retired and was replaced as a joint liquidator by Mr. Philip Wallace.
After WSTC ceased business on 30 April 1991 its affairs were investigated by the SFO. At about the end of April 1991 Mr. Smith was arrested.
On 14 May 1991 a notice was served on Mr. Gareth Davies pursuant to section 2 of the Criminal Justice Act 1987. Mr. Davies was a former partner in Deloitte and also a partner in the merged firm. He had been engaged in the audit of the accounts of WSTC in the relevant financial years.
The notice, which was from the SFO, was, as far as is material, in the following terms:
"NOTICE REQUIRING ATTENDANCE TO ANSWER QUESTIONS FURNISH INFORMATION AND PRODUCE DOCUMENTS
PERSONS UNDER INVESTIGATION: Wallace Duncan Smith and Wallace Smith Trust Co. Limited
1. The Director of the Serious Fraud Office has decided to investigate suspected offences which appear to her to involve serious or complex fraud.
2. Pursuant to section 2(11) of the Criminal Justice Act 1987 (the Act) I have been authorised by the director of the Serious Fraud Office to exercise on her behalf all the powers conferred by section 2 of the Act for the purpose of investigating the affairs of the persons under investigation.
3. There appears to me, for the purposes of the investigation referred to at 1 above, to be good reason to exercise the powers conferred by section 2(2) and (3) of the Act for the purpose of investigating the affairs of the persons under investigation.
I have reason to believe that you have relevant information about the affairs of the persons under investigation, and I therefore require you to answer questions or otherwise furnish information to me with respect to matters relevant to the investigation forthwith. I also require you to produce to me forthwith the following documents which appear to me to relate to the matters relevant to the investigation:
All files, documents and papers relating to the persons under investigation and connected companies as per the attached list."
Enclosed with the notice was a list of seventeen identified documents and also a list of ten companies connected with WSTC.
On 20 June 1991 a further notice under section 2 of the Criminal Justice Act 1987 was sent to Mr. Davies. The notice was in substantially the same terms as the notice dated 14 May 1991 but in the June notice the persons under investigation were identified as being Mr. Smith and WSTC and also a number of other companies additional to those set out in the list enclosed with the earlier notice. The names of the persons under investigation concluded with the words "… and related companies and persons".
The final paragraph of the notice dated 20 June was in these terms:
"All files, documents and papers relating to the persons under investigation."
On 5 February 1992 a third notice under section 2 of the 1987 Act was sent to Mr. Davies. This notice was in similar terms to the earlier notice save that
(a) the persons under investigation were stated to be "Wallace Duncan Smith, Wallace Smith Trust Company Ltd. and related companies and persons"; and
(b) the last paragraph of the letter was in these terms:
"I have reason to believe that you have relevant information about the affairs of the persons under investigation, and I therefore require you to answer questions or otherwise furnish information to me with respect to matters relevant to the investigation at Elm House … on Thursday 13 February at [as amended on 13 February] 2.30 p.m. I also require you to produce to me at the same place on the same date at the same time the following documents which appear to me to relate to matters relevant to the investigation:
All audit working papers and any additional documents and records in the possession of Coopers Lybrand Deloitte which support the audit opinions on the financial statements of Wallace Smith Trust Company Limited for the year ended 30 April 1987 and for the year ended 30 April 1990."
In addition on 5 February 1992 a notice under section 2 of the 1987 Act was served on Mr. W. Ginsberg, who had been a manager employed by Deloitte and who subsequently became a manager in the audit department of Coopers. The notice served on Mr. Ginsberg was in the same terms as the notice served on Mr. Davies on 5 February 1992 save that he was asked to attend at Elm House at 1030 a.m. on 13 February.
On 13 February 1992 Mr. Davies and Mr. Ginsberg duly attended for interviews at Elm House, the offices of the SFO. The interviews were recorded and tapes of the interview together with transcripts were subsequently prepared. In both cases the tapes of the interviews extended over three tapes.
I shall have to refer later to the correspondence which took place before these interviews were arranged.
THE PROCEEDINGS AND THE APPLICATION FOR PRODUCTION OF DOCUMENTS
The first writ in these proceedings was issued in July 1992 and further writs were issued in 1993. A consolidated statement of claim was served on 22 July 1994.
It was alleged in the statement of claim that both Deloitte and Coopers had held themselves out as being firms which had particular experience and knowledge of the banking industry. It was further alleged that both firms were in breach of implied terms of their respective contracts of engagement and were also in breach of the duties owed by them to WSTC in tort. The allegations of breach and of negligence included allegations that in planning and conducting the audits of WSTC and in making their reports to the board and to the shareholders the two firms:
(a) Had failed to review the business and internal controls of WSTC properly or at all; and
(b) Had failed to acquire evidence of the assets held by WSTC and in particular had failed to count or arrange for the counting of financial instruments which were recorded as being in WSTC's custody or control.
In summary, it was alleged that the two firms as auditors were in breach of their duties both in contract and in tort in failing to detect that the business of WSTC was being conducted fraudulently. In paragraph 48(1) of the statement of claim it was stated that the net deficiency of...
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