Istil Group Inc & Anor v Zahoor & Ors

Litigation privilege protects communications created for the dominant purpose of obtaining evidence or preparing pending litigation. It is the client’s privilege and does not depend on a prospective witness having agreed to confidentiality.

Where privileged and confidential material reaches an opponent, an injunction restraining its use is an equitable remedy. The court will ordinarily protect the confidence, and does not balance privilege against the mere value of the material in revealing the truth. Equitable conduct and a distinct public interest in exposing wrongdoing or protecting the administration of justice may, however, justify refusal.

Forgery connected with litigation, coupled with a deliberate presentation of materially misleading evidence, may outweigh the interest in maintaining confidentiality.

The claimants alleged that Mr Zahoor had diverted a lucrative Ukrainian military-equipment commission arrangement to Reventox, in breach of contractual and fiduciary duties. A central factual dispute concerned whether the relevant Reventox/Progress appendix related to tank power-packs or hulls.

An anonymous source, “ISTIL Friend”, supplied documents to the claimants. The defendants later obtained copied e-mails between that source and the claimants and their advisers. The claimants sought a final injunction restraining the defendants from using the e-mails and requiring delivery up. They relied on litigation privilege and confidence.

The principal issue was whether the equitable jurisdiction protecting confidential privileged material required restraint, despite evidence that an earlier appendix supplied by the same source was forged and had not been disclosed when the claimants relied on a later appendix.

1. The application was refused in substantial part. The court refused an injunction restraining use of the principal e-mails and all other communications with ISTIL Friend, except the e-mail intended for the claimants’ United States lawyer.

2. All relevant e-mails were covered by litigation privilege in the hands of the claimants and their solicitors. They had plainly been created for preparation of the proceedings. Privilege did not require an express or implied undertaking by the prospective witness to maintain confidentiality. The court also found that the communications were intended to be confidential and that ISTIL Friend would have understood this.

3. The fraud exception did not apply. It requires a definite charge of fraud or illegality supported by prima facie evidence, rather than an allegation alone. Nor had the claimants waived privilege by relying on documents obtained from an anonymous source or by stating that documents had been faxed to their solicitors. Civil Procedure Rules 1998 rule 31.14 did not give a right to inspect the fax because it had not been sufficiently mentioned.

4. The jurisdiction derived from Lord Ashburton v Pape [1913] 2 Ch 469 was equitable and protected confidence. The court would ordinarily intervene, but did not conduct a general balancing exercise between privilege and the importance of evidence or the emergence of truth. General equitable principles, including the applicant’s conduct, remained relevant. Confidentiality could also yield to a distinct public interest, including disclosure of wrongdoing and the proper administration of justice.

5. Here the claimants knew, before Mr Masood swore his affidavit exhibiting the alleged true appendix, that the same source had supplied a bogus appendix and that it was forged. Their deliberate omission made the account of acquisition incomplete and misleading. The likely litigation-related forgery and misleading evidence created a sufficient public interest to refuse equitable restraint.

High Court (Chancery Division): On 20 September 2002 the court made a worldwide freezing and disclosure order without notice. Other Chancery judges continued that order on agreed terms. This interlocutory application concerned the proposed use of communications obtained from an anonymous source before the contested continuation hearing.