Tchenguiz & Ors v The Serious Fraud Office (SFO)

A declaration that conduct was unlawful on public law grounds does not necessarily determine private law tort liability. An order quashing a warrant may therefore leave open defences such as lawful justification, subject to the facts and the pleaded claim. The court determining an estoppel should examine the substance and reality of the earlier decision, using a flexible approach to the relevant orders, judgment and procedural history. A party may withdraw an admission where the defence is arguable, the application is made in good faith, and refusal would cause greater injustice than permitting the issue to be tried. The overriding objective favours determining the correct legal position rather than preserving a possibly erroneous admission, absent irremediable prejudice.

The proceedings arose from judicial review proceedings concerning warrants used to enter and search premises connected with the claimants. The Divisional Court had quashed the warrants and declared the consequential entries, searches and seizures unlawful on public law grounds. It transferred any civil claims for damages to the Queen’s Bench Division.

The SFO initially admitted liability for trespass to land but later sought to withdraw that admission and rely on lawful justification and statutory protection. The claimants argued that the Divisional Court’s orders created cause of action estoppel or issue estoppel, preventing the SFO from disputing trespass liability. The court had to determine whether the earlier orders had decided private law liability and, if not, whether withdrawal of the admission should be permitted.

1. Estoppel. The Divisional Court’s orders did not preclude the SFO from disputing liability for trespass. The declaration that the entries, searches and seizures were unlawful was expressly linked to the public law grounds stated in the judgment. It did not necessarily determine whether the SFO had private law liability to the particular claimants.
2. The expression lawful justification concerns the availability of a defence to a particular private law claim. It does not mean that conduct was lawful as a matter of public law. The authorities on judicial warrants support that distinction. Accordingly, the public law unlawfulness declared by the Divisional Court did not itself resolve the proposed private law defences.
3. In deciding the scope of cause of action estoppel or issue estoppel, the court should focus on what was actually adjudicated. It should examine substance and reality and may consider the orders, judgment, pleadings and, where necessary, the wider procedural history. An unnecessarily rigid or blinkered approach risks injustice.
4. Withdrawal of admission. Under CPR r14.1(5), permission to withdraw the admission was discretionary. The SFO bore the burden under CPR 14PD7.2 and the guidance in Sowerby v Charlton [2006] 1 WLR 568. The proposed defences were arguable; there was no reason to doubt the SFO’s good faith; the trial remained about ten months away; and the claimants suffered no irremediable prejudice. The interests of justice therefore favoured allowing the SFO to defend the trespass claims on their merits.
5. The court rejected any additional relevance in the fact that success might benefit public funds. The SFO was granted permission to withdraw its admission. Costs and consequential matters were left for agreement or further determination.

The Divisional Court, in [2012] EWHC 2254 (Admin), quashed the search warrants and declared the consequential entries, searches and seizures unlawful on public law grounds. It transferred any civil claims for damages to the Queen’s Bench Division under CPR Part 54.20. The present court held that those orders did not determine private law trespass liability and permitted the SFO to withdraw its admission.