EURASIAN NATURAL RESOURCES CORPORATION LIMITED v DECHERT LLP

This commercial trial concerned two related actions brought by ENRC against its former external lawyers (DLA/Dechert and principally the partner Neil Gerrard) and against the Director of the Serious Fraud Office (the SFO). The court made extensive factual findings and legal determinations on Phase 1 issues.

• Solicitor duties: The court held that Mr Gerrard owed ENRC the usual implied duties of care, skill and fiduciary duties and that he repeatedly breached them by (inter alia) making unauthorised, confidential and privileged disclosures to the SFO and third parties, instigating press leaks (notably August 2011, December 2011 and March 2013), failing to advise or record advice properly, expanding investigatory scope unnecessarily, and failing to protect privilege. Many breaches were found to be deliberate or reckless; one significant breach (failure to inform ENRC of the Depel interview) was admitted by Dechert as reckless.
• SFO liability: The court found that specific senior SFO officers (including Mr Alderman, Mr Gould and Mr Thompson in relation to particular contacts) knowingly or recklessly received and encouraged unauthorised disclosures by Mr Gerrard and, in a number of discrete contacts, induced him to act in breach of his retainer. However, ENRC’s broader misfeasance claims (bad faith or deliberate misconduct by the SFO as a public body) largely failed: the court did not conclude that the SFO had committed misfeasance in public office on the pleaded bases.
• Privilege and disclosure: The court refused ENRC’s application for prospective declarations preventing all use by the SFO of privileged/confidential material disclosed in breach of duty, explaining that English authority bars equitable restraint of admissible material in criminal proceedings and that, in any event, ENRC had not established the necessary basis for the discretionary relief sought.
• Limitation and caps: The court ruled the contractual liability cap in the retainer did not bar ENRC’s claim for repayment of unnecessary fees as a matter of construction and, in any event, was unreasonable to the extent relied upon; limitation defences were rejected on the facts where concealment/recklessness had delayed discovery.

The trial resolved liability and many factual questions; causation and quantification of loss were left (largely) to a subsequent phase.

The judgment resolves Phase 1 issues in two consolidated claims by ENRC: (1) professional negligence, breach of contract and breach of fiduciary duty claims against Dechert LLP and its partner Neil Gerrard arising from conduct while investigating internal whistleblower allegations, and (2) tort claims (inducement and misfeasance in public office) against the Director of the SFO for the conduct of senior SFO officers in their dealings with Mr Gerrard and ENRC.

Background and parties: ENRC is an international mining group. DLA/Dechert (working through Mr Gerrard) were retained to lead internal investigations arising from an anonymous whistleblower (WB1) about Kazakhstan operations and later African acquisitions. ENRC, Dechert and the SFO each called extensive documentary and witness evidence.

Relief sought: ENRC sought substantial damages (complaining of unnecessary legal and third-party fees and wasted management time), exemplary damages against the SFO, and declaratory relief to prevent SFO use of privileged/confidential material and to remove staff who had reviewed such material.

Issues before the court:

1. Whether Mr Gerrard/Dechert breached duties to ENRC (contract/tort/fiduciary) by unauthorised disclosures to the press and to the SFO, by giving wrong advice, by expanding the investigations and by failing to protect privilege.
2. Whether senior SFO officers induced or assisted Mr Gerrard’s breaches and/or committed misfeasance in public office by knowingly or recklessly receiving, encouraging or concealing his unauthorised disclosures and by other misconduct (including alleged concealment of materials, leaks and failure to record events).
3. Whether ENRC’s claims are time-barred or reduced by contractual caps, and whether ENRC was contributorily at fault.
4. Whether declaratory and injunctive relief should be granted to restrain SFO use of privileged/confidential material.

Court’s reasoning (concise):

• On the evidence the judge made adverse credibility findings about Mr Gerrard and accepted the testimonies of a range of witnesses (and contemporaneous documents). The judge concluded that Mr Gerrard instigated key press leaks (August 2011, December 2011 and March 2013) and that he repeatedly disclosed confidential and privileged material to the SFO and others without authority. One reckless (Depel interview) breach by Mr Gerrard was admitted during trial; other breaches were found deliberate or reckless.
• In relation to the SFO, the court distinguished two claims. It found that certain senior SFO officers knowingly or recklessly received unauthorised disclosures and, by repeated private contacts, encouraged and assisted Mr Gerrard so as to satisfy the elements of the tort of inducement in respect of specified "disputed contacts". By contrast, the higher threshold for misfeasance in public office was not established on the pleaded facts in most respects, and other allegations against the SFO (including as to the June 2013 material and certain alleged leaks) failed.
• On privilege and the request for declarations, English precedent (Butler v Board of Trade and subsequent authority) bars equitable restraint of admissible evidence in criminal proceedings; the judge therefore refused wide prospective declarations and concluded there was no sufficient basis for discretionary relief.
• Limitation and limitation-of-liability issues were considered. The court construed the contractual cap, held it did not sensibly extend to claims for repayment of unnecessary fees and, in any event, found limitation defences inapplicable where concealment/recklessness delayed discovery.

Disposition: The court determined liability and made extensive factual findings. Many claims against Dechert were upheld (liability established); claims against the SFO succeeded in part on inducement but failed in large part on misfeasance and on the prospective declaratory relief sought. Questions of causation and quantum were reserved for a later phase.

Issues determined. The court found Mr Gerrard (and through him Dechert) liable for multiple deliberate or reckless breaches of duty to ENRC (including unauthorised and privileged disclosures, instigating press leaks, failing to protect privilege, and expanding investigations). The SFO was held liable in part for inducement to breach (certain disputed contacts) because senior officers knowingly or recklessly received and encouraged Mr Gerrard’s unauthorised disclosures; however, most claims in misfeasance in public office failed. Prospective declarations restraining SFO use of material were refused. Several points (notably causation and quantification of loss) were left for a further phase.