Calver: Information not privileged
The High Court has ordered a leading City litigation firm to name the source of a potentially forged report produced as part of an arbitration dispute between Russian oligarchs.
Mr Justice Calver took the rare step of making a Norwich Pharmacal order against a law firm, in this case Quinn Emanuel (QE), to identify the business intelligence consultancy which gave it the so-called Glavstroy report.
It was accepted that QE did not know the ultimate source of the report, which was used to found an ultimately discontinued claim under section 68 of the Arbitration Act 1996 that an arbitration award in favour of its clients should have been $300m larger.
Calver J said the evidence indicated the report was a forgery but he was “not willing to make the serious finding that QE ought to have known that they were facilitating arguable wrongdoing at the time when the section 68 proceedings were issued”.
However, once the other side had raised questions about the report, QE failed to make the “urgent enquiries which they ought to have made at that stage to satisfy themselves as to the authenticity of the report”.
This failure was a factor, “but no more than that”, in deciding whether to make the order.
QE was advising Vladimir Chernukhin and his company Navigator Equities – although Clifford Chance were the solicitors on the record – in a dispute with Oleg Deripaska and his company, Filatona Trading.
The judge noted that “it is fair to say [the two sides] are not the best of friends”. He continued: “It is also fair to say that the honesty and integrity of both of Mr Deripaska and Mr Chernukhin has from time to time been found to be wanting in cases before the English courts.”
QE instructed the consultancy that obtained the Glavstroy report. The claimants said knowing the name of the consultancy and those who procured the report would allow them to seek an order that they identify the ultimate source.
The underlying dispute concerned the breakdown of a joint venture that led to an arbitration where the Deripaska parties were ordered to buy out the Chernukhin parties for $95m.
Various civil proceedings followed, including the section 68 action to set aside the buy-out award and remit the question of quantum to the tribunal.
The Chernukhin parties alleged that the award was vitiated by the Deripaska parties deliberately suppressing the Glavstroy report, which would have led to an award of $395m.
The Deripaska parties’ then solicitors, City firm RPC, questioned the authenticity of the report and asked detailed questions about it – for example, the report was supposedly written in 2016 but referenced a 2018 document – which neither Clifford Chance nor QE answered, except to say they had no reason to doubt it was genuine.
QE told RPC that the consultancy was “routinely engaged by city law firms in the context of legal disputes”.
While it said it would ordinarily have no problem revealing the name, here it refused “because both we and the intelligence firm have serious concerns about the safety of the ultimate source(s) of the Glavstroy report given the identity of your client”.
Three months after issuing the proceedings, however, Clifford Chance discontinued them. Whilst making no admissions, Clifford Chance agreed to an order for indemnity costs against its clients.
Calver J found that the requirements for Norwich Pharmacal relief were met, saying it was “strongly arguable that the Glavstroy report is a forgery”.
Whilst counsel sought to argue that only parts of the report were false and that the valuations may be genuine, the judge found it “significant” that neither QE nor Clifford Chance “have ever taken issue with the indicia of fraud/forgery put forward” and “have never suggested that the report is genuine”.
It also seemed “very unlikely” that the Chernukhin parties would have withdrawn the claim and agreed to pay indemnity costs if they thought it was.
“All of the evidence before me points to this document being a forgery designed to cause very considerable loss to the Deripaska parties, by deceiving this court into granting section 68 relief and subsequently an arbitral tribunal into making an order requiring the Deripaska parties to pay up to an additional US$300m to the Chernukhin parties.”
QE was involved in the wrongdoing “and indeed has unwittingly facilitated it”. QE confirmed in correspondence that both it and Clifford Chance conducted a “detailed analysis” of the report before the proceedings were commenced.
The judge rejected an argument that the names were privileged, saying the information would “reveal nothing about the content of any privileged communications”, or the litigation strategy, and would not “inhibit candid discussion” between Mr Chernukhin and QE.
Rather, there was “a strong public interest” in allowing the Deripaska parties to vindicate their legal rights and an order would likely deter similar wrongdoing in future, “certainly by the wrongdoer(s) concerned if, as the Deripaska parties reasonably suspect, the content of the Glavstroy report is derived from a ‘mole’ from within the Deripaska parties’ organisation”.
Calver J concluded that granting the claim for Norwich Pharmacal relief was “a necessary and proportionate response to this serious wrongdoing in all the circumstances”.
He added: “I consider that the Deripaska parties are genuinely seeking lawful redress of a serious wrong for which they cannot otherwise obtain redress. As [counsel] pithily stated, if Mr Chernukhin had anything to do with the wrongdoing, it is right that his involvement should be exposed. If not, he has nothing to fear from disclosure.”
Quinn Emanuel had no comment on the ruling.
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