COUNSEL: Jonathan Sumption Q.C. and Alastair Walton for the defendants

Sydney Kentridge Q.C. and Victor Lyon for the plaintiff

 

SOLICITORS: Solicitors: Herbert Smith; Denton Hall

 

JUDGES: Sir Thomas Bingham M.R., Leggatt and Roch L.JJ.

 

DATES: 1993 Oct. 6, 7; 26

 

Action for damages by Lonhro for wrongful interference with business interests and conspiracy to injure by unlawful means. Question of public interest immunity in documents sought to be disclosed.

 

Interlocutory Appeals from Popplewell J.

 

Cur. adv. vult.

 

26 October 1993. The following judgments were handed down.

 

SIR THOMAS BINGHAM M.R. The first to fourth defendants (“the Fayeds”) appeal with leave against two orders of Popplewell J. in favour of the plaintiff (“Lonrho”). One order, made on 23 June 1993, rejected a claim by the Fayeds to withhold certain documents from production on grounds of public interest immunity. The documents in question are communications between the Fayeds and their tax advisers and the Inland Revenue and relate to the Fayeds’ tax affairs. The second order, made on 16 July 1993, refused the Fayeds a relaxation of the terms upon which they had obtained disclosure of confidential documents relating to the financial affairs of Lonrho. The fifth and sixth defendants have played no part in these appeals.

 

The events giving rise to this action, and the nature of the action itself, are so well known that no detailed recital of the facts and issues is necessary for purposes of this appeal. It is enough to record in bare outline how the appeals arise.

 

In November 1984 the Fayeds bought 29.9 per cent. of the shares of House of Fraser Plc. from Lonrho by private treaty. Pursuant to a public offer announced in March 1985 they bought the remainder of the shares. Lonrho claims that it would itself have wished to buy the House of Fraser shareholding had it not been precluded from doing so by an undertaking previously given to the Secretary of State for Trade and Industry. The thrust of Lonrho’s case in this action (begun in March 1987) is that the Fayeds deprived it of the opportunity to acquire the House of Fraser shareholding by a number of deliberate and fraudulent misrepresentations made to the Secretary of State, the board and shareholders of the company and certain regulatory authorities. These misrepresentations are said to have concerned the Fayeds’ personal backgrounds and means, and in particular the source of the funds available to them to buy the shareholding. Lonrho lays its claim in tort, alleging that the facts relied on show wrongful interference with its business interests and actionable conspiracy to injure by unlawful means.

 

In their defence the Fayeds plead that the sum (of £571m.) needed to finance the House of Fraser acquisition was found from their own [*784] resources. Lonrho has been concerned to trace the source of that money and to discover how it was earned. These questions were not answered by the Fayeds’ initial discovery given in January 1992. No documents appear to survive bearing on that important question. Lonrho accordingly issued a summons seeking additional discovery of a number of classes of documents including documents relating to the Fayeds’ tax affairs. After a contested hearing in September 1992, Swinton Thomas J. ordered the Fayeds to disclose (among many other documents) the following:

 

“All documents, relating to the period 1 January 1983 to 31 March 1987 including correspondence, memoranda, notes of meetings, copy bank statements, copy returns to any tax authority anywhere in the world relating to the wealth and business interests of the first, second and third defendants or one or more of them and to any of their firms or companies received by the said defendants from, or held by the following as agents for the said defendants: (a) Peat Marwick Mitchell; and (b) any person, firm or entity anywhere in the world giving tax and accounting advice to the said defendants and/or to their firm and companies.”

 

In January 1993 the Fayeds made affirmations verifying a further list of documents. In part 2 of schedule 1 of their list the Fayeds disclosed:

 

“letters and other written communications and documents passing between the Fayeds or their advisers on the one hand and the Inland Revenue on the other relating to the tax affairs of the Fayeds and documents notes drafts and memoranda prepared or coming into existence in relation to such affairs.”

 

The Fayeds claimed:

 

“the said documents are by reason of their contents or the class of documents to which they belong to be withheld from production on the ground that production of the same would be injurious to the public interest.”

 

Lonrho challenged this claim. In May 1993 it issued a summons for production of the Fayeds’ taxation documents. This summons gave rise to Popplewell J.’s ruling on the Fayeds’ claim to public interest immunity which is the subject of their first appeal.

 

Meanwhile, in January 1993, the Fayeds had issued a summons seeking specific discovery by Lonrho of wide-ranging financial documentation bearing on Lonrho’s ability to bid for the House of Fraser and the probable results if it had done so. Lonrho’s response was that this documentation was very sensitive, commercially and politically; it had not been made available to shareholders and Lonrho did not wish the Fayeds personally to have access to it. Lonrho was accordingly willing to consent to an order for discovery but only on terms that the documents were disclosed to the Fayeds’ legal advisers and expert witnesses and not to the Fayeds themselves.

 

At the hearing of the summons, shortly after issue, on 27 January 1993 a compromise was reached and an order for discovery made by consent upon

 

“the first to fourth defendants by their counsel undertaking that without a prior order of the court (for the making of which order [*785] they are to be at liberty to apply) (i) they will not cause or permit any of the documents falling within paragraph 11 of schedule A to this order to be disclosed to themselves or to any other persons except their legal advisers or any expert instructed by them herein where that expert has previously furnished to their solicitors an undertaking in writing to the plaintiff that he will not use any of the information contained therein for any purpose outside the scope of this action and (ii) they will forward any such written undertaking to the plaintiff upon service of such expert’s report herein.”

 

Paragraph 11 of schedule A listed under general headings the financial documents in question.

 

There matters rested until, by summons of 8 July 1993, the Fayeds sought an order that the restriction on their personal access to the documents be removed. As defendants, the Fayeds wished to be informed of the detail of the documents in order to be able to give full instructions on the conduct of their case, and they challenged the grounds relied on for denying them access.

 

This application, dismissed by Popplewell J. on 16 July 1993, gives rise to the Fayeds’ second appeal. The judge did not give detailed reasons for his decision, but appears to have thought that there had been no change of circumstances since the Fayeds gave their undertaking in January 1993 which would justify releasing them from it.

 

A. The public interest immunity appeal

 

Before the judge three issues were argued. The first was whether public interest immunity attaches to documents in the hands of the Inland Revenue relating to a taxpayer’s tax affairs in the absence of consent to disclosure by the taxpayers. The Fayeds argued that it does. Lonrho did not seriously challenge that contention. The judge held that immunity does attach in these circumstances.

 

The second issue was whether immunity attaches to documents held by a taxpayer and his agents relating to a taxpayer’s tax affairs where the documents came into existence with specific reference to the taxpayer’s tax liabilities and the taxpayer does not consent to disclosure. The Fayeds argued that the immunity which attaches to such documents in the hands of the revenue similarly attaches to such documents in the hands of the taxpayer and his agents. Lonrho challenged that proposition, but the judge held, somewhat reluctantly, that he was bound to accept it.

 

The third issue was whether, balancing the public interest in non-disclosure against the public interest in disclosure, the Fayeds should be ordered to produce the tax documents for inspection. The judge held without hesitation that they should.

 

Before this court the same three issues have been argued, although on the first (whether public interest immunity attaches to a taxpayer’s documents in the hand of the revenue) Mr. Sydney Kentridge advanced a more robust challenge to the Fayeds’ argument than appears to have been advanced by leading counsel then appearing for Lonrho. And a further question arose on the third issue, as to whether the judge had correctly directed himself on it. [*786]

 

The first issue

 

Mr. Kentridge argued that while the revenue were bound to seek to protect the confidentiality of documents relating to a taxpayer’s tax affairs, it was a duty resting on confidentiality alone and high authority showed that confidentiality would not on its own found a claim for public interest immunity. That the duty did rest on confidentiality alone was shown both by Lord Reid’s explanation of In re Joseph Hargreaves Ltd. [1900] 1 Ch. 347 in Conway v. Rimmer [1968] A.C. 910, 946, and by the fact that the revenue’s duty did not on any showing survive the taxpayer’s consent to disclosure. Thus, he argued, documents of this kind enjoyed no immunity, but the revenue were obliged to protect their confidentiality subject to any order of the court in the ordinary course of discovery just as the employers were in Science Research Council v. Nassé [1980] A.C. 1028 in relation to the documents there in issue, which were confidential but not covered by public interest immunity.

 

In his argument for the Fayeds Mr. Sumption rejected this contention as inconsistent with binding authority and with the accepted practice of the revenue over many years.

 

The modern law of public interest immunity dates from Conway v. Rimmer [1968] A.C. 910. The cases decided since then have shown the public interest which earns immunity to be more complex than had hitherto been thought. While documents containing state secrets or confidential communications at the higher levels of government are without doubt entitled to immunity, material falling well outside these categories may be protected if a genuine public or national interest in non-disclosure can be demonstrated. If disclosure would significantly injure “the proper functioning of the public service:” (see Viscount Simon L.C.’s famous phrase in Duncan v. Cammell, Laird & Co. Ltd. [1942] A.C. 624, 642), that is a ground for claiming immunity, but unless that expression is read in a very expansive way it could scarcely embrace cases such as Reg. v. Lewes Justices, Ex parte Secretary of State for the Home Department [1973] A.C. 388 or D. v. National Society for the Prevention of Cruelty to Children [1978] A.C. 171. I do not therefore regard it as an objection in principle to Mr. Sumption’s argument that the immunity claimed for the revenue lapses on the taxpayer consenting to disclosure, whereas consent to disclosure of inter-ministerial correspondence by those participating would not necessarily undermine a departmental claim for immunity. That may only show that the public interest takes many forms.

 

Those concerned with the administration of the public revenue are obliged, as they have been for many years, to make a solemn declaration that they will not disclose information acquired in the course of their duties save for specified purposes which include compliance with legal requirements: see Taxes Management Act 1970, section 6 and Schedule 1. This obligation is reinforced by criminal penalties, now contained in section 182 of the Finance Act 1989, formerly contained in section 2 of the Official Secrets Act 1911. There can be no doubt of Parliament’s intention, subject to specified exceptions, to prohibit disclosure by the revenue of a taxpayer’s affairs. [*787]

 

I am satisfied that the courts have in the past treated claims by the revenue to withhold documents from disclosure as claims for Crown privilege or, in modern parlance, public interest immunity. In Brown’s Trustees v. Hay (1897) 3 T.C. 598 the Outer House of the Court of Session treated a claim to withhold documents made by the Lord Advocate on behalf of the Commissioners of Inland Revenue as in effect conclusive. In Shaw v. Kay (1904) 5 T.C. 74, another Scots authority, the same result followed in so far as production by the revenue of the taxpayer’s income tax returns was concerned. In Henderson v. M’Gown, 1916 S.C. 821, the Court of Session did not regard the Inland Revenue’s objection to producing the taxpayer’s returns as conclusive, but did regard the objection as one appropriately made on the public interest grounds advanced.

 

Authority south of the border is more sparse but not inconsistent with that to the north. In In re Joseph Hargreaves Ltd. [1900] 1 Ch. 347, the Board of Inland Revenue supported the objection of a surveyor of taxes to production of documents relating to a taxpayer company on the grounds that production would be “prejudicial and injurious to the public interests and service.” Wright J. treated this objection as in effect conclusive. The Court of Appeal declined to interfere with the judge’s exercise of discretion without in any way criticising his legal approach to the case.

 

This authority was one of many considered by the House of Lords in Conway v. Rimmer [1968] A.C. 910. Lord Reid explained it. He said, at p. 946:

 

“In re Joseph Hargreaves Ltd. [1900] 1 Ch. 347 the Inland Revenue objected to producing documents submitted to them in connection with income tax. That seems to me to have nothing to do with candour. If the state insists on a man disclosing his private affairs for a particular purpose it requires a very strong case to justify that disclosure being used for other purposes.”

 

This passage, brief though it is, is important for two reasons. First, it had previously been thought (and in some cases held) that the privilege recognised as attaching to taxpayers’ documents in the hands of the revenue rested at least in part on the consideration that taxpayers would be encouraged to “come clean” with the revenue, and so greatly assist the revenue in its task of assessment and collection, if they could be sure that information given to the revenue for that purpose would not be passed to any other government department or any other third party for unrelated purposes. This view of the ground of the privilege, not an untenable view in my opinion, would to some extent assimilate this class of case with that in which the ground of the privilege is to encourage an uninhibited flow of information to a body exercising public functions. But Lord Reid discountenanced that view, and since 1968 his approach has been accepted and followed by the revenue. It is important to note, secondly, that neither Lord Reid in the passage quoted, nor Lord Morris of Borth-y-Gest, at p. 967, threw any doubt on the treatment of this class of case as one of public interest immunity.

 

There is only one modern English authority directly touching on this issue: H. v. H. (1980) 52 T.C. 454, a decision of Balcombe J. at first [*788] instance. On objection taken by the revenue to production of documents relating to administration of a deceased’s estate without the consent of the administrator, the judge treated the claim as one for public interest immunity and carried out the balancing exercise required by Conway v. Rimmer [1968] A.C. 910.

 

In my judgment Mr. Sumption’s argument on this first issue is correct. I think that a claim made by the revenue to withhold documents relating to a taxpayer’s tax affairs from production without his consent is properly to be regarded as a claim for public interest immunity. But what matters more than the label is the practice, and in this instance the practice seems to me to be very clear. For the reasons which Lord Reid gave, the courts will give very great weight to preserving the confidentiality of such documents in the hands of the revenue. They will override that confidentiality only if, according to settled principles, the applicant shows very strong grounds for concluding that on the facts of the particular case the public interest in the administration of justice outweighs the public interest in preserving the confidentiality of the documents.

 

The second issue

 

Mr. Sumption’s argument on the second issue was admirably simple. Once it was accepted (a) that a taxpayer’s documents in the hands of the revenue were entitled to public interest immunity unless he consented to disclosure; and (b) that that immunity was founded on the undesirability of documents compulsorily created for tax purposes being disclosed for any other purpose it necessarily followed that such immunity necessarily extended to documents of the same kind held by the taxpayer himself. Any other ruling would, he said, undermine the very interest the immunity existed to protect. Authority showed that if an original document was immune from production, a copy in other hands was similarly immune and secondary evidence of its contents was similarly inadmissible. Mr. Sumption relied on Chatterton v. Secretary of State for India in Council [1895] 2 Q.B. 189, where it was held that if a document was immune from production secondary evidence of its contents could not be given, and Ankin v. London and North Eastern Railway Co. [1930] 1 K.B. 527, where objection was successfully made to production by a railway company of a copy of a privileged accident report made to the Ministry of Transport.

 

There are some fields in which, if immunity covers a document in the hands of party A, it would be absurd to order production of a copy in the hands of B or to permit oral evidence of the contents of the document by C. In fields such as national security or the conduct of international relations, production of B’s copy or the admission of C’s evidence would injure the very public interest which the immunity exists to protect. But it does not follow that that need be so in all fields. It all depends on the facet of the public interest which is in question. Mr. Sumption was, I think, right to pose the question: what is for present purposes the relevant public policy?

 

The answer to that question must be that which Lord Reid gave in commenting on In re Joseph Hargreaves Ltd. [1900] 1 Ch. 347. The state must not, backed by compulsory powers, obtain information from the [*789] citizen for one purpose and use that information for another. It does not matter whether this is seen as a principle of good administration or statutory construction or ordinary morality or all three. That is the ratio which Lord Reid gave, as I understand him, and I do not think it bears on whether the taxpayer himself can be required to produce the documents or not. If that is so, it fatally weakens Mr. Sumption’s submission on this issue.

 

But I think there are other grounds, which Mr. Kentridge gives, for rejecting it. They include the following. (1) While statute imposes clear and carefully-drawn obligations of confidentiality on the revenue (as noted above), there is no indication that any protection is intended to be given to documents or information in the hands of the taxpayer. (2) In certain fields of litigation, notably personal injury claims and matrimonial causes, production of tax returns is routinely ordered. Objection is never taken. These cannot realistically be seen as cases in which the party is entitled to refuse production on grounds of public interest immunity but nonetheless consents. It is unnecessary to comment on the practical consequences to the conduct of litigation if any other view were taken. (3) In a series of Scottish cases production has been ordered against the taxpayer: Macdonald v. Hedderwick & Sons (1901) 3 F. 674; Stroyan v. M’Whirter (1901) 9 S.L.T. 242; Robertson v. Hamilton (1915) 2 S.L.T. 195. In Gray v. Wyllie (1904) 6 F. 448 the court would have been willing to order production against the taxpayer had it not held the documents to be irrelevant. In some of these cases, it is true, the documents in question appear to have been no more than receipts, but in the first case cited these were treated as containing the taxpayer’s own statement about his income and profits, and it is possible from a receipt alone to draw inferences as to the assessment on which the tax charge was based. (4) In H. v. H., 52 T.C. 454, Balcombe J. assumed that production of the documents could have been obtained from the administrator. (5) Commonwealth authority lends no support to Mr. Sumption’s argument. In Crane v. Johannesburg Stock Exchange Committee, 1949 (4) S.A. 835 a stockbroker who asserted public interest immunity as a ground for withholding his tax documents from disclosure under the rules of the Johannesburg Stock Exchange was held to have no ground for doing so. This authority was followed, on different facts, in Marais v. Lombard, 1958 (4) S.A. 224. A similar decision was reached, reversing earlier authority, by the Supreme Court of South Australia in Pooraka Holdings Pty Ltd. v. Participation Nominees Pty. Ltd. (1989) 52 S.A.S.R. 148. These decisions were reached against a statutory background quite different from our own, and some of the reasoning may be open to criticism, but in general I find these authorities a persuasive refutation to Mr. Sumption’s argument on this issue. (6) The revenue have been at pains to adopt a neutral stance on this application, neither supporting the Fayeds’ argument nor opposing it. No application is made against the revenue and they are content to await the outcome. This is a very proper position. But if the revenue regarded Lonrho’s application, if successful, as capable of injuring any public interest in the fair and efficient operation of the tax system, I would not expect the revenue to be neutral. This neutrality is in my view an indication that it is the Fayeds’ private right and not any public right [*790] which is in issue here. But, as Lord Scarman pointed out in Science Research Council v. Nassé [1980] A.C. 1028, 1087, public interest immunity raises issues of public law, not private right.

 

I conclude that on this second issue Lonrho is right. In this conclusion I differ from the judge. But it is the conclusion he favoured and would have reached if he had felt free to do so.

 

This conclusion, if correct, makes it unnecessary to consider the third issue, since on this basis there is no public interest available to the Fayeds to put in the scales to weigh against the public interest in the administration of justice. I shall, however, briefly state my opinion on the third issue in case I am wrong on the second.

 

The third issue

 

Mr. Sumption criticised the judge’s self-direction when carrying out the balancing exercise in two main respects. First, he said, the judge appeared to give no weight to the public interest represented (on this hypothesis) by the need to preserve the confidentiality of the Fayeds’ tax affairs. Secondly, he submitted that the judge did not, as the majority decision in Air Canada v. Secretary of State for Trade [1983] 2 A.C. 394 required, ask himself whether the documents if produced would be likely to help Lonrho or (if he did ask that question) give reasons for concluding that they would. There is some force in these criticisms. The judge may well have regarded the answer as clear and therefore have recorded his thought processes less fully than he would otherwise have done. But I would myself have reached the same conclusion.

 

Lonrho’s central charge in this action is that when the Fayeds bought the House of Fraser shares they were unable to finance the purchase out of their own resources and were dishonest when they represented to the Secretary of State and others that they could and would. The source of the funds used for the purchase is therefore crucial, and the credibility of the Fayeds on that matter is directly in issue. Discovery has thrown little or no light on the issue, since it is the Fayeds’ practice (so it is said) to dispose of documents which they receive. It appears that more than one explanation has at different times been given of where the money came from. On various occasions since 1987 the money has been said, in large part, to represent the proceeds of secret oil trading, but D.T.I. Inspectors did not accept this account and little detail has been forthcoming to support it.

        

        

 

It is not possible for a party to demonstrate with any precision howa document which he has not seen will help him. That is a weakness, as some might think, of the majority Air Canada test. It does, however, seem intrinsically unlikely that the Fayeds declared the sums brought to this country to effect the purchase to the revenue as the proceeds of oil trading. It seems more likely that communications with the revenue, and documents exchanged between the Fayeds and their advisers, either omitted reference to oil trading or pointed towards a different explanation. If the documents supported the Fayeds’ case, they would have no reason to withhold their consent to production.

 

The public interest in non-disclosure which I assume to exist must be respected and given weight. But it is in my opinion, as in the judge’s, [*791] outweighed here: without contemporary documentation the judge’s task in reaching a reliable conclusion on this issue may be well-nigh impossible.

 

I would dismiss the Fayeds’ appeal.

 

B. The financial documents appeal

 

There are two principles of law relevant to this appeal.

 

The first is that if a party elects to give an undertaking in order to avoid the grant of an injunction, it cannot ordinarily and in the absence of changed circumstances re-open the matter some months later if it concludes on reconsideration that it could have defeated the application for an injunction: see Chanel Ltd. v. F. W. Woolworth & Co. Ltd. [1981] 1 W.L.R. 485, 492, per Buckley L.J.

 

The second principle is that if a party reserves a right to apply, or an undertaking is given until further order, it is entitled to return to court to vary the order or undertaking if reason for doing so is shown (see the Chanel case), and where disclosure of documents is initially ordered on a restricted basis the court may at a later stage permit wider disclosure: see Warner-Lambert Co. v. Glaxo Laboratories Ltd. [1975] R.P.C. 354, per Buckley L.J.

 

In the present case, it is said by Mr. Sumption for the Fayeds, the judge gave full weight to the first principle (although wrongly holding that there had been no change of circumstances), but gave no weight to the second.

 

Mr. Sumption submitted that the procedure adopted was a sensible one, intended to avoid a long wrangle over documents the significance of which, until they were seen, could not be assessed. The form of the undertaking expressly included a liberty to apply, and so signalled that the Fayeds might apply to vary the undertaking once their advisers had seen the documents. Mr. Lyon, for Lonrho, submitted that the possibility of varying the undertaking had not been raised at the hearing when it was given; had it been, Lonrho would have fought out the summons on the merits there and then.

 

Given the terms of the undertaking, I do not think the Fayeds should be shut out from seeking a variation. Having seen the documents their advisers are much better placed to consider which documents their clients should see in order fairly to defend the action and give instructions. In that respect the situation today differs from that in January when the undertaking was given. It would, however, be unfair to Lonrho simply to relax the restriction which the Fayeds then accepted: Lonrho’s case on the merits of the application has not been heard; and it may be that some restriction should continue to apply in relation to some documents even if not all. Were this court simply to remove the restriction, the Fayeds might achieve a result they could not have achieved had the matter been fully contested before the judge.

 

I would therefore allow the Fayeds’ appeal and order that this summons be reconsidered by the judge in the light of this judgment. The Fayeds’ advisers should consider carefully which of these documents it is really necessary for them personally to see in order fairly to defend themselves. Both sides will, I am sure, bear in mind the strict rules governing the use which may be made of documents disclosed on [*792] discovery, even in the absence of an express undertaking, and the sanctions available to the court if misuse is shown.

 

LEGGATT L.J. Apart from his own honest instincts, a person makes a truthful tax return not on the faith that the Inland Revenue will keep it confidential but because if he gives false information or conceals any part of his income, he can be prosecuted. The confidentiality is itself exacted by statute. So there is no need to introduce the concept of what is now called public interest immunity with its cornucopia of legal argument. But because for nearly a century communications with the revenue have been regarded as the subject of immunity, it is convenient to continue doing so, and it may indeed be too late for this court to put the clock back.

 

What then is the scope of the immunity? It is plain that in the hands of the taxpayer tax returns have never been treated as privileged, whereas in the hands of the revenue they always have, unless the taxpayer consents to their production. The immunity therefore only protects a taxpayer’s tax papers in the hands of the revenue in fulfilment of their obligation to keep such documents secret in default of consent. Though the court can override the immunity, it will not ordinarily do so.

 

In the present case the Fayeds’ tax documents in their accountants’ hands are outwith the scope of the immunity; they must be produced for inspection; and the judge was right to order their production, even though he only did so in the supposed exercise of his discretion. Certainly, if it had come to that, it would be difficult to envisage any class of documents more liable to damage the Fayeds’ case, and so benefit Lonrho’s; and on balance I consider that in the circumstances to which Sir Thomas Bingham M.R. and Roch L.J. have referred such documents would be likely to do both. The fact that they might also damage the Fayeds’ credit is no reason for not ordering their production.

 

About the appeal relating to Lonrho’s financial documents there is nothing that I wish to add. So I agree that for the reasons given by the Master of the Rolls that appeal should be allowed, and the appeal relating to public interest immunity dismissed.

 

ROCH L.J. With regard to the financial documents appeal I agree that the Fayeds’ appeal should be allowed and that there should be an order in the terms proposed by Sir Thomas Bingham M.R.

 

Equally I would dismiss the Fayeds’ appeal against the order of Popplewell J. that the Fayeds produce communications between them and their tax advisers and them and their tax advisers and the Inland Revenue relating to their tax affairs. I adopt the statement of the facts of the case in the judgment of Sir Thomas Bingham M.R. However my reasons for dismissing this appeal are different from those of the Master of the Rolls and Leggatt L.J. In my judgment these documents do not attract public interest immunity.

 

The second submission made on behalf of the Fayeds by Mr. Sumption was that documents which have public interest immunity have that immunity in whoever’s hands they happen to be. Further, the immunity is such that secondary evidence of their contents cannot be given. The [*793] principles were stated by Bingham L.J. in Makanjuola v. Commissioner of Police of the Metropolis [1992] 3 All E.R. 617, 623:

 

“Where a litigant asserts that documents are immune from production or disclosure on public interest grounds he is not (if the claim is well founded) claiming a right but observing a duty. Public interest immunity is not a trump card vouchsafed to certain privileged players to play when and as they wish. It is an exclusionary rule, imposed on parties in certain circumstances, even where it is to their disadvantage in the litigation. This does not mean that in any case where a party holds a document in a class prima facie immune he is bound to persist in an assertion of immunity even where it is held that, on any weighing of the public interest, in withholding the document against the public interest in disclosure for the purpose of furthering the administration of justice, there is a clear balance in favour of the latter. But it does, I think, mean: (1) that public interest immunity cannot in any ordinary sense be waived, since, although one can waive rights, one cannot waive duty; (2) that where a litigant holds documents in a class prima facie immune, he should (save perhaps in a very exceptional case) assert that the documents are immune and decline to disclose them, since the ultimate judge of where the balance of public interest lies is not him but the court; and (3) that, where a document is, or is held to be, in an immune class, it may not be used for any purpose whatever in the proceedings to which the immunity applies, and certainly cannot (for instance) be used for the purposes of cross-examination.”

 

The Fayeds’ counsel recognise that a taxpayer may consent to production of his tax returns. Further, it is accepted that orders for production of such documents by the taxpayer are routinely made in personal injury cases where the plaintiff is self-employed, and in matrimonial property disputes. This raises the question whether the protection which is accorded to these documents is truly public interest immunity. In the skeleton argument submitted on behalf of the Fayeds’ their counsel deal with this point in this way:

 

“The [Fayeds] do not dispute that they would be entitled if they wished to deliver up the documents voluntarily, thereby consenting to disclosure. There is no inconsistency between this state of affairs and the existence of public interest immunity. The reason is that in circumstances such as these the immunity precludes disclosure without the consent of the taxpayer. If the taxpayer does consent, then he is not waiving the immunity (for he has no right to do that); he is simply removing a condition for its existence.”

 

The difficulty that I find with this analysis is that if it is a condition precedent to the immunity existing that the taxpayer does not consent to the production of the documents then it is not a public but a private immunity. If it were a true instance of public interest immunity, it would involve the taxpayer being able to say “I do not consent to the production of these documents and therefore I am now under a duty to claim immunity for them and so is the Inland Revenue.” If the taxpayer can [*794] consent to the disclosure of the documents what he is doing in reality is waiving the immunity whatever that immunity might be. If the taxpayer can waive it, it is not public interest immunity.

 

The second reason why I have reached the conclusion that this is not a case of public interest immunity is that examination of the decided English cases shows that there is no decision binding on this court that such documents are the subject of public interest immunity. The oldest case is Mitchell v. Koecker (1849) 11 Beav. 380. In that case disclosure of tax documents was not ordered, but there the taxpayer objected that those documents might incriminate him.

 

The second case is in In re Joseph Hargreaves Ltd. [1900] 1 Ch. 347. This was an application by the liquidator of a company in proceedings for misfeasance against directors and auditors of the company for an order that the court should summon before it the tax surveyor as a person whom the court deemed capable of giving information concerning the trading and dealings of the company and require the tax surveyor to produce documents in their custody relating to the company, namely balance sheets of the company delivered to the surveyor for the purpose of assessing the company’s liability to pay income tax. The application was made under section 115 of the Companies Act 1862 (25 & 26 Vict. c. 89) which opened with the words: “The court may, after it has made an order for winding up the company, summon before it . . .” It was therefore clear that section 115 gave the court a discretion whether to make an order or not. The secretary to the Commissioners of Inland Revenue filed an affidavit stating that the following resolution had been passed by the Commissioners sitting as a Board:

 

“In the opinion of the Board of Inland Revenue, who have duly considered the question, the production of the documents referred to in the summons . . . would be prejudicial and injurious to the public interests and service.”

 

In his judgment Wright J., at p. 350, as a first observation pointed out that section 115 gave the court a discretion. He treated the affidavit as sufficient evidence that in the opinion of the Board of Inland Revenue the public service would suffer by the production of these documents and he decided that very strong grounds ought to be shown before the court would be justified in going behind the certificate of the board. He gave a separate ground for his decision to refuse to make an order, at p. 351: “even if I had power to overrule the objection, I ought not to do so in the exercise of the discretion vested in the court by section 115.” The Court of Appeal upheld this decision on this second and separate ground. Sir Nathaniel Lindley M.R. began his judgment by saying that it was in his opinion quite unnecessary for the court and indeed would not be in accordance with the usual practice of the court to decide a speculative case which was not before them. It is true that Vaughan Williams L.J. said, at pp. 352-353:

 

“It is not, as I understand, denied that communications made to the Board of Inland Revenue are documents which come within the rule which enables the heads of Government departments to object on their own responsibility to their production. At all events, if this were [*795] disputed, it seems to me that there is ample authority that such a contention would be ill-founded.”

 

Nevertheless that part of Vaughan Williams L.J.’s judgment shows that the point of Crown privilege as it was then known was not argued before the Court of Appeal.

 

Mr. Sumption submitted that it must have been implicit in the judgments of the Court of Appeal that the members of the court accepted that this class of documents was the subject of public interest immunity. That may be so, but there was no argument on the point nor was the point decided by the Court of Appeal nor was a decision on that point necessary to support the conclusion that the court reached.

 

The third case is H. v. H. (1980) 52 T.C. 454, a decision of Balcombe J. This was an application for financial provision by a wife against her husband. The wife subpoenaed the Controller of the Capital Taxes Office to give evidence and produce the originals of any affidavit together with any other documents relating to the letters of administration concerning the husband’s deceased grandfather. The wife did not subpoena the administrator of the estate, the husband’s brother, to give evidence or to produce all or any of the documents, nor did she obtain the administrator’s authority for the Inland Revenue to produce any of the documents. The Chairman of the Board of Inland Revenue objected by affidavit to the Controller of the Capital Taxes Office giving evidence of the contents of or producing except by order of the court documents which were either the affidavits or correspondence or other documents passing between the Estate Duty Office and the administrator’s solicitors or the Estate Duty Office’s internal papers. Balcombe J. refused to make the orders for which the wife applied. The judge clearly thought that this was a case of public interest immunity: see p. 457F. It may be that the internal papers of the Estate Duty Office would be the subject of public interest immunity. However it is clear, at p. 457A, that Balcombe J. considered that the other documents sought by the wife could be obtained by serving the administrator with a subpoena either ad testificandum or duces tecum or both. That suggests that Balcombe J. did not consider that the affidavits and correspondence and other documents passing between the Estate Duty Office and the administrator’s solicitors were the subject of public interest immunity, strictly so called.

 

It is necessary to examine the basis of public interest immunity of classes of documents to see whether that basis or justification applies to the class of documents with which this court is concerned in this case. The leading authority is Conway v. Rimmer [1968] A.C. 910. Cases decided before Conway v. Rimmer are of doubtful validity because, as Lord Reid observed, at p. 943: “So it appears to me that the present position is so unsatisfactory that this House must re-examine the whole question in light of all the authorities.” Lord Reid said, at p. 952:

 

“There may be special reasons for withholding some kinds of routine document, but I think that the proper test to be applied is to ask, in the language of Lord Simon in Duncan’s case [1942] A.C. 624, 642, whether the withholding of a document because it belongs to a [*796] particular class is really ‘necessary for the proper functioning of the public service.’”

 

Thus there are two reasons for documents being accorded public interest immunity which overlap. First, that the documents contain information which in the public interest should be kept secret, and second that the document belongs to a class of documents production of which should not normally be ordered because the keeping secret of the documents is necessary for the proper functioning of a public service. There is no suggestion in this case that the documents which the plaintiff seeks fall into the first category.

 

The decided cases show that the courts will, in relation to the second head of public interest immunity, look critically at claims that privilege from disclosure is necessary because without that private individuals will not be frank and candid with public services. Thus in commenting on the decision in In re Joseph Hargreaves Ltd. [1900] 1 Ch. 347 Lord Reid said in his opinion in Conway v. Rimmer [1968] A.C. 910, 946:

 

“That seems to me to have nothing to do with candour. If the state insists on a man disclosing his private affairs for a particular purpose it requires a very strong case to justify that disclosure being used for other purposes.”

 

Lord Upjohn in his opinion said, at pp. 994-995:

 

“The tests to be applied to claims for Crown privilege in class cases I think should be as follows: There are some documents which, apart altogether with the alleged necessity for candour, fall within the claim of protection; and probably at the same time, though not necessarily, within the ‘contents’ class. I have already given some examples and do not repeat them; the judge still has, though I should be surprised if it were ever necessary to exercise it, the rights I have mentioned in the ‘contents’ cases. Then within the ‘class’ cases we come to the ‘candour’ cases pure and simple. For my part I find it difficult to justify this when those in other walks of life which give rise to equally important matters of confidence in relation to security and personal matters as in the public service can claim no such privilege.”

 

Thus the factor whether the maker of a report or the provider of information will or will not be candid of itself is not a reason for according a class of documents a public interest immunity. On the other hand if it is necessary for the proper functioning of a public service that information should not be disclosed or the identity of the informant should not be disclosed then there will be public interest immunity: see D. v. National Society for the Prevention of Cruelty to Children [1978] A.C 171.

 

It can be observed that taxpayers might be more candid in making their tax returns if those tax returns were published. I am not advocating that the present statutory rules on confidentiality in relation to tax returns should be abrogated. I am merely observing that the present statutory rules of confidentiality are not likely to render a taxpayer’s tax return more complete and candid. It is the taxpayer’s statutory obligations and [*797] the consequences of not meeting those obligations which persuade taxpayers who need persuading to be candid in making their tax returns.

 

In Science Research Council v. Nassé [1980] A.C. 1028 the House of Lords decided that while no principle of public interest immunity protected confidential documents such documents were not immune from discovery by reason of confidentiality alone. The court has a discretion to order discovery of confidential documents in the exercise of which it would have regard to the fact that the documents are confidential and that discovery will be a breach of confidence so that the mere fact that the documents were relevant to an issue between the parties did not mean that an order for discovery and production would automatically be made. The party seeking discovery had still to show that the order was necessary for disposing fairly of the proceedings. Lord Wilberforce, at p. 1065, said: “There is no principle in English law by which documents are protected from discovery by reason of confidentiality alone.ֲ Then he went on to set out the other principles which I have rehearsed by paraphrasing the headnote to the case.

 

In the present case there is no evidence that the disclosure of the Fayeds’ tax documents will interfere with the proper functioning of the Inland Revenue. There is no affidavit in this case along the lines of that in In re Joseph Hargreaves Ltd. [1900] 1 Ch. 347. Mr. Sumption for the Fayeds tried valiantly to discover some ground for claiming immunity for these documents apart from that of confidentiality alone. In my judgment he failed in that attempt.

 

The law in this field is developing so as to restrict the scope of public interest immunity. In Science Research Council v. Nassé [1980] A.C. 1028, 1087, Lord Scarman said:

 

“For myself, I regret the passing of the currently rejected term ‘Crown privilege.’ It at least emphasised the very restricted area of public interest immunity. As was pointed out by Mr. Lester Q.C. . . . the immunity exists to protect from disclosure only information the secrecy of which is essential to the proper working of the government of the state. . . . We are in the realm of public law, not private right.”

 

Having reached the conclusion that this is not a case of public interest immunity but simply a case of confidentiality based on the provisions of the Taxes Management Act 1970 and the Finance Act 1989, the test which the judge should have applied was whether the discovery was necessary for disposing fairly of the proceedings. In my judgment there is but one answer to that question. Nevertheless, if I am wrong and this is a case of public interest immunity it required the judge to be satisfied that the documents, disclosure of which was sought, would give substantial support to the contention of the plaintiff on an issue which arose in the case, I would uphold the judge’s decision on this issue.

 

These tax documents do not go simply to the credit of the Fayeds as was submitted by Mr. Sumption. As Swinton Thomas J. said at the outset of his judgment on the 15 October 1992 on the plaintiff’s application for further discovery:

 

“Two vital questions of fact underlie the plaintiff’s allegations: first the source of the funds which enabled the defendants to acquire the [*798] House of Fraser. Second, the background and commercial history of the three Fayed brothers.”

 

A large part of those funds were held in two accounts at the Royal Bank of Scotland in 1984 and 1985. If, as seems likely in the light of the Inland Revenue’s statement in their letter of the 5 October 1993 that the Inland Revenue were unaware of the existence of the accounts at the Royal Bank of Scotland during the period November 1984 to November 1985 when the Fayeds were making tax returns, the Fayeds told lies about the sources of the funds with which they purchased the House of Fraser in those returns, either directly or indirectly by omitting to mention the payments which they now claim were the origin of those funds, then such untruths would be probative of the plaintiff’s main contention that these moneys were not the property of the Fayeds.

 

These documents contain statements made by the Fayeds in a case where they have disclosed little either by way of discovery or by way of answers to interrogatories. In his judgment, Swinton Thomas J. found that there existed companies which would have in their possession documents relevant to the origins of these funds and to the financial status of the Fayeds which, although the Fayeds were not the alter egos of those companies so that they were obliged to list and produce those documents, they did have sufficient interest in and influence over those companies to be able to obtain copies of those documents had they so wished.

 

The tax documents contain statements made by the Fayeds or by their agents on their instructions. They are not statements made by third persons whose identity is unknown to the plaintiff. Those documents were not included in the Fayed original lists of documents as they should have. Before Swinton Thomas J. the plaintiffs’ solicitor had exhibited a letter to his second affidavit sworn on the 14 September 1992 from the Royal Bank of Scotland to Mr. MacArthur of Kleinwort Benson Ltd. who acted as merchant bankers to the Fayeds which said that the proposed acquisition of the House of Fraser was being fronted by the Fayeds for a very substantial investor. There are substantial grounds for believing, in my view, that the tax returns will provide evidence coming from the Fayeds themselves which will add weight to the contents of that letter. It must be remembered that Popplewell J. sat with Swinton Thomas J. in the hearing at that application and would have been well aware of all those matters.

 

For those reasons and the reasons given by Sir Thomas Bingham M.R. in his judgment I would uphold the decision of the judge.

 

Orders accordingly.