SKATTEFORVALTNINGEN v ELYSIUM GLOBAL [2020] DIFC CFI 048 — Adjudication of privilege claims over disputed documents (22 December 2020)

This order addresses the complex evidentiary requirements for asserting legal advice and common interest privilege within the ongoing litigation between the Danish Customs and Tax Administration (SKAT) and the Elysium entities, clarifying the threshold for protecting sensitive corporate communications.

What is the specific dispute between SKATTEFORVALTNINGEN and Elysium Global regarding the disclosure of documents in CFI 048/2018?

The litigation concerns a high-stakes tax recovery action initiated by SKATTEFORVALTNINGEN (the Danish Customs and Tax Administration) against Elysium Global (Dubai) Limited and Elysium Properties Limited. The core of this specific procedural dispute involved the Defendants' refusal to disclose a series of documents, which they asserted were protected by legal advice privilege and litigation privilege. The Claimant sought access to these documents to substantiate its claims regarding the Donaldson/La Rosa WHT Scheme.

The Court was tasked with reviewing various document annexes to determine whether they were exempt from inspection. The Defendants’ claims for privilege were initially scrutinized by the Court’s Senior Legal Researcher (SLR), whose preliminary views were challenged by the subsequent submission of additional evidence by the Defendants. As noted in the Court's findings:

The claim for privilege has developed in relation to the documents in dispute in JD3B beyond the information given to the SLR when he originally inspected the documents and formed the views that he did.

This dispute highlights the evidentiary burden placed on parties in the DIFC to clearly categorize and justify privilege claims at the outset of the disclosure process, rather than through iterative submissions. Further context on the procedural history of this case can be found in SKAT v Elysium Global [2019] DIFC CFI 048 — Enforcement of disclosure and rejection of unsubstantiated privilege claims (29 January 2019).

Which judge presided over the privilege determination in the December 2020 order for CFI 048/2018?

The order was issued by Justice Sir Jeremy Cooke, sitting in the DIFC Court of First Instance. The decision was rendered on 22 December 2020, following a review of multiple reports from the Court’s Senior Legal Researcher and submissions from both the Claimant and the Defendants filed between July and November 2020.

How did the parties argue the scope of common interest privilege in the context of the Solo Capital entities?

The Defendants argued that a wide range of documents were protected by common interest privilege, asserting that the interests of the Elysium entities were inextricably linked with Solo Capital Ltd and Solo Capital Partners LLP, all of which were allegedly controlled by Mr. Sanjay Shah. The Defendants contended that communications involving these entities and their legal advisors—specifically Kaye Scholer and Hannes Snellman—constituted privileged legal advice regarding the tax schemes in question.

Conversely, the Claimant challenged the breadth of these privilege claims, suggesting that the Defendants had failed to provide sufficient evidence to establish the necessary common interest or the privileged nature of specific communications. The Court acknowledged that the initial evidence provided to the SLR was insufficient, leading to a situation where the SLR’s initial assessment was based on limited information. As the Court observed:

On the basis of what he was told, and the very limited evidence adduced, it is understandable that he took the views that he did.

What was the precise legal question regarding the validity of common interest privilege between Solo Capital and the Elysium entities?

The Court had to determine whether the Defendants had successfully established the criteria for common interest privilege under DIFC law. Specifically, the issue was whether the corporate relationship between Solo Capital Ltd, Elysium Global (Dubai) Limited, and Solo Capital Partners LLP—and their shared connection to Mr. Sanjay Shah—was sufficient to allow them to share privileged legal advice without waiving that privilege. The Court also had to decide whether the documents in question were indeed created for the purpose of obtaining legal advice or in connection with litigation, or if they were merely administrative or commercial in nature.

How did Justice Sir Jeremy Cooke apply the test for common interest privilege to the Elysium entities?

Justice Sir Jeremy Cooke applied a pragmatic approach, looking at the nature of the documents and the underlying corporate structure. While he criticized the initial lack of evidence, he ultimately concluded that the connection between the entities was sufficient to sustain the claim. The Court’s reasoning focused on the reality of the corporate group’s operations and the shared legal interests in the tax scheme structure.

Nonetheless on the basis of the information now available and the very nature of the documents, combined with the information as to shareholdings or membership of the limited partnership, it is clear that there is a valid claim to common interest privilege as between Solo Capital Ltd, Elysium Global (Dubai) Limited and Solo Capital Partners LLP, behind which it is said stands Mr Sanjay Shah.

The Court further distinguished between documents that were clearly requests for legal advice (such as those involving the NY firm Kaye Scholer) and those that were merely administrative, such as engagement letters, which were ordered to be disclosed.

Which specific statutes and rules governed the Court’s authority to order the disclosure of the disputed documents?

The Court exercised its powers under the Rules of the DIFC Courts (RDC), specifically those governing the disclosure and inspection of documents. The Court relied on its inherent jurisdiction to manage the disclosure process and to adjudicate claims of privilege. While the judgment does not cite specific RDC rule numbers in the final order, the process was governed by the standard DIFC disclosure regime, which requires parties to disclose documents unless they are protected by a recognized privilege, such as legal advice privilege or litigation privilege. The Court also referenced the impact of collateral use restrictions imposed by the Kingston Crown Court, demonstrating the interplay between DIFC disclosure obligations and foreign court orders.

How did the Court utilize precedents regarding privilege and collateral use in this order?

The Court utilized the concept of "collateral use" restrictions to protect documents that had already been subject to orders in the Kingston Crown Court. By recognizing these restrictions, the Court ensured that the disclosure process in the DIFC did not undermine the integrity of foreign proceedings. Furthermore, the Court’s approach to legal advice privilege followed established common law principles, requiring that documents must be created for the purpose of seeking or providing legal advice to be protected. The Court’s refusal to determine the issue of "waiver" due to insufficient evidence underscores the strict evidentiary requirements parties must meet when asserting that privilege has been lost.

What was the final disposition regarding the release of documents and the allocation of costs?

The Court granted the application for privilege in part and refused it in part. It ordered that specific documents be withheld from inspection, while others were ordered to be released to the Claimant, either in their entirety or in redacted form.

The Disputed Documents referred to in Exhibit JD3B are privileged and shall be withheld from inspection by members of the public and the Claimant, save for the following documents: 1.1.

Regarding costs, the Court determined that the Defendants were entitled to their costs in the case, despite the partial success of the Claimant in obtaining some documents.

In these circumstances, the right order for costs, although the Defendants have largely succeeded in making good the claims for privilege, is Defendants’ costs in the case-i.e., they are entitled to their costs if they win the action.

What are the practical takeaways for DIFC practitioners regarding privilege claims in complex multi-entity litigation?

Practitioners must ensure that claims for privilege are supported by robust, contemporaneous evidence at the time of the initial disclosure. The Court’s criticism of the "very limited evidence" initially provided to the SLR serves as a warning that relying on vague assertions of common interest or privilege will likely lead to adverse procedural outcomes and increased costs. Furthermore, when dealing with associated entities, practitioners should clearly document the legal basis for common interest privilege, ensuring that the shared legal interest is explicitly linked to the specific advice being sought. The case demonstrates that the DIFC Courts will not hesitate to order disclosure if the evidentiary threshold for privilege is not met, regardless of the complexity of the corporate structure involved.

Where can I read the full judgment in Skatteforvaltningen v Elysium Global [2020] DIFC CFI 048?

The full judgment can be accessed via the DIFC Courts website at: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-048-2018-skatteforvaltningen-danish-customs-and-tax-administration-v-1-elysium-global-dubai-limited-2-elysium-properties-lim-2 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-048-2018_20201222.txt.

Cases referred to in this judgment:

Legislation referenced:

• Rules of the DIFC Courts (RDC) - Disclosure and Inspection provisions