Analysis

Oct
2013

How to obtain Confidential Information through the Courts

Introduction

The recent report concerning the Serious Organised Crime Agency's (now the National Crime Agency) list identifying the 102 companies and individuals believed to have hired corrupt private investigators has caused many companies and individuals concern as to whether they have been included on the "blue chip hacking" list. What remains surprising is the fact that much of the information the investigators may have been hired to obtain could legitimately be obtained. 

Norwich Pharmacal Orders

The Courts of England and Wales provide a mechanism for a potential claimant to seek documents and information from an innocent third party that is mixed up in wrongdoing.

The documents or information sought could extend to bank statements or the identity of a proposed defendant. The types of information which could potentially be sought are not limited, but rather depend on the facts of each case. The person or entity from whom the information is sought must be a party involved or mixed up in wrongdoing, whether innocently or not, but is unlikely to be a party to the potential proceedings. This remedy is commonly known as a Norwich Pharmacal Order ("NPO").

There are many situations where those who are potentially mixed up in wrongdoing are prevented from providing the necessary evidence or information without an order from the Court. This could relate, for example, to information which would otherwise be prohibited from disclosure by the Data Protection Act.

NPOs can be used to identify potential defendants, identify the full nature of the wrongdoing, to trace assets in proprietary claims, obtain the source of information in a publication and enable the Claimant's case to be properly pleaded.  It is a little unclear as to whether it could be used to only establish a cause of action, where there is insufficient evidence that there is a claim at all, but as it is a developing area there may be circumstances where this would be possible.

The Norwich Pharmacal jurisdiction was established in the House of Lords' decision in Norwich Pharmacal v Commissioners of Customs & Excise [1974] UKHL 6 and, since then, its scope has been tested and expanded on many occasions. This is still a developing area of law and we expect the Courts to continue exercising its discretion in shaping how and when NPOs may be utilised.

NPOs are invaluable when attempting to trace assets belonging to the potential claimant. Typically, fraudsters are likely to undertake many transactions through multiple bank accounts.

A NPO can compel a third party bank to assist in the tracing of the victim's assets by requiring the bank to provide copies of bank statements, details of transactions, account holder identification documents and other records relating to the fraudsters' accounts.  This sort of information will disclose the destination of payments made from the account, allowing further orders to be sought.

NPOs can also be utilised to require a third party to reveal the source of information. This could relate to the identity of a person suspected of leaking confidential information or indeed the identity of those who make defamatory comments whilst attempting to hide behind their internet profiles, subject to questions of jurisdiction where the information is held abroad. It should be noted that it won't be appropriate to apply for a NPO where the applicant is "fishing" for documents, as the claimant will need to clearly define what documentation or information it is seeking and why. In addition, the claimant will also need to demonstrate that the respondent does in fact hold the documentation and information sought.

How to Apply for a NPO

In the case of Mitsui & Co Ltd v Nexen Petroleum UK Ltd [2005] EWHC 625 (Ch) Mr Justice Lightman summarised the requirements that claimants must satisfy in order to obtain a NPO:

  • A wrong must have been carried out, or arguably carried out, by an ultimate wrongdoer;

  • There must be the need for an order to enable action to be brought against the ultimate wrongdoer; and

  • The person against whom the order is sought must:

Be mixed up in so as to have facilitated the wrongdoing; and 
Be able or likely to be able to provide the information necessary to enable the ultimate wrongdoer to be sued.

The Courts will also need to consider whether making an order is in the interests of justice. The Court will carry out a balancing exercise, taking into consideration issues such as:

  • the likely consequences if the order is refused;

  • whether there are any alternative remedies available;

  • the potential advantage to the claimant versus the potential harm to the respondent; and

  • the nature of compliance with an order, and whether it is likely to be onerous.

The claimant will also need to pay the respondent's reasonable expenses in complying with the Court's order and the costs of the application. In practice, it is unusual for an application to be opposed by the respondent. Accordingly, the claimant will need to demonstrate that it has sufficient funds to pay the respondent should it be required to do so.

As with most other applications to Court, an application for a NPO will need to be supported by evidence. This will usually take the form of a witness statement which will be accompanied with a statement of truth.

It is always recommended that the applicant liaise with the respondent to ascertain as much information as possible concerning the type of information it is holding.  There will obviously be limitations to this in the case of a without notice application, but an attempt should always be made. The applicant may also be able to ascertain how quickly and easily the respondent could produce the necessary information and to identify specifically which legal entity is holding the information required by the applicant. All of this information should be presented to the Court to provide an accurate view of how the practicalities of the order will be satisfied.

NPOs, Bankers Trust Orders and Gagging Orders

Where there is a need for secrecy or urgency, the application can be made without notice to the respondent to the application. Where the Respondent might have an obligation to inform the target, as in the case of a bank and their customer, such an order would be coupled with a gagging order (see below).  The advantage of this approach is that you are able to proceed in secret and obtain the necessary information without fear of tipping off the potential defendant. However, this imposes a duty of "full and frank" disclosure. This duty requires an applicant to disclose all matters that are material to the Court in deciding whether to grant the order and, if so, on what terms.

This includes disclosure of relevant legal principles even if they are not in the applicant's favour.

Bankers Trust Orders ("BTOs") (after the case of Bankers Trust Company v Shapira [1980] 1 W.L.R. 1274) are concerned with obtaining information relating to the location of assets against which the claimant is asserting a proprietary claim, and so are more limited in scope.

A proprietary claim is essentially a claim to recover specific misappropriated assets, as opposed to a damages claim against the wrongdoer. A BTO is potentially available where there is strong evidence of fraud and the claimant seeks disclosure of confidential documents, usually from the defendant's bank, in order to follow the money.

A BTO can be sought to disclose all relevant documents relating to the accounts of suspected fraudsters, including the balance on the accounts, correspondence passing between the bank and the defendants, cheques, debit vouchers, transfer applications and orders and internal memoranda relating to the accounts.

When applying for a NPO or BTO, it is also open to the claimant to apply for a "gagging order", and in cases of fraud it is advisable to do so. A gagging order will specify a period during which the respondent is prevented from informing anyone about the application or about the fact that information is being provided to the claimant. The gagging order is intended to provide the claimant with a short period of time (usually three weeks) to consider the information and documentation and to decide what further steps need to be taken.  Prior to the end of the period stipulated in the gagging order, a decision will need to be made as to whether an extension of time should be sought in respect of the gagging provision either in order to continue reviewing the documentation, or to make further NPO applications, or whether to deploy the information already obtained in an application for a freezing order against the potential defendants.

The Civil Procedure Rules

The Civil Procedure Rules ("CPR") complement the Norwich Pharmacal jurisdiction. When litigation is contemplated against a respondent, it may be possible to obtain disclosure of documentation prior to issuing proceedings. For this reason, CPR rule 31.16 may not be suitable in some circumstances, especially if there is a risk of dissipation and an application for a without notice freezing injunction is envisaged.

This provision is also unlikely to be of assistance when information is sought from a third party not likely to be a party to the subsequent proceedings.

Once the proceedings are under way, CPR rule 31.17 provides for orders for disclosure against a person who is not a party to the proceedings.

The provisions of the CPR should be remembered when considering how best to obtain documentation which may assist with the case against the potential defendants.

Conclusion

It is worth bearing in mind that court applications can be expensive.  However, because of the risks, a premium is often charged for unlawfully obtaining information, so the difference is probably negligible.  The cost benefit analysis comes down hard on the side of making applications to court for the most sensitive information.

Quite apart from the risk of criminal liability and reputational damage for being involved in unlawfully obtaining information, this route can often be counter-productive.  Reports containing information obtained unlawfully lose legal professional privilege.  Draconian and effective orders obtained using unlawfully obtained information can be discharged unless the unlawful activities are disclosed to the court.  In the current environment it can be difficult to be as candid as required.  It is very likely that if unlawful methods are used the applicant will be, at the very least, heavily penalised by having costs orders made against it, whatever the outcome of the proceedings.

We strongly recommend a strategic approach to information gathering.  This would include planning where information might come from and who is best placed to obtain it, whether an investigator, or through the Courts.

http://www.pinsentmasons.com/en/expertise/services/litigation-international-arbitration/fraud--asset-recovery/

http://www.nationalcrimeagency.gov.uk/





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