BAILII [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]

England and Wales Court of Appeal (Civil Division) Decisions


You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> C v S & Ors [1998] EWCA Civ 1474 (03 October 1998)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1998/1474.html
Cite as: [1998] EWCA Civ 1474

[New search] [Printable RTF version] [Help]


IN THE SUPREME COURT OF JUDICATURE CHANI 98/0941/3
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE (CHANCERY DIVISION)
(MR JUSTICE JACOB )

Royal Courts of Justice
Strand
London WC2

Tuesday, 3rd October 1998

B e f o r e:

THE MASTER OF THE ROLLS
LORD JUSTICE SIMON BROWN
LORD JUSTICE MUMMERY

- - - - - -

C
Appellant

- v -

S and Others
Respondents

- - - - - -

TRANSCRIPT OF HANDED-DOWN JUDGMENT

- - - - - -



MISS S PREVEZER (Instructed by Lovell White Durrant, 65 Holborn Viaduct, London EC1A 2DY) appeared on behalf of the 13th Respondent

MR K TALBOT (Instructed by the Treasury Solicitor) appeared as Amicus Curiae


- - - - - -
J U D G M E N T
(As approved by the Court )
- - - - - -
©Crown Copyright
Tuesday, 3 October 1998

JUDGMENT


LORD WOOLF MR :


The problem

The sequence of events giving rise to this judgment are highly unusual. The Plaintiff company (“C”) has been excluded from the majority of the hearings which have been held in camera in relation to its claim for discovery from a bank (“B”). However this judgment is being given in public because it is clear from what has happened in these proceedings that there is a real problem requiring general guidance as to the course which should be followed if the same situation arises again. To protect the identity of the parties they will be known by initials.

The problem arises because of statutory provisions such as sections 52 and 53 Drug Trafficking Act 1994 and sections 29 to 32 Criminal Justice Act 1993 (which amended the Criminal Justice Act 1988 by inserting additional sections into that Act ). These statutory provisions are designed to prevent money laundering. They encourage the disclosure of information which could reveal money laundering. In addition they make it an offence to disclose to another information which is likely to prejudice an investigation or proposed investigation by the police (“tipping off”) into money laundering. The offences of tipping off are punishable with what can be substantial periods of imprisonment.

The background
These proceedings were commenced by C because C alleged that vast sums of money had been misappropriated by the defendants other than B. On 9 June 1998 C obtained from Lightman J. a Mareva injunction against the defendants apart from B. C required information as to what had happened to the money and so it also obtained from Lightman J. a “Norwich Pharmacal” order requiring B to disclose certain banking papers which were in C’s name or in the name of named defendants. The object of the order which was made against B was to assist C to trace its funds and obtain effective relief against the other defendants. No other relief was sought against B. All the orders were obtained ex parte.

Presumably unbeknown to C and the judge who made the orders, B had made a series of money laundering reports to the Economic Crimes Unit of the National Criminal Intelligence Services (“NCIS”). These reports were subject to the tipping off provisions contained in section 93 D of 1988 Act as amended by the 1993 Act. B’s solicitors therefore sought an assurance from the NCIS that there would be no prosecution if it complied with the order with which it had been served. The assurance was not forthcoming The NCIS made it clear that any disclosure by the B of its difficulties could amount to tipping off. In addition the NCIS indicated that any assurance that it gave would not be watertight because the ultimate decision whether to prosecute rests with the prosecuting authorities.

On 19 June 1998, the NCIS made an application under Schedule 1, Police and Criminal Evidence Act 1984 (“PACE”) for an order requiring B to produce similar documents to those which Lightman J. had ordered to be disclosed.

B considered they were in an invidious position. They were at risk of prosecution if they complied with the order of Lightman J or in contempt if they did not do so. They therefore made an ex parte application to the court and on 22 June 1998 Rimer J discharged the order made by Lightman J and made an order that evidence sworn in support of the application, the transcript of the hearing and the judgment should not be open to inspection without the leave of the court. Rimer J being aware that C was in ignorance of what had happened gave C liberty to apply for a further order against B.

The next event in the saga was an application by the NCIS on 25 June 1998 in the Crown Court for an order against B’s solicitors for similar papers to those which were the subject of Lightman J’s order. Because of Rimer J’s earlier order B sought leave ex parte from Rimer J. to comply with the PACE order. Rimer J gave his leave but made a similar requirement that there should be no inspection of the papers to that which he had made previously. At a meeting on the previous day NCIS had made it clear they did not want C to know of NCIS’s involvement.

On 21 July 1998 C’s second application came before Jacob J inter partes in camera. B’s counsel, Miss Susan Prevezer, delivered a skeleton argument to the court explaining B’s predicament but did not deliver a copy to C. C was however informed that B was not prepared to consent to the application. In the unusual circumstances the Judge heard submissions from Miss Prevezer in the absence of C and decided to make no order. C were informed by the Judge of his decision, but were given no reasons for the refusal. The judge did however require undertakings from B which B gave. These were that B should (1) take all steps in its power to resolve the issue and (2) inform C’s solicitors as soon as it was aware there was no risk of B being prosecuted.

The Appeal
C appealed and the appeal was expedited. On 30 July the appeal came before this court. Miss Prevezer took the same sensible course she had previously before Jacob J. In view of the contents of her skeleton this court requested the attendance of the NCIS and arranged to hear from their counsel and Miss Prevezer in camera without C being present. We also heard subsequently from counsel for the NCIS in the absence of Miss Prevezer and her instructing solicitors and client. A transcript was taken of what occurred. We were given a letter dated 28 July 1998 from the solicitors acting for NCIS which clearly set out their position. The terms of that letter so far as relevant are as follows:

“We should point out again that the provisions of Section 93D of the Criminal Justice Act 1988 as amended apply insofar as your client is aware that a constable is acting in connection with an investigation which is being conducted into money laundering and any disclosure of any information in relation to the operation of the account in question and surrounding matters relevant to it would amount to the offence of Tipping-off under Section 93D.

The duty of your client not to disclose information arises by way of statute and it is not directly connected to the Production Order which has now served its purpose. Neither does it arise under the doctrine of Public Interest Immunity although some of the considerations for non-disclosure are akin to that doctrine.

For the avoidance of doubt, our client’s position is that if the Court of Appeal ordered disclosure or limited disclosure of certain elements of the bank account transactions or of any other information, disclosure of any part of such information would in our client’s view constitute the offence of Tipping-off. Indeed communication of this letter or any part of its contents (other than to the Court and then not in the presence of any other party) would in our opinion also constitute Tipping-off.

We may say that we have recommended to our client that urgent consideration should be given to providing some policy statement with the banks and other regulatory bodies and for the issue of a Practice Direction through the Lord Chancellor’s Department. The aim would be to deal with difficult situations such as this in a pre-ordained way and on the basis of some guidelines. Nevertheless no rapid solution is going to be found and we think it best to state our client’s position very clearly in this letter.”

While perfectly courteous, the initial position adopted by counsel for NCIS reflected the contents of the letter. It was that NCIS were not concerned with the difficulties which their investigation and the statutory prohibition on tipping off created for B. It was submitted that NCIS is entitled having warned those involved of its interests to await developments and then leave it to those responsible for determining whether there should be a prosecution to decide whether to prosecute or not. The civil courts should not involve the NCIS as to do so resulted in their limited resources being diverted from the purpose for which they should be used.

While recognising the importance of not causing the NCIS unnecessary expense, this approach is neither sensible or appropriate. First of all it will deter financial institutions, such as B, doing their duty to make reports if their co-operation does not result in a sympathetic and helpful response in relation to their difficulties being adopted by the authorities in return. This would be unfortunate because, as the statement made by Detective Chief Superintendent Barlow makes clear, financial institutions are an important source of valuable information. In addition, if a financial institution has made a disclosure in compliance with an order of the court, after placing all the relevant facts of which it was aware before the court, as happened in this case, it would be, absent exceptional circumstances which it is difficult to envisage, an abuse of process to prosecute the institution for making that disclosure.

The fact that the statutory provisions make it an offence to tip off in the specified circumstances provides considerable but not unqualified protection of investigations into money laundering from the adverse consequences of orders of the court which could interfere with the investigation. The court will not make an order which it would otherwise make if it would result in a person being required to commit a criminal offence. (See Rowell v Pratt [1938] AC 101, Lord Wright at p106). However courts are required to protect the interests of litigants who find themselves in a similar position to that which exists here. They are therefore entitled to satisfy themselves that an offence will be likely to be committed if disclosure were to be made before refusing an order for disclosure. In addition they will want to explore the possibility of reconciling the position of the party to the litigation seeking the assistance of the court and the investigating authority by making a more restricted order for disclosure than would otherwise be made.

In accordance with these considerations we pressed counsel appearing for the NCIS to identify documents which would not impede their investigation. We heard representations from counsel in the absence of the representatives of B and granted the parties time in the hope of resolving the position. However it was not possible to achieve an agreed position. We therefore adjourned into open court and explained to C and its representatives that the court had been seeking to protect its position in its absence and that we were prepared to make an order for disclosure of a restricted schedule of documents, subject to giving the Attorney General an opportunity to intervene in his capacity as the guardian of the public interest, if he wished to do so.

In the event the Attorney decided not to intervene. The Attorney and the NCIS now accept that the disclosure in this case would not interfere with any investigation. There is now no impediment to disclosure. Subject to the question of costs it is therefore possible to allow C’s appeal by consent. However having become aware of the problem this case has revealed it is desirable that we should provide guidance as to the action which should be taken when similar situations arise in the future. Accordingly we restored the appeal for further argument.

The Attorney responded favourably to a request of the court for an amicus and on the adjourned hearing of the appeal we had the benefit of argument not only from Miss Prevezer but also from Mr Philip Sales instructed by the Treasury Solicitor. We are grateful for their arguments. It was not necessary to trouble counsel for C as C is no longer concerned in the outcome of this appeal and, unlike B, is unlikely to be faced with the same problem again.

The relevant statutory provision

The terms of section 93 D of the 1988 Act are, so far as relevant;


(1) A person is guilty of an offence [of tipping off] if :

(a) he knows or suspects that a constable is acting or is proposing to act, in connection with an investigation which is being or is about to be, conducted into money laundering; and

(b) he discloses to any other person information or any other matter which is likely to prejudice that investigation or proposed investigation ...

(4) Nothing in subsections (1) to (3) above makes it an offence for a professional legal advisor to disclose any information or other matter

(a) to, or to a representative of, a client of his in connection with the giving by the advisor of legal advice to the client; or

(b) to any person

(i) in contemplation of, or in connection with, legal proceedings and,
(ii) for the purpose of those proceedings.

(7) In this section “money laundering” means doing any act which constitutes an offence under Section 93A, 93B or 93C or...

(9) A person guilty of an offence under this section shall be liable

(a) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum or to both, or

(b) on conviction on indictment, to imprisonment for a term not exceeding five years or a fine or to both.

It is not necessary to refer to the equivalent provisions in the drug trafficking legislation.


The conflicting principles
This case demonstrates how statutory provisions designed to achieve the highly commendable objective of combating serious crime can interfere with the individual’s rights. It has never been in dispute that C would have been entitled to obtain the initial order requiring B to make disclosure but for the investigation being conducted by the NCIS. That investigation created a conflict between the interests of the State in combating crime on behalf of the public and the entitlement of a private body to obtain redress from the courts. It was also in conflict with the principles to which the courts attach the greatest importance; namely that justice should be administered in public, that a party should know the case which is being advanced by another party and should have the opportunity to reply to it. Finally it produced a conflict with the principle that a party who comes before the courts is entitled to know the reasons for the courts’ decisions.

Without seeking to diminish the importance of these principles and the interests of the individual that they are designed to protect it has to be accepted that their importance can not always be paramount. There are situations where the interests of the individual have to give way to the interests of the public. However, while giving due weight to any statutory guidance, unless Parliament has provided otherwise it is for the courts to decide how conflicts between these interests are to be reconciled. In performing this task the courts are entitled to receive the assistance of those involved. In particular, in cases involving investigations into money laundering, this includes the co-operation of the NCIS or other agency conducting the investigation.

All the situations in which the problem can arise cannot be anticipated and the guidance has to be adapted to the circumstances of the particular case. The authorities which can be involved in relevant investigations may differ but in the guidance we refer to the NCIS as a convenient representative for all the authorities. Subject to this, it is anticipated that if the approach which we recommend is followed this should provide protection for the institution and the party seeking disclosure without prejudicing the investigations of the NCIS. The guidance is that ;

1. As soon as a financial institution is aware that a party to legal proceedings intends to apply for or has obtained an order for discovery which might involve the institution having to give disclosure of information which could prejudice an investigation it should inform NCIS of the position and the material which it is required to disclose.

2. The NCIS will then have the opportunity to identify the material which it does not wish to be disclosed and indicate any preference which it has as to how an application or order should be handled. In doing this it should be born in mind that usually it will not be necessary to disclose any document or part of a document which refers to the fact of the investigation since this will not be relevant to the issues with which the applicant for the order is concerned. A case such as the present is likely to cause particular difficulty because the NCIS did not wish the applicant, C, to know that there was an investigation in progress. However there should be cases where the NCIS is not concerned about the applicant knowing about the investigation. Where this is the position it may be sufficient to make the compliance with the order subject to an appropriate undertaking to keep the relevant information confidential.

3. If NCIS has no objection to partial disclosure the applicant may be satisfied by partial disclosure if it is explained that the alternative is for the matter to be considered by the court. Whether an explanation for the partial disclosure can be given will depend on the attitude of NCIS.

4. If the restricted disclosure is unacceptable to the applicant then the directions of the court will have to be sought. The extent to which the applicant can be informed of the reason for the issue being referred to the court will depend on the circumstances. The circumstances will also influence the way in which the matter is brought before the court. The application can be to set aside the order if it was made ex parte. Alternatively there can be an application for directions. If the order has not been made the problem can be brought to the attention of the court without the need for a separate application. The court will have to be warned in advance of the difficulties. Where a high degree of confidentiality is required a sealed letter can be written to the judge in charge of the relevant court setting out the circumstances and that judge can then put in place the necessary arrangements. In this case we found the provision of a skeleton argument to the court alone setting out the background facts and issues and identifying the problem a very convenient way of ensuring that the court is sufficiently informed of the situation.

5. On the issue being brought before the court the degree to which the applicant can be involved and the extent that it is possible for the issues to be resolved in open court again will depend on the circumstances, but the general approach must be to comply with the ordinary principles to the extent that this is possible. If necessary the stratagems which were deployed in this case will have to be used. Where these sort of arrangements are necessary there should always be a transcript prepared and the institution should be required to provide a copy to the applicant when it is informed by the NCIS that there is no longer any requirement for secrecy.

6. In deciding what order should be made the court will have to decide what evidence it requires. In an obvious case a letter from NCIS will suffice. In other cases their attendance will be required. If the court considers this is justified to achieve justice, the NCIS can be made a party.

7. It will be for the NCIS (or other investigating authority) to persuade the court that, were disclosure to be made, there would be a real likelihood of the investigation being prejudiced. If the NCIS did not cooperate with the institution (and with any requirements of the court) in advancing such a case, the court could properly draw the inference that no such prejudice would be likely to occur and could accordingly make the disclosure order sought without offending the principle in Rowell v Pratt and without putting the institution at risk of prosecution.

8. Especially when the applicant can not be heard it is important that the court recognises its responsibility to protect the applicant’s interests. The court must have material on which to act if it is to deprive an applicant of his normal rights. The one criticism which can be made in this case of what occurred in the courts below is that they did not have that material. The court should bear in mind that a partial order may be better than no order. It should also consider the desirability of adjourning the issue in whole or in part since the expiry of a relatively short period of time may remove any risk of the investigation being prejudiced. The NCIS will no doubt wish to co-operate with the courts in achieving speedy progress as this will be the most productive way of avoiding prejudicing an investigation and protecting the interests of litigants.

Some other general points arose in the course of argument. An order such as that which was made in this case is not subject to any implied limitation excluding the obligation to make disclosure because to do so would involve committing a criminal offence. Unless the applicant agrees to the order not being complied with in whole or part, it will be necessary for the court to be informed and directions obtained if it considered that the order cannot be obeyed. As a financial institution will normally not be subject to a forthwith order there should be time to make an application but if necessary an ex parte application for a stay will have to be made.

B points out that the order is sometimes coupled with an order not to disclose the fact that an order has been made. Such an order should not be regarded as preventing the financial institution from approaching NCIS; seeking the co-operation of the NCIS is a step which is necessary in complying with the requirement to give disclosure. The approach to the NCIS is to be regarded as being impliedly permitted despite the non disclosure requirement.

The effect of section 93 D (4)(b) is not clear as Rimer J and Miss Prevezer have pointed out. It would not be appropriate to express a final view as to its interpretation in a case where its interpretation is not directly in issue and no satisfactory explanation for its presence was provided by counsel in the course of argument. In so far as it provides protection this appears to be limited to the legal adviser and not to extend to the client. So its provisions may not give any protection to the client even if he channels the information via the solicitor. Its provisions can not be safely relied on as providing protection for B in the present type of situation.

Where a financial institution is aware of a report to the NCIS, it would be wise for it to inform the NCIS before complying with an order for discovery which covers the same subject matter. Where discovery is restricted at the request of the NCIS that body should inform the institution as soon as there is no risk of the investigation being prejudiced. The suggestion that NCIS is not in a position to give any assurance that there will be no prosecution on the basis that it does not make decisions about prosecutions is theoretical rather than realistic. If it gives clearance it is unthinkable there would be a prosecution and thus its clearance should satisfy the recipient of the clearance.

The application in the present case for the Norwich Pharmacal order was made ex parte at the same time as the ex parte applications for a Mareva injunctions against the other defendants. Miss Prevezer submits that this was not justified. She contends that in the case of B it should have been made on notice. There was no need for B to be kept in ignorance of the application. The only justification for not giving B notice is urgency and saving the costs of a separate application. If time permits it would seem sensible to give the institution at least informal notice of the application.

In the course of argument the problems which could arise where an Anton Pillar order is made were canvassed. Where the criminal offence might be committed by the person subject to such an order this does create additional problems. It seems the best that could be done would be to gain time for an application to the court by handing any relevant documents to the supervising solicitor in a sealed envelope.

The appeal should be allowed.


BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1998/1474.html