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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.
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URL: http://www.bailii.org/ew/cases/EWCA/Civ/1998/1474.html