Part 1 of Preliminary Applications Used in Fraud and Corruption Cases

The Civil Procedure Rules in England and Wales stipulate that, except where a Court otherwise gives permission, disclosed documents may be used “only for the purpose of the proceedings in which [they were] disclosed” (CPR 31.22(1)).

Authors: Rachel Cropper-Mawer, George Cornell & Amy Wong

There will be occasions where the use of disclosed documents is desirable for the purposes of a new claim involving the same party or another party, or relating to satellite litigation elsewhere in the world. The Courts here will also apply the collateral purpose rule to disclosure which a party may wish to rely on, that has been obtained in proceedings elsewhere in the world.

When Might You Need to Do This?

Most commonly, this issue arises in corruption cases or where there are multiple cases over a number of years and in different jurisdictions against different parties where the factual issues are common to all cases. In our experience, this can also  happen when, in the course of an investigation, a client realises that documents disclosed by a party in historic or on-going proceedings are relevant to the matter now being investigated or to new proceedings against the disclosing party. Such documents may shed light on where assets have been hidden or on a wider or previously unknown conspiracy or cause of action. Such a document may have previously had little relevance to the other matter. The purpose of the application is also of importance – is it for the Press or for other litigation?

Legal Considerations

Plainly, if the disclosing party is happy to give permission for the document to be used, then this does not need to become a contentious issue, but, often, the disclosing party is not willing to do so as they may also be closely linked with the party against whom the use of the document is intended once permission is granted.

The first problem is the age old “chicken and egg” consideration in that the use of documents for the purpose of obtaining legal advice about those documents is itself a collateral purpose and a breach of the rule. However, a party needs to get advice to be able to apply for permission to use such documents. In practice, the Courts may see this as a modest collateral purpose and may consider that it is in the interest of justice for parties to be able to take legal advice, which overrides this breach of the rule (Tchenguiz v Director of the Serious Fraud Office [2014] EWHC 1315 (Comm)).

The burden of proof will fall on the party who asserts that the prohibition on the collateral use of the disclosed document should be lifted, and this party will need to “demonstrate cogent and persuasive reasons why it should be released” (Marlwood Commercial Inc v Kozeny [2005] 1 WLR 104, para. 30 per Rix LJ).    

In granting the application, the Court must consider whether to do so would be in the public interest of discovering the truth. Full disclosure “operates in favour of releasing relevant documents from hub into satellite proceedings [whilst ensuring] no significant injustice is done to the disclosing party” (Cobra Golf Inc v Rata [1996] FSR 819 p. 831 per Laddie J).This must also be carried out in “the interest of justice which involves considering the interest of the party seeking to use the document and that of the party protected by the CPR 31.22 Order” (SmithKlein, para. 37 per Aldous LJ).

A material consideration will be if the documents are obtainable from an alternative source (CPR r 31.17), although the documents being obtainable from another source is not a factor against permitting collateral use.

Wider Legal Strategy

A careful litigation strategy may be necessary to gain permission to use the disclosed documents and may be used to secure further material in co-ordination with an injunction, search and seize or delivery-up orders, or a preservation order.  

An application for permission may be made ex-parte and in private to prevent destruction of documents if there is a compelling enough reason to do so. The original disclosing party does have a right to address the Court on whether it should allow the documents to be more widely used but may do so at a return date in such circumstances; it may also be possible to get a so called “gagging order” preventing that party from disclosing information about the application to other entities. 

US View

George Cornell of our New York office notes that the U.S. Federal Rules of Civil Procedure and Federal Rules of Evidence contain no similar general bar to using documents disclosed in one case in a subsequent proceeding. However, the Court in the original proceeding may enter a protective order which limits the use of documents and information disclosed in that case, including restricting the use of such documents for purposes of the instant proceeding only.