Part 2 of Preliminary Applications Used in Fraud and Corruption Cases
Market Insight 14 July 2022 14 July 2022
UK & Europe
Energy & Natural Resources
Evidence plays a critical role in any proceedings, in providing potential clarification on the issues and in supporting the parties’ separate arguments. Critical for any party wishing to rely on such evidence is the need to ensure that this material - whether it consists of paper documents, digital data, or any other type of information - is carefully preserved and protected from third-party interference. To this end, evidence preservation orders provide a useful measure.
When Might You Need to Apply for an Evidence Preservation Order?
Where there is:
- cause to believe that certain individuals have documents or data in their possession which are incriminating and/or material to a dispute; and
- a real concern that such documents and data may be destroyed or concealed.
The data in question may be stored on a computer, phone, or other electronic devices.
The jurisdiction to bring a preservation application falls under two gateways of the Civil Procedure Rules (“CPR”) 25.1(1), as follows:
- CPR r 25.1(1)(c)(i) sets out grounds for the Court to make an order for the detention, custody, or preservation of relevant property, which is defined as property subject to a claim or as to which any question may arise in a claim; and
- CPR r 25.1(1)(a) sets out the more general power of the Court to grant an interim injunction.
This application will usually be made without notice to the respondent where there is a real risk of documents being destroyed. The court has discretion on whether to grant a preservation order, however, as with any other injunction, the applicant must, first, satisfy the court that there is a “serious issue to be tried” and, second, that without the injunction there would be a real risk that relevant evidence might be lost.
Once the court is satisfied that there is a serious issue to be tried and a real risk that evidence will be lost, it will next consider if damages (i.e., pecuniary compensation) can satisfy the applicant instead of an order. The court will only grant a preservation order if it is demonstrated that the danger the applicant is seeking to avoid cannot be repaired by any monetary value, or if it would be too difficult to assess. The danger may also be non-pecuniary, for example loss of reputation or goodwill.
The court must be reassured that the respondents to any preservation order will not be prejudiced or suffer any injustice. To satisfy the court that a respondent would not suffer any illegitimate prejudice as a result of the preservation order, it is common for the applicant to give a cross undertaking to the court to account for any potential loss suffered.
If the application is made without notice, the applicant is subject to a duty to make full and frank disclosure by revealing any and all facts that are relevant to the case. Such disclosure must include facts that are adverse to the applicant’s case, and this is usually done in a witness statement.
The draft order for preservation should include a penal notice in bold on the front page. The purpose of the penal notice is to warn the respondent that they may be held in contempt of court and punished by a fine or imprisonment if the order is not complied with (CPR 81.2).
Wider Legal Strategy
An application for preservation may be made ex-parte and in private so that a respondent is not tipped-off prior to the order being granted.
An alternative course of action would be to apply for an imaging application to create a digital copy of all data held on an electronic device, or a search order whereby the respondent is obliged to allow their home to be searched and for certain items to be removed. Typically, a longer court hearing (usually half a day) is required for the court to consider an imaging application or search order, and it may, therefore, be quicker and more effective to obtain a preservation order if:
- the court has limited availability for a longer hearing, and
- the risk of destruction of data and documents is high.
A preservation order is also less invasive since it requires the respondent to comply with document preservation duties, which it would already be subject to under the CPR if a claim was already afoot, or once a proposed claim was issued. The only additional feature of a preservation order is that there is a Penal Notice attached to it.
If the hearing has been held without notice, the applicant must serve the preservation order, application documents, and a full note of the hearing on the respondent as soon as possible. Unless the court directs otherwise, these documents must be personally served on the respondent (CPR 81.9(3)). If more than one party has to be served and there is a risk of tipping off the other parties, then it is sensible to try to serve them all simultaneously.