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Fraud may justify 'collateral use' of documents in multiple sets of civil proceedings, court rules

The "strong public interest" in pursuing claims for fraud, bribery and corruption may justify allowing the use of documents obtained in one set of legal proceedings in a different set of proceedings, the High Court has ruled.03 Nov 2017

The Civil Procedure Rules (CPRs) restrict what is known as the 'collateral use' of documents without the consent of the other party to cases in which the court gives permission, which it will only do in "special circumstances". Parties can therefore come up against a tricky procedural hurdle where they consider that documents disclosed by other parties could be useful in establishing or progressing proceedings against another party.

The application by the Libyan Investment Authority (LIA) in the present case failed for fact-specific reasons. However, the case "shows the correct way for a party to deal with this sort of issue", according to civil fraud and asset recovery expert Michael Reading of Pinsent Masons, the law firm behind Out-Law.com.

"That correct way is to apply to the court, ask for permission to 'use' the documents obtained from other proceedings and set out why a 'special circumstance' arises which means that the CPRs' collateral use restrictions should not apply," he said.

"Parties who have suffered a loss will welcome Mr Justice Teare's further confirmation that 'special circumstances' include there being a 'strong public interest in facilitating the just resolution of civil litigation', especially when fraud is involved," he said.

Reading added that those who had obtained documents disclosed in one set of proceedings which could potentially allow them to bring further proceedings against a third party should speak to a civil fraud and asset recovery specialist.

"We can advise them about what steps they may be able to take to use the relevant documents in a further claim without fear of criticism from other parties or the court," he said.

The LIA had sought to review certain documents disclosed to it during "very substantial and complex" proceedings it had recently settled with Société Générale (SocGen), the French investment bank. Its intention was to see if it could use the documents to establish different proceedings against two individuals, a Mr Giahmi and an individual known only as 'Person B', who it considered may have been involved in corrupt activity through other financial institutions. Although SocGen consented to the further use of the documents, Giahmi and B objected.

The High Court dismissed the application after finding that the LIA's receiver did not have the requisite power to make the application. However, it went on to consider the collateral use argument in case it was wrong about the receiver point.

In the 1987 Crest Homes v Marks case, the House of Lords ruled that a party to civil litigation could be released from the general prohibition on collateral use of documents if there were special circumstances justifying it, and where no injustice would be caused to the other party. The LIA had argued that special circumstances applied in this case, namely the "compelling public interest in investigating … potential fraud, bribery and corruption".

In his judgment, Mr Justice Teare agreed there was a "strong public interest in facilitating the just resolution of civil litigation". While he was concerned that the LIA had not yet begun proceedings against any other financial institutions, and that it was "unable to show a prima facie case of fraud, bribery and corruption" involving Giahmi or B, there had been such a case against SocGen and there were "grounds for connecting" Giahmi and B to the fraudulent transactions.

"These matters may or may not be sufficient if and when the LIA decides to make a claim against another financial institution with regard to the questionable trades and seeks permission to deploy documents in such a claim," the judge said. "But the present application is merely to review the documents in circumstances where there is reason to believe that there may be civil litigation with one or more financial institutions."

"In my judgment the required special circumstances have been shown, notwithstanding the fact there is as yet no civil litigation with any other financial institution. Further, in circumstances where the review is to be conducted by those who have already had access to the documents, there is no reason to consider that such a review will or may cause harm to [Giahmi or B]," he said.