Under CPR 31.22, a party to whom a document has been disclosed may only use it for the purpose of the proceedings in which it has been disclosed. There are some limited exceptions to this, the most important (for our purposes) being that the court may grant permission for the disclosure to be used for a collateral purpose.
There are obvious policy reasons behind CPR 31.22: disclosure is an invasive process and litigants have a legitimate entitlement to a degree of privacy. This is all the more important where it is not intended that the disclosing party will play a role in the resulting proceedings, as is generally the case under the Norwich Pharmacal jurisdiction. The court will therefore only exercise its discretion to permit the collateral use of disclosed documents where it is in the interests of justice having regard to all the circumstances of the case.
In Tchenguiz v Director of the Serious Fraud Office, the Court of Appeal noted (at paragraph 66) that decisions in respect of the collateral use of documents are often highly fact sensitive. Permission is only granted where there are “special circumstances which constitute a cogent reason for permitting collateral use”.
This reasoning was adopted in IFT SAL Offshore v Barclays Bank plc by Burton J, who considered (at paragraph 9) that the onus was very much on the applicant to present “cogent and persuasive reasons” why the court should exercise its discretion to grant permission.
IFT SAL Offshore v Barclays Bank plc
In this case, the applicant was a victim of a push payment scam (where an innocent party is duped into transferring funds to “mule” bank accounts controlled by fraudsters). The mule accounts were administered by the respondent (although there was no suggestion of complicity on its part).
The applicant obtained Norwich Pharmacal relief, which obliged the respondent to disclose various documents that could help the applicant to identify the fraudsters and trace the funds. On receiving those documents, the applicant took the view that the respondent had missed a number of opportunities to prevent the fraud or mitigate the loss. Further, it subsequently became clear that the applicant stood almost no chance of recovering its loss from the fraudsters.
The applicant wanted to use the disclosure it had obtained under the Norwich Pharmacal order in a claim against the respondent. This would, of course, go against the long-established principle that a party making disclosure under the Norwich Pharmacal jurisdiction will generally not be party to the resulting proceedings (and, indeed, the applicant’s own undertakings to that effect). The applicant issued an application for permission to use the disclosure for the collateral purpose of pursuing a claim against the respondent.
As well as arguing that it could not possibly have known of the respondent’s alleged shortcomings until evidence of them had been disclosed, the applicant relied on the following grounds:
- As Jackson LJ explained in Tchenguiz, there was a strong public interest in facilitating the just resolution of civil litigation. Absent issues such as estoppel or abuse of process, the court should not stand in the way of the fair and just resolution of a potential claim.
- Banks such as the respondent were part of the main line of defence against frauds such as the one perpetrated against the applicant. The potential claim therefore went to the wider issue of the prevention and detection of fraud.
In reply, the respondent’s reasons for opposing the application were also strongly linked to the public interest:
- First, the respondent cited the importance of the confidential relationship between a bank and its customers; albeit it was noted that this was overridden in the event of fraud (BankersTrust Co v Shapira).
- Secondly, it argued that the granting of the application could set an unwelcome precedent, whereby victims of scams who were unable to secure redress from the fraudsters could use disclosure obtained under the Norwich Pharmacal jurisdiction to pursue speculative claims against disclosing banks. Those claims would put the banks to unnecessary expense and expenditure of time.
- Finally, it submitted that the threat of documents being used for the collateral purpose of pursuing a claim against a disclosing bank may disincentivise the bank from undertaking a thorough disclosure exercise. Banks may also be more reluctant to consent to the making of Norwich Pharmacal orders.
Burton J was not persuaded by the respondent’s arguments. He considered that disclosing banks were perfectly entitled to oppose applications for Norwich Pharmacal relief, but that if the relief was granted in spite of this, such opposition would only have served to increase costs.
Burton J also noted that, if the applicant issued a claim against the respondent, it would have to set out its case in full. The court would then determine the claim and, to the extent that it was speculative, the resulting judgment would serve as a deterrent for other litigants in the same position as the applicant. Burton J considered (at paragraph 13(ii)) that this was the proper way to establish a precedent which would “prevent, inhibit or discourage the making in future of such speculative claims”.
In this case, both the applicant’s and respondent’s arguments were rooted in policy concerns. On the one hand, it cannot be in the public interest to allow speculative claims to proceed. On the other, the court has a duty to facilitate the fair and just resolution of proceedings and it is vital that meritorious claims are not unduly stifled.
While the merits of the applicant’s claim against the respondent will no doubt be a matter for another day, it would seem unduly restrictive that key evidence should be shut out from a prospective claim because that claim may prove to be speculative. As Burton J noted, the court has tried-and-tested procedures for disposing of claims which on the evidence are unmeritorious, which serve as a cautionary tale for other litigants.
This article first appeared on the Practical Law Dispute Resolution Blog on 31 December 2020.