BDW Trading Ltd v Fitzpatrick & Anor [2015] EWHC 3490 (Ch)

Case No HC-2015-004356[2015] EWHC 3490 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue 7 Rolls Building, New Fetter LaneDate 3 December 2015
London EC4A 1NL
Before
His Honour Judge Behrens sitting as a Judge of the High Court
Between
BDW TRADING LIMITEDApplicant(1) MICHAEL NEILL FITZPATRICKRespondents(2) TOP CONSTRUCTION SERVICES LIMITEDRespondent
Daniel Toledano QC and Nehali Shah (instructed by Slaughter & May) for ApplicantCharles Béar QC and Simon Paul (instructed by Stokoe Partnership) for RespondentsHearing Hearing date: 19 November 2015
JudgmentJudge Behrens :
[1]Introduction This is an application by the Applicant (“BDW”) to continue a freezing injunction made by Newey J on 19 October 2015. In addition to the freezing order BDW seeks disclosure orders in order to ascertain the extent of Mr Fitzpatrick’s alleged wrongdoing. It also seeks to interrogate Mr Fitzpatrick in order to enable it to trace the proceeds of the alleged wrongdoing.[2]The application was argued on 19 November 2015 for a full day by leading Counsel on both sides. During the course of the hearing I decided to continue the freezing order against the Respondents. However I reserved judgment on all other matters. In addition to the matters already mentioned there were arguments as to the extent to which TCS should be entitled to dispose of assets “in the ordinary course of business” and as to the extent to which BDW should be entitled to use the information supplied by Mr Fitzpatrick under the compulsion of the court orders.[3]Before dealing with the reserved matters I must acknowledge with thanks the considerable assistance I have had from the full and clear written submissions and oral argument on the points that have been argued which have been of the highest quality. In this judgment I shall refer only to Mr Toledano QC and Mr Béar QC by name. This is for convenience only and is not intended as a discourtesy to either Ms Shah or Mr Paul each of whom has, I am sure, contributed to the submissions that have been made on behalf of their respective clients.[4]This is the judgment on those reserved matters.[2]The underlying facts[5]BDW is the principal operating company in the Barratt Group of companies, which operates a national business involved in the purchase and development of land and the construction and sale of homes. It is the largest house builder in the UK. Mr Fitzpatrick has been employed by BDW since 2003. He is currently employed as a Procurement Manager in the Stratford division of the Barratt Group.[6]Top Construction Services Limited (“TCS”) is a company, incorporated on 24 September 2008, of which Mr Fitzpatrick is and has at all material times been the sole director and shareholder.[7]BDW alleges that Mr Fitzpatrick and TCS have received and/or participated in the procurement of the payment of secret profits, bribes or commissions from sub-contractors or potential sub-contractors of BDW (or connected parties) for favours (namely assistance with the procurement and/or maintenance of business with BDW), and in misappropriating and misusing BDW’s confidential information.[8]The extent of the alleged secret profits is unknown but the evidence currently available suggests that it is substantial. In paragraphs 27 and 28 of his witness statement Mr Dobie identified sums totalling approximately £1 million being paid into the Respondents’ bank accounts in the period between September 2013 and August 2015 from companies that provide construction materials and related services to Barratt London.[9]On 19 October 2015 an application was made to Newey J without notice to the Respondents for a freezing order and other relief. The application was supported by a detailed affidavit from Mr Dobie which extended to 47 pages and numerous exhibits.[10]It is not necessary to go into details but a summary of the overview is contained in paragraph 13: As I will describe in further detail below, I have identified information which appears to show that: i. In recent years, Mr Fitzpatrick’s spending is well beyond what could reasonably be supported by his salary from the Applicant. He has purchased assets, including expensive cars and a house, worth a significant sum of money. He has also provided significant sums of money – on the basis of what is presently known, in excess of £450,000 – to his parents and to his wife. ii. Much of this money appears to have passed through TCS. However, the business activities of that company are not clear, it has no public profile, and it is not clear how it could generate significant turnover and profits when Mr Fitzpatrick (as its sole director) is working full time for the Applicant. iii. Some of the funds received by TCS were paid to it by a company, M Price Limited (“M Price”), which has tendered for and been awarded substantial contracts by the Applicant. Mr Fitzpatrick appears to have been involved in the tendering processes in which that company participated. So far as I am aware, Mr Fitzpatrick has not disclosed to the Applicant the existence of TCS or the fact that he has, through TCS, established a financial relationship with some of the Applicant’s subcontractors. It also appears that Mr Fitzpatrick (directly or through TCS) may have sourced further significant sums (several hundreds of thousands of pounds) from subcontractors in order to finance the purchase and renovation of his home. iv. Mr Fitzpatrick appears to be taking inappropriate steps to assist certain subcontractors to obtain contracts and maintain business with the Applicant, including by providing or offering to provide them with competing bids from other tenderers. Much of this activity appears to take place using a personal email account, fitzie69@hotmail.com (The “Hotmail Account”). The only reason that the Applicant has become aware of the Hotmail Account is because Mr Fitzpatrick forwards emails from that account to his work email account from time to time.[11]Newey J duly made a freezing injunction against the Respondents. It is not necessary to comment on the terms of the freezing order save to note: 1. that under paragraph 15(2) there was the exception which permitted TCS to dispose of its assets in the ordinary course of business in slightly modified form: This order does not prevent TCS from dealing with or disposing of any of their assets in the ordinary and proper course of business, but before doing so TCS must tell [BDW]’s legal representatives. 2. that BDW undertook (in Undertaking 8): [BDW] will not without the permission of the court use any information obtained as a result of this order for the purpose of any civil or criminal proceedings against the Respondents … other than this claim.[12]Newey J also made a number of other orders which included: 1. An order in standard form requiring the Respondents to provide details of all their assets exceeding £1,000. 2. An order (under paragraph 9(2)) requiring the Respondents to provide an affidavit setting out:
“The nature, extent, value, what has become of and who now holds all and any assets, including profits from assets, which are derived from all or any monies received by either of the Respondents during the course of the First Respondent’s employment with the Claimant from (a) sub-contractors or tenderers for business of or providers of goods and services to the Applicant (the “Subcontractors”) or (b) officers or employees or companies connected with the Subcontractors (the “Connected Entities”). The Subcontractors and the Connected Entities include [a non-exhaustive list then follows]”
[3]An order (under paragraph 10) requiring the Respondents to provide copies of bank statements for the 12 month period prior to the date of the order.[13]Peter Smith J approved a consent order dated 29 October 2015 in which a number of variations to the order were agreed: 1. BDW consented to extend the time for compliance with paragraph 9(2) until 5 days after the Return Date hearing. 2. BDW also consented to restrictions on the use of any information disclosed pursuant to the Newey Order such that BDW would not (prior to the Return Date)(i) share any such information outside a “Confidentiality Club” (consisting of Barratt Development PLC’s (“BD PLC’s”) Board, BD PLC’s Group General Counsel, BD PLC’s Chief Internal Auditor (“Mr Dobie”), and BDW’s solicitors/counsel;(ii) share any information with any officer, employee or manager of Barratt; and(iii) use any information in any disciplinary proceedings/investigation against Mr Fitzpatrick.[14]On 27 October 2015 Mr Fitzpatrick filed an affidavit in compliance with paragraphs 9(1) and 10 of Newey J’s order. In paragraphs 4 to 14 he disclosed his assets as: 1. an interest in a property jointly owned with his wife with an equity of approximately £500,000; 2. an interest in 3 prestige cars with a combined equity estimated at £130,000; 3. a bank account with a balance of approximately £25,000. A joint account with his wife with a balance of approximately £3,500; and 4. Jewellery and a watch valued at approximately £6,000.[15]It is not necessary to refer to the details of his personal circumstances which are contained in the affidavit.[16]In paragraphs 16 – 19 of the affidavit Mr Fitzpatrick set out TCS’s assets. The assets consisted of two bank accounts with balances totalling approximately £70,000. The only debtors were Mr Fitzpatrick’s parents in respect of a loan of £325,500 which was not repayable until after the death of the survivor of them. The only liabilities disclosed were a liability for VAT in the sum of £12,000 and an unspecified sum in relation to corporation tax.[17]On the same day the Respondents provided BDW with bank statements in compliance with Newey J’s order. I have already summarised Mr Dobie’s analysis of the payments received by Mr Fitzpatrick.[18]On 3 November 2015 Mr Fitzpatrick served a witness statement in opposition to this application. In paragraphs 8 and 9 he dealt with the allegations made by Mr Dobie in the following way: 8. I deny having received payments from sub-contractors of the Claimant, or sub­ contractors' officers or employees, in return for influencing the award of tenders. 9. I am advised that in view of the seriousness and potential consequences of the allegations made against me I should not further set out my and TCS's defence at present. I note that the Claimant has not particularised its case nor has it been willing to give me access to the information in its possession, beyond what was in or exhibited to Mr Dobie's affidavit.[19]On 10 November 2015 Mr Dobie filed a witness statement in reply. In paragraphs 16 – 20 he dealt with Mr Fitzpatrick’s role at Barratt and suggested that it was clear that Mr Fitzpatrick did indeed exercise significant influence over BDW’s tendering processes at the London Stratford Division.[3]Continuation of the freezing injunctions[20]Mr Fitzpatrick sought to oppose the continuation of the freezing injunctions on three main grounds. First, he contended that his assets and those of TCS were not substantial and that there was no proportionate basis for continuing the injunction over those assets. Second, he submitted that there was no risk of dissipation of the assets. Finally he submitted that it was not just and convenient to continue the order.[21]As already noted, for the reasons given in the ex tempore judgment on 19 November 2015, I rejected those arguments. There was no dispute that BDW had a good arguable case. There was in my view more than enough detail in Mr Dobie’s affidavit to call for a reply from Mr Fitzpatrick. Furthermore the payments disclosed in the bank statements made matters worse. There was, in my view, clear evidence of past dissipation demonstrated by the loans to his parents, the gifts to his wife, the withdrawals of cash and the extravagant lifestyle. The alleged dishonesty was sufficiently proximate to give rise to a risk of dissipation. I also thought that there was force in Cooke J’s observations in paragraph 29 of the judgment in Antonio Gramsci Shipping Corporation v Recoletos Ltd [2011] EWHC 2242 (QB) to which I was referred. I thought that it was just and convenient to continue the order.[4]Bank Statements[22]In the original application before Newey J BDW had sought (under paragraph 10 of the draft order) bank statements for the 12 months prior to the date of the order and (under paragraph 11) bank statements for the period from 30 September 2009 to the date ending 12 months prior to the date of the order. Different periods were given for compliance with the two orders.[23]Newey J granted the order under paragraph 10 but refused the order under paragraph 11 commenting that it could be asked for on the return date Transcript p 13 – lines 40 – 42. . Unsurprisingly the application for a continuation of the injunction repeated the request for the bank statements back to September 2009.[24]When the application was before Newey J no proceedings had been issued thus the application for disclosure was, in effect, an application for pre-action disclosure under CPR 31.16. Proceedings have, of course, now been issued and thus the application is for specific disclosure under CPR 31.12. The notes to CPR 31.12 At 31.12.2 p 1006 in the 2015 White Book include: The rationale for the discretion to order specific disclosure is that the overriding objective obliges the parties to give access to those documents which will assist the other’s case: Commissioners of Inland Revenue v Exeter City AFC Ltd [2004] B.C.C. 519. The court has a discretion as to whether it makes the order. It may make an order at any time, regardless of whether standard disclosure has already occurred; and it may make orders for specific disclosure against a claimant before the service of the defence where it would assist the defendant to plead a full defence rather than an initial bare denial: Dayman v Canyon Holdings Ltd January 11, 2006, unrep., Ch.D, H.H. Judge Mackie Q.C[25]The reasons that BDW requires the documents are summarised in paragraph 32 of Mr Toledano QC’s skeleton argument. They include the need: to understand the full scope of the funds received from third parties by the Respondents in furtherance of the fraud perpetrated on BDW, to identify whether there are any other subcontractors who have been paying sums to the Respondents (in order to manage the position going forward, to ensure compliance with its anti-bribery policies and the law and to manage its commercial relationships), to identify whether there are any other employees involved in the wrongdoing (as Mr Fitzpatrick may have shared amounts received from subcontractors with other employees) and take appropriate action, and to try to find out where any funds already dissipated by the Respondents have gone, so that, if appropriate, action can be brought to recover them.[26]In his oral submissions Mr Toledano QC pointed out that the statements already disclosed had revealed over £1 million pounds in payments from subcontractors; that the earlier statements were plainly relevant to the issues and were likely to reveal further payments from subcontractors. BDW had no way of knowing what payments had been made. He submitted that it was important that disclosure was made sooner rather than later as any delay would reduce the chance of recovering assets.[27]In his skeleton argument Mr Béar QC combined his submissions in relation to the disclosure order and the paragraph 9(2) order. In paragraph 38 he submitted that the purpose of the application was to: conduct a “fishing exercise” to see whether its claims against Ds can be expanded, and whether it has any claims against other employees or sub-contractors.[28]In paragraph 39 he submitted that the Court should not permit BDW to engage in such a fishing exercise rather than plead its claim and conduct disclosure in the ordinary way.[29]In his oral submissions it was plain that Mr Béar QC’s main opposition related to the paragraph 9(2) order. He accepted that there was no difficulty in providing the bank statements within 3 days as they were readily available. He did not dispute that the bank statements would be disclosable at some time.[30]I unhesitatingly prefer the submissions of Mr Toledano QC. I do not regard the request for the bank statements as a “fishing exercise”. The evidence from Mr Dobie provides a strong prima facie case that Mr Fitzpatrick and TCS have participated in a dishonest scheme to receive secret profits from BDW’s subcontractors. Mr Fitzpatrick has chosen not to answer the allegations in any way other than a bare denial. Whilst it is true that there has been no detailed Particulars of Claim, the brief details of the claim are set out in the Claim Form and substantial circumstantial evidence is provided in Mr Dobie’s evidence. None of this has been answered. Furthermore, the bank statements already disclosed have revealed unexplained payments of over £1 million from BDW’s subcontractors.[31]In my view the bank statements will plainly be relevant and thus disclosable and thus the only question is whether to order disclosure at this early stage or leave the matter until after the close of pleadings in the ordinary way.[32]I agree with Mr Toledano QC that it is appropriate to order immediate disclosure of the bank statements. I agree that BDW has no realistic other practical way of discovering the full extent of the scheme. I also agree that the sooner the order is made the more likely it is that BDW will be able to take appropriate action against other persons involved.[33]Accordingly there will be an order for disclosure of the bank statements from 30 September 2009 until 19 October 2014 (12 months before the date of the order of Newey J).[5]The Paragraph 9(2) Order.[34]This was the most controversial of the applications made by BDW. There was considerable dispute between Mr Toledano QC and Mr Béar QC both as to the relevant principles and as to the application of those principles to the facts of this case.[35]It will be recalled that Newey J made the order under paragraph 9(2). However by agreement between the parties the time for compliance with the order was extended so as to enable Mr Fitzpatrick and TCS to challenge BDW’s right to the order.[36]For convenience I repeat the terms of the order made by Newey J. The Respondents were required to provide an affidavit setting out:
“The nature, extent, value, what has become of and who now holds all and any assets, including profits from assets, which are derived from all or any monies received by either of the Respondents during the course of the First Respondent’s employment with the Claimant from (a) sub-contractors or tenderers for business of or providers of goods and services to the Applicant (the “Subcontractors”) or (b) officers or employees or companies connected with the Subcontractors (the “Connected Entities”). The Subcontractors and the Connected Entities include [a non-exhaustive list then follows]”
[37]During the course of his submissions Mr Toledano QC, at my suggestion and with the consent of BDW, modified his application so that it only applied to sums received in excess of £5,000 from a starting date of 30 September 2009.[38]Before discussing the rival submissions it is right to point out that, in the light of the decision of the Supreme Court in FHR Ventures v Cedar Capital [2015] AC 250, both Counsel accepted that where an agent received a bribe or secret commission in breach of his fiduciary duty to his principal the bribe or commission was held by him on trust for his principal who accordingly had a proprietary remedy in respect of the bribe or commission. Mr Toledano QC’s submissions[39]Mr Toledano QC relied on three separate grounds to justify the modified order.[40]First, he submitted that the order can be made as ancillary to the freezing order. He has referred me to the decision of Morison J in International Fund for Agricultural Development v Jazayeri [unreported – 8th March 2001] and the comments on that decision in Commercial Injunctions by Steven Gee QC 5th Edition (“Gee”) at paragraphs 22.11 – 22.13. He pointed out that the order sought is modelled on the order which Morison J actually made.[41]Second, he submitted that the order can be made under the Court’s equitable jurisdiction to protect trust money. He referred to a number of authorities in support of this ground including Mediterranea Raffineria Sciliana Petroli SpA v Mabanaft GmbH[1978] CA transcript 816 and paragraphs 22.053 – 22.056 of Gee.[42]Third, he submitted that the order could be justified under the jurisdiction in Norwich Pharmacal Co v Customs and Excise Commissioners[1974] AC 133 (“Norwich jurisdiction”). He relied on a number of authorities as examples of cases where Norwich orders have been made and submitted that this case fell within the principle. He also referred me to Gee at paragraphs 22.048 – 22.050. Mr Béar QC’s submissions[43]Mr Béar QC sought to answer these submissions in a number of ways:[44]He invited me not to follow the decision of Morison J. He referred me to the decision of the Court of Appeal in Den Norske Bank v Antonatos [1999] QB 271 which he submitted was inconsistent with the decision in Jazayeri. In so far as Morrison J had purported to distinguish his order from the order in Den Norske Bank he submitted that his decision was wrong.[45]Mr Béar QC did not accept that the equitable jurisdiction to protect trust money was different from the Norwich jurisdiction. He submitted that the order could only be justified under the Norwich jurisdiction. He referred me to a number of authorities Mitsui v Nexen Petroleum [2005] EWHC 625 (Ch) paragraphs 19, 21, 27; Nikitin v Richards Butler [2007] EWHC 173 (QB) paragraphs 20, 21 and 24. Arab Monetary Fund v Hashim (No 5) [1992] 2 A E R 911 at p 916 c-e, 918 g – j and 919 c. which he said demonstrated 6 principles which I noted as: 1. The Norwich jurisdiction is not only discretionary but also exceptional. 2. It is not a substitute for ordinary disclosure, and cannot be used for that purpose. 3. It is aimed at specific information of practical value which evidence establishes is likely to enable the Claimant: 1) to identify a key wrongdoer, so that he can be sued or other redress obtained; 2) to track down specific assets which the claimant can claim are its; or 3) to bring a vital step knowledge of which step is required to establish and plead a claim against a third party . 4. There must be a real and demonstrated prospect that it will actually have the effect set out in (3). 5. There must be no alternative method open to the Claimant to the use of the discretion under the Norwich jurisdiction. 6. The order sought must not contravene the decision in Den Norske Bank – it cannot be used to build a case against the Defendant.[46]Mr Béar QC submitted that this was not a case where the exceptional Norwich jurisdiction should be invoked. He referred me to paragraph 131 of Mr Dobie’s affidavit and suggested that none of the four reasons justified the use of the jurisdiction. He submitted that it did not reveal “a vital step” necessary to help BDW complete its claim. Whilst it might help identify subcontractors there was no indication that BDW intended to sue those subcontractors. There was no reason to suspect that others were involved. This was not a reason to invoke the jurisdiction. He pointed out that BDW had not disclosed the full extent of its investigations. It could pursue other subcontractors. Thus BDW had not established that there was a need for the exercise of such an exceptional jurisdiction. He submitted that the proposed order was onerous even in its modified form. Discussion The authorities[47]I do not intend to lengthen this judgment with an extensive discussion of all the passages from the judgments to which I was referred. However it is plainly necessary for there to be some reference to some of them.[48]I do not accept that the equitable jurisdiction and the Norwich jurisdiction are part and parcel of the same jurisdiction. The point was discussed by Neuberger J in Murphy v Murphy [1999] 1 WLR 282 at 289G – 290B. He held that there were in reality 2 jurisdictions, albeit in many cases they will overlap.[49]The equitable jurisdiction is discussed by Neuberger J at 288F – 289F: A somewhat different jurisdiction was considered and invoked by Robert Goff J in A v C [1980] 2 All ER 347, [1981] QB 956. In that case, the plaintiff had obtained a Mareva injunction pursuant to an ex parte application, and the court was considering a continuation of that injunction. The injunction, which the court granted, was based on the plaintiff's contention, which the judge accepted was supported by 'prima facie evidence that a fraud had been committed', that he had been defrauded of substantial sums (see [1980] 2 All ER 347 at 349, [1981] QB 956 at 957). The judge was considering an application which required a bank, which was, on the face of it, wholly innocent of any fraud, but through whose accounts the money may have passed, to disclose the sums presently standing in the names of the other defendants (who may well have been implicated in the fraud) and 'all the facts within [the bank's] knowledge as to the present whereabouts' of the sum of which the plaintiff claimed to have been defrauded. Robert Goff J held that he had jurisdiction to make such an order ([see 1980] 2 All ER 347 at 349, [1981] QB 956 at 958). He said:
'I take first the proprietary claim. In such cases, there is good authority that the court may make orders with the purpose of ascertaining the whereabouts of the missing trust fund.' (See [1980] 2 All ER 347 at 350, [1981] QB 956 at 958.) He found assistance from an unreported decision of the Court of Appeal, Mediterrania Raffineria Siciliana Petroli SpA v Mabanaft GmbH [1978] CA Transcript 816, where Mocatta J had made what Robert Goff J called 'a sweeping order requiring directors and an employee of the defendant company to make full disclosure of certain specified facts' (see [1980] 2 All ER 347 at 350, [1981] QB 956 at 959). He then quoted and relied on what Templeman LJ said about that order on appeal, namely that this was-- 'a strong order but the plaintiff's case is that there is a trust fund of $3,500,000. This has disappeared; and the gentlemen against whom orders are sought may be able to give information as to where it is and who is in charge of it. A court of equity has never hesitated to use the strongest powers to protect and preserve a trust fund in interlocutory proceedings on the basis that, if the trust fund disappears by the time the action comes to trial, equity will have been invoked in vain. That is why orders of this sort were made long before the recent orders for discovery, and they are at the heart of the Chancery Division's concern, and it is the concern of any court of equity, to see that the stable door is locked before the horse has gone.' (See [1980] 2 All ER 347 at 350, [1981] QB 956 at 959.) He concluded ([1980] 2 All ER 347 at 351, [1981] QB 956 at 959): '... in an action in which the plaintiff seeks to trace property which in equity belongs to him, the court not only has jurisdiction to grant an injunction restraining the disposal of that property; it may, in addition ... make orders to ascertain the whereabouts of that property.'
A similar approach was adopted by the Court of Appeal on not dissimilar facts in Bankers Trusts Co v Shapira [1980] 3 All ER 353 at 357, [1980] 1 WLR 1274. There, Lord Denning MR, having approved A v C and quoted from the Mediterranea Raffineria case, said:
'In order to enable justice to be done, in order to enable these funds to be traced, it is a very important part of the court's armoury to be able to order discovery. The powers in this regard, and the extent to which they have gone, were exemplified in Norwich Pharmacal ...' (See [1980] 3 All ER 353 at 357, [1980] 1 WLR 1274 at 1281.) He then went on to say: '
This new jurisdiction must, of course, be carefully exercised. It is a strong thing to order a bank to disclose the state of its customer's account and the documents and correspondence relating to it. It should only be done when there is a good ground for thinking the money in the bank is the plaintiff's money, as, for instance when the customer has got the money by fraud, or other wrongdoing, and paid it into his account at the bank.' (See [1980] 3 All ER 353 at 357- 358, [1980] 1 WLR 1274 at 1282.)[50]In Hashim Hoffmann J discussed the origins of the equitable jurisdiction at pages 914e – 915e citing substantially the same cases as Neuberger J was to cite 7 years later. At page 918e he discussed the limits of the jurisdiction: What are the limits of the Bankers Trust jurisdiction? They must, I think, be deduced from the reasoning upon which that jurisdiction, like the Norwich Pharmacal jurisdiction, is distinguished from the 'mere witness' rule. It rests upon the proposition that unless the assets in question can be located and secured, the ultimate determination of ownership of those assets may be frustrated by their removal or dissipation and there will be no point in calling on the third party at the trial to produce the required documents or give the requested information. In my judgment, therefore, the first principle of the Bankers Trust case is that the plaintiff must demonstrate a real prospect that the information may lead to the location or preservation of assets to which he is making a proprietary claim. This is a matter upon which opinions may differ. In the Bankers Trust case itself, Mustill J refused an order because the fraud had happened eight months earlier and he thought that any money which was no longer in the account would long since have vanished. The Court of Appeal was more sanguine. Waller LJ said ([1980] 3 All ER 353 at 358, [1980] 1 WLR 1274 at 1283):
'... where you have a fraud of this nature, although it may be late, and although much or perhaps all of the money may be now gone, the sooner that steps are taken to try and trace where it is the better. If steps are going to be taken, it is important that they should be taken at the earliest possible moment.'
[51]Hoffmann J then went on to hold that there was no real prospect that the order sought would locate or preserve assets of the AMF. He also went on (at 919h) to say: Even if the application prima facie falls within the Bankers Trust principle, I consider that the potential advantage of the order to the AMF must be balanced against the detriment to the person against whom the order was sought, not merely in terms of cost (for which he is ordinarily compensated on an indemnity basis by the terms of the order) but by way of invasion of privacy and requiring breach of obligations of confidence to others[52]In Jazayeri (which was also a case involving bribes) Morison J was referred to the Court of Appeal decision in Den Norske Bank. As a result he refused to make an order permitting the Claimant to interrogate the Defendant so as to discover if he had other claims. However he regarded the order in the form now sought by BDW as permissible for the following reason: The choice of that language, which has been carefully selected, will avoid, as I see it, the dangers referred to by Waller LJ, but will enable the Claimants properly to consider how best to trace any moneys that may have been received and declared by the Defendant.[53]Thus, the basis of Morison J’s order was to enable the Claimants to trace. He was, in effect, invoking the equitable jurisdiction. Analysis[54]To my mind the modified order sought by BDW can be justified on the basis of the equitable jurisdiction. As noted above it is common ground that BDW has a proprietary remedy in relation to any bribes. There is thus a potential tracing remedy available to BDW in relation to any bribes disposed of by Mr Fitzpatrick or TCS. As Waller LJ pointed out in Bankers Trust “the sooner steps are taken to try and trace where it is the better”.[55]I do not accept that BDW has any other method of determining what has happened to the moneys received from the subcontractors. There is no reason why the subcontractors should know what has happened to the moneys. This is not a case like Hashim where extensive information has already been provided by Mr Fitzpatrick. Thus I do think that this is a case where there is a real prospect that the order sought will locate or preserve assets of BDW. Furthermore I think the modified order is proportionate (though there may need to be a discussion as to how long Mr Fitzpatrick should be allowed to comply with the order). In particular the bank statements go back to 2009 and are available. Thus there should be no difficulty in identifying payments from subcontractors in that period. The order is only concerned with payments over £5,000. Furthermore Mr Fitzpatrick is only required to answer the interrogatories to the best of his ability. Thus if he genuinely does not know and cannot with reasonable diligence discover what happened to the payments he will be able to say so. In my view the balancing exercise mentioned by Hoffmann J at 919h is of limited importance where, as here, the information is sought from the wrongdoer.[56]In my view those considerations are sufficient to justify an order under the equitable jurisdiction. In so far as other cases under the Norwich jurisdiction suggest more stringent requirements I do not accept that they apply to the equitable jurisdiction.[57]In the light of my views on the equitable jurisdiction it is unnecessary for me to consider whether an order could also have been made on either of the other two grounds relied on by Mr Toledano QC.[6]The ordinary course of business exception.[58]In paragraphs 61 to 62 of his affidavit Mr Dobie expressed his concern as to the legitimacy of the large sums generated by TCS:61. It is clear from Mr Fitzpatrick’s correspondence with his accountants, from the bank account balances set out at paragraph 53 above, and from my analysis of the annual accounts filed by TCS which I discuss in more detail at paragraph 63 below, that large sums of money are being paid through TCS. That in turn raises the question of how TCS has generated such large sums. The information which I have seen does not give a clear picture of how TCS has generated these funds.62. The abbreviated accounts for TCS for the year ended 31 August 2011, describe its principal activities as “procurement advice, supply chain management and identifying potential savings using alternative suppliers / products” [GD1/199]. However, I have not been able to find any information about TCS from searching the internet, other than what is made available through Company’s House i.e. its address, the name of its directors and shareholders and its annual returns and abbreviated accounts, to the extent those documents have been filed with Companies House. In particular, although it appears within a short period of being set up to have generated large amounts of money, it does not appear to have a website, a place of business or, as far as I can tell, to have advertised its services.[59]When the matter came before Newey J Mr Toledano QC made the point Transcript p 15 – lines 1 – 8. The exception was paragraph 16(2) in the draft order. that the exception contained in paragraph 15(2) may not be appropriate in the light of the fact BDW was not aware of any ordinary and proper course of business of TCS. Newey J left the exception in but commented that it would be open to BDW to argue on the return date that it should not be included Transcript p 15 lines 10 – 12. .[60]In paragraph 26 of his skeleton argument Mr Toledano QC duly submitted that it would no longer be appropriate for an ordinary course of business exception to be included in the order as regards TCS, in light of the Respondents’ wholesale failure to explain how that company carries out any legitimate business.[61]Mr Béar QC resisted this submission. He pointed out that the exception was commonly included in freezing orders and in all of the standard forms. There was no reason to leave it out. If and in so far Mr Fitzpatrick and/or TCS made payments that were not in the ordinary and proper course of business they would risk being held in contempt of court.[62]There is a summary of the law in Vol 2 of the 2015 White Book paragraph 15-71 at p 3347. The relevant principles are discussed in paragraphs 16 – 20 of the judgment of Clarke LJ in Halifax v Chandler [2001] EWCA Civ 1750: 16. It is well settled that a freezing injunction is not granted in order to provide the claimant with security for its claim. It is, at least in part, for that reason that the standard form of order permits the defendant to spend monies on legal expenses and indeed on ordinary and proper business expenses. The order ordinarily either includes a specific weekly sum for legal or business expenses or permits a reasonable sum for such expenses. 17. These principles are not in dispute. Three examples may be given.(1) A defendant is entitled to pay his debts as they fall due even if the creditor could not recover them at law, as, for example, because of the provisions of the Moneylenders Act (see the decision of Robert Goff J in Iraqi Ministry of Defence and Others v Arcepey Shipping Co SA, The Angel Bell [1981] 1 QB 65, which has frequently been followed in the 20 years or so since it was decided.(2) A distinction is drawn between cases where the claimant has a proprietary claim and cases where he does not. Sir Thomas Bingham MR put the distinction in this way in Sundt Wrigley Co Ltd v Wrigley (unreported, 23rd June 1993): “In the Mareva case, since the money is the defendant's subject to his demonstrating that he has no other assets with which to fund the litigation, the ordinary rule is that he should have resort to the frozen funds in order to finance his defence. In the proprietary case, however, the judgment is a more difficult one because in the plaintiff's contention the money on which the defendant wishes to rely to finance his litigation is not the defendant's money at all but represents money which is held on trust for the plaintiff. That, of course, gives rise to an obvious risk of injustice if the plaintiff, successful at the end of the day, finds that his own money has been used to finance an unsuccessful defence. As these authorities make plain, a careful and anxious judgment has to be made in a case where a proprietary claim is advanced by the plaintiff as to whether the injustice of permitting the use of the funds by the defendant is out-weighed by the possible injustice to the defendant if he is denied the opportunity of advancing what may of course turn out to be a successful defence.”(3) As that passage shows, in the Mareva case, in order to be allowed to spend frozen monies, the defendant must show that he has no other assets which he can use. 18. In cases of what may be called ordinary business expenses the court does not usually consider whether the business venture is reasonable, or indeed whether particular business expenses are reasonable. Nor does it balance the defendant's case that he should be permitted to spend such monies against the strength of the claimant's case, or indeed take into consideration the fact that any monies spent by the defendants will not be available to the claimant if it obtains judgment. As I see it, that is because the purpose of a freezing injunction is not to interfere with the defendant's ordinary business or his ordinary way of life. 19. In the fourth edition of Mareva Injunctions and Anton Pillar Relief, Gee says at page 318: (1) “The court will always be concerned to ensure that a Mareva injunction does not operate oppressively and that a defendant will not be hampered in his ordinary business dealings any more than is absolutely necessary to protect the plaintiff from the risk of improper dissipation of assets. Since the plaintiff is not in the position of a secured creditor, and has no proprietary claim to the assets subject to the injunction, there can be no objection in principle to the defendant's dealing in the ordinary way with his business and with his other creditors, even if the effect of such dealings is to render the injunction of no practical value.” 20. In my judgment, the relevant principles are correctly stated in that passage.[63]This is a case where BDW does have a proprietary claim to the assets or many of the assets held by TCS. Thus this is a case where a careful and anxious judgment has to be made as to whether the injustice of permitting the use of the funds by TCS is out-weighed by the possible injustice to the defendant if he is denied the opportunity of using those funds to defray ordinary and proper business expenses. It seems to me to be extremely difficult for the court to perform that balancing exercise where, as here, Mr Dobie has been unable to discover anything about the business activities of TCS and Mr Fitzpatrick has not been willing to explain what legitimate activities TCS undertakes.[64]The only information provided by Mr Fitzpatrick is that there is a VAT liability in the sum of £12,000 and a liability for corporation tax. Subject to any further argument when this judgment is handed down I am provisionally minded to permit the payment of these two liabilities.[65]Subject to those two payments I propose to accede to Mr Toledano QC’s application in relation to the exception. That will not prevent TCS and/or Mr Fitzpatrick making an application to vary the order in relation to specific identified expenses. However in order to succeed I would expect them to have to explain in more detail the nature of TCS’s legitimate business activities. If BDW unreasonably refuses to consent to such an application it is likely to be penalised in costs.[7]Use of the information supplied or disclosed by Mr Fitzpatrick.[66]As noted above Newey J’s order contains an express undertaking (in standard form) that BDW would only use the information obtained as a result of the order for the purpose of this claim.[67]By agreement between the parties when the consent order was approved by Peter Smith J, BDW further undertook to limit the dissemination of the information to a Confidentiality Club and not to use the information in any disciplinary proceedings against Mr Fitzpatrick.[68]Those undertakings lasted until the return date. Whilst the draft order prepared on behalf of BDW still contains an undertaking (No 5) in the same form as that contained in Newey J’s order it is plain from paragraphs 10 and 11 of the order that BDW are in fact seeking a substantial relaxation of the undertaking. Paragraphs 10 and 11 provide: 10. The Applicant is no longer restricted as regards the information and documents disclosed to it pursuant to the order of Mr Justice Newey dated 19 October 2015 in the terms of the undertaking in respect of the “Disclosed Information” recorded in paragraph 1 of the undertakings set out in the consent order dated 29 October 2015. 11. The Applicant is permitted to use the information and documents disclosed to it pursuant to the order of Mr Justice Newey dated 19 October 2015 and pursuant to this Order for the purposes of:(1) Its investigation into the matters that are the subject of these proceedings, including in its discussions with its employees or joint venture parties or Subcontractors or Connected Entities and including but not limited to the Specified Subcontractors (each as defined in paragraph 9(2) of the order of Mr Justice Newey dated 19 October 2015) and, in addition, AG Building & Joinery (collectively, the “Relevant Persons”).(2) Managing its ongoing contracts and relationships with the Relevant Persons and ensuring compliance with its anti-bribery policies and the law.(3) Bringing action, including legal proceedings, against any other persons involved in the matters that are the subject of these proceedings (including but not limited to the Relevant Persons and the family of the First Respondent).(4) Taking action to seek to preserve property over which, as a result of the matters which are the subject of its claim in these proceedings, it claims a proprietary interest.(5) Disciplinary proceedings or investigations against the First Respondent or other employees of the Applicant.[69]In his skeleton argument in support of the application Mr Toledano QC submitted that there is no good reason why BDW should be restricted from sharing the Disclosed Information only within the confidentiality club set out in the Undertakings (which would impinge on its ability to take appropriate action further to the information disclosed), nor why it should be prevented from using the Disclosed Information in any disciplinary proceedings or disciplinary investigation involving Mr Fitzpatrick. He pointed out that the Norwich jurisdiction can be granted to assist an employer in identifying his employee who has acted in breach of confidence so that he can dismiss him Citing British Steel Corporation v Granada Television[1981] AC 1096; AshworthHospital Authority v MGN Ltd[2002] 1 WLR 2033 . He submitted that there was no reason why BDW should not be able to use the information and documents in disciplinary proceedings against Mr Fitzpatrick.[70]In his skeleton argument in opposition to the application Mr Béar QC invited the Court to continue the confidentiality club restrictions as a proportionate way of minimising the potential for irreparable harm to the Respondents resulting from these extensive disclosure applications. He justified this submission on two grounds: 1. to preserve the practical value of the Respondents’ right to continue to challenge any disclosure order the Court makes or continues, the circulation of such information needs to be limited. The more people within BDW’s organisation who have seen that information, the harder it will be to undo the damage to the Respondents, should BDW decide not to pursue its claim or the orders turn out to have been wrongly granted. 2. Mr Fitzpatrick is subject to an ongoing disciplinary investigation and has been informed by BDW that this investigation might result in disciplinary proceedings.[71]The oral submissions on this point were limited by time constraints. However it became clear that Mr Béar QC did not seriously oppose the use of the information in relation to possible tracing claims against possible subcontractors. The principal battleground between the parties related to the use of the information for the purpose of the disciplinary investigation and any subsequent disciplinary proceedings. Mr Fitzpatrick is currently suspended on full pay.[72]In those circumstances during the course of the hearing I invited further short written submissions from the parties. In response I have received sequentially further written submissions from Mr Toledano QC, Mr Béar QC and (in reply) from Mr Toledano QC. I am grateful for these additional submissions. Although substantially in accordance with the directions I gave as to their length, these submissions referred me to a number of additional authorities. Subcontractors and Members of Family[73]As this is not the main area of controversy I propose to deal with it relatively shortly. The relevant law is summarised in paragraph 24.024 of Gee in the following terms: In the context of a tracing claim, if disclosure of documents or information is ordered to be given by a bank in order to enable a claimant to trace assets, there will be no implied undertaking to by the Claimant preventing him from using the documents or information to preserve the relevant assets or their proceeds, or to sue third parties… Nor should there be an express undertaking prohibiting this. But the information cannot be used for the purpose of pointing out to a third party some wrong doing on the part of the Defendant, because this is not within the purpose of the order or part of the process of conducting the proceedings.[74]The bank accounts and the information to be supplied under paragraph 9(2) fall into that category. It would plainly defeat the purpose of the application if BDW could not use the information to further the tracing claims.[75]In those circumstances I have no difficulty in acceding to the application in paragraphs 11(3) and (4) of the draft order. For the avoidance of doubt I include within this possible tracing claims against Mr Fitzpatrick’s parents and wife. Disciplinary Proceedings.[76]In his further submissions Mr Toledano QC accepted that the court’s permission is required for collateral use of documents subject to the implied undertaking, or, where CPR 31.22 applies, for use of a document disclosed for a purpose other than use in the proceedings in which it is disclosed. He drew my attention to two authorities SmithklineBeecham v Generics [2004] 1 WLR 1479 and Tchenguiz[2014] EWHC 2597 . He submitted that the court had to perform a balancing exercise between the interests of the party who has disclosed the documents in the current proceedings and the interests of the other party receiving those documents to use them for some collateral purpose. He submitted that the most important consideration must be the interests of justice.[77]He pointed out that the purpose of these proceedings is to enable BDW to obtain redress against the Respondents. Part of that redress includes disciplinary action against Mr Fitzpatrick. It would not be practicable for BDW to shut its mind to the information in the disciplinary proceedings and there is no reason why it should be required to do so or why its disciplinary proceedings should be fettered by the Court. There is no undue prejudice or injustice to Mr Fitzpatrick.[78]In his submissions in reply he pointed out that the very purpose of the relief, which can be obtained against third parties (such as TCS) in the Norwich jurisdiction to obtain information to take steps in relation to an employee, is to enable appropriate action to be taken, whether by legal or disciplinary proceedings. In addition, Mr Fitzpatrick’s employment was the vehicle by which he was able to perpetuate the fraud which forms the subject matter of the civil proceedings now being brought against him – his employment is inseparable from these proceedings and vice versa. It would be absurd to create a situation whereby matters relevant to his employment could not be considered and addressed in the disciplinary process. There are therefore special circumstances or reasons to justify BDW being permitted to use the information for the purposes of disciplinary proceedings.[79]In answer to these submissions Mr Béar QC submitted that BDW had not made out its case for permission to use the documents and information for this collateral purpose. He submitted that it is for BDW to show “cogent and persuasive reasons why [the undertaking] should be released” and the Court will not do so “save in special circumstances…where the release…will not occasion injustice Crest Homes v Marks [1987] 1 AC 829, 859G-860C.[80]He submitted that there are no special circumstances justifying the unusual position of an employer being able to rely on disclosure ancillary to a freezing order in disciplinary proceedings. Such a course would clearly occasion injustice. BDW would be able to conduct disciplinary proceedings against Mr Fitzpatrick using the disclosure powers of the Court, when ordinarily employees would be under no disclosure obligations in such proceedings. Discussion CPR 31.22, which has been described as a complete code (1). A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where—(a) the document has been read to or by the court, or referred to, at a hearing which has been held in public;(b) the court gives permission; or(c) the party who disclosed the document and the person to whom the document belongs agree. (2). The court may make an order restricting or prohibiting the use of a document which has been disclosed, even where the document has been read to or by the court, or referred to, at a hearing which has been held in public. (3). An application for such an order may be made— (a) by a party; or (b) by any person to whom the document belongs.[81]It is not in dispute that BDW’s application in relation to the information and documents disclosed falls within r22(1)(b) and/or an application to lift the implied undertaking at common law, whereas an application to restrict the use of documents referred to in court falls within r 22(2).[82]In Crest Homes Plc v Marks [1987] AC 829 at 860. Lord Oliver said:
“Your Lordships have been referred to a number of reported cases in which application has been made for the use of documents obtained under Anton Piller orders or on general discovery for the purpose of proceedings other than those in which the order was made. Examples were Halcon International Inc. v. Shell Transport and Trading Co. [1979] R.P.C. 97 and Sybron Corporation v. Barclays Bank Plc [1985] Ch. 299. I do not, for my part, think that it would be helpful to review these authorities for they are no more than examples and they illustrate no general principle beyond this, that the court will not release or modify the implied undertaking given on discovery save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery. As Nourse L.J. observed in the course of his judgment in the instant case (ante, p.840G), each case must turn on its own individual facts.”
[83]That passage was cited by Aldous LJ in Smith Kline who went on in paragraph 37: 37. The Halcon case was considered by Laddie J together with the other relevant authorities in Cobra Golf Inc v Rata [1996] FSR 819. The guidance he gave as to the matters the court will include in its considerations is useful. However it is important under the CPR to have in mind the overriding principles when considering whether to lift an order made under CPR 31.22. The most important consideration must be the interest of justice which involves considering the interest of the party seeking to use the documents and that of the party protected by the CPR 31.22 order. As Lord Oliver said each case will depend upon its own facts. But a material consideration must be whether the documents could have been obtained under CPR 31.17. That rule enables the court to order disclosure from the third parties if the documents were likely to support SB’s case and disclosure was necessary in order to dispose fairly of the claim.[84]I have summarised the rival submissions above. I have to ask whether BDW has shown that the circumstances of this case justify the court granting permission under r22(1)(b). I have to carry out a balancing exercise between the interests of BDW and those of Mr Fitzpatrick. I prefer the submissions of Mr Toledano QC. I agree that there is a close connection between these proceedings and the disciplinary proceedings. The alleged fraud arose out of Mr Fitzpatrick’s employment. I agree that the whole purpose of the application was to obtain information to enable appropriate action to be taken against the wrongdoers. It seems to me to be artificial to permit the information to be used against the subcontractors who made the secret payments but not against Mr Fitzpatrick who received them. In my view the interests of justice point to permission under r 22(1)(b) being granted. I do not think there is any serious injustice to Mr Fitzpatrick.[85]I would accordingly accede to the application under paragraph 11(5). Confidentiality Club[86]In the light of my decision in regard to the subcontractors and the disciplinary proceedings there is no basis for restricting the information to the confidentiality club. I will accordingly release BDW from its undertaking. Other Matters[87]In the course of the oral hearing and in his further submissions Mr Toledano QC made it clear that BDW had no intention of disclosing matters of a purely personal nature which have no relevance to the proceedings. If possible this should be reflected in the wording of the order.[88]No doubt those advising BDW will wish to consider the extent to which undertaking 5 should be part of the order in the light of this judgment.[89]I have not dealt with paragraphs 11(1) and 11(2) of the draft order as I do not think I have received any submissions in relation to them. It may be that the parties can agree whether these two paragraphs can be included in the light of this judgment. If not the matter will have to be raised when this judgment is handed down.

Cited in 1 later judgment