Key Court Ruling for Victims of Fraud

The Fight Back Begins - No More Privilege Against Self-Incrimination For Pre-existing Documents

On Friday 26 May 2006, a High Court Judge took a brave and long awaited step to protect victims of financial crime who use the Civil Legal process to recover their money. The Judge held that fraudsters can no longer rely on the privilege against self-incrimination to refuse to deliver up pre-existing documents evidencing their fraudulent activities.

For over 20 years, whenever a party in civil proceedings was obliged to produce documents they could refuse on the basis that the documents 'tend to expose that person to proceedings for an offence or for the recovery of a penalty'. This is known as the Privilege Against Self Incrimination (PSI). This had the bizarre result of enabling an 'alleged' fraudster who was confronted with a Search (Anton Piller) Order to refuse to hand over the key documentation already in their possession, or on their computer, that evidenced the fraud and the whereabouts of the money they had stolen on the basis that they might be prosecuted for 'conspiracy to defraud', 'VAT Fraud' or some other offence. They simply cannot do that any more thanks to Mr Justice Evans-Lombe.

In C and W and P and The AG [2006] EWHC 1226 (Ch) the Independent Expert (represented by Mishcon de Reya) was appointed to image computers under a Search Order obtained by the Claimant who was pursuing the Defendant for breach of confidence and copyright. He came across documents on the Defendant's computer that were pornographic in nature. Simply possessing these documents without a lawful defence constituted an offence.

The Independent Expert was in between a rock and a hard place. He could not ask his client, the Claimant, what they should do as he was subject to a specific Court Order prohibiting him from revealing any information to anyone other than the Defendant's lawyers and the Claimant's lawyers. Neither could he simply just sit on the documents, as he would soon face criticism or even prosecution owing to the offensive nature of the documents.

We advised him to go to Court to seek guidance from the Judge. This resulted in a full hearing of a number of issues, the critical one being whether PSI applied to these pre-existing documents. If so they could not be delivered to the Police. If not, they could be handed over and our client relieved of having to hang onto documents that he had no desire to have.

In a 58 page ground breaking judgment, which charts the history of the law and practice of PSI in the civil, criminal and human rights arenas, the learned Judge came down firmly on the side of the victims of financial crime. What this Judge decided was that in light of the Human Rights Act 1998 and the cases that have been decided since it came into force in October 2000, there was a positive duty on the English Court to 'modify' the scope of our domestic law on PSI to bring it into line with PSI under European Law i.e. that it does not apply to pre-existing documents. The Judge held that this duty to modify PSI existed because each Contracting State had a positive obligation to consider the wider interest of the public, in particular, the public's right to be protected by the State from the effects of crime by an efficient criminal justice system.

The end result was that the Judge Ordered our client (subject to the Defendant's right of Appeal) to hand the documents over to the Police and simultaneously also released our client from his undertaking to keep such documents confidential to the proceedings.

From now on, subject to any Appeal (which may not happen as the Defendant has run out of funds and had his Legal Aid Certificate revoked), whenever a Search Order or Asset Freezing Order is executed a Defendant cannot prevent the Claimant from obtaining copies of

any pre-existing documents, provided of course they are covered by the terms of the relevant Orders. As a result, it is going to be significantly easier to discover how a fraud was committed and where the money has gone.

Also, in light of the Judge's finding, there is now a positive obligation on the Courts to balance a Defendant's right to fair trial against the wider public interest to be protected from the effect of criminal activity. Judges should now be more open to developing the law and practice regarding Search, Asset Freezing and Disclosure Orders in a way that actually helps victims get their money back.

The facts of this case and the Judgment have thrown some light on the way in which CFS's who are appointed as Independent Experts under Search Orders could protect themselves in the future, as follows:

• where possible the Independent Expert should be retained directly by the Claimant's Solicitors rather than the Claimant
• they should ensure their Terms of Business include a provision that entitles them to protection in the event that they find material during the imaging exercise that exposes them to liability
• they should not act as Independent Experts if they are already assisting the Claimant in investigating the case itself

• whenever acting as an Independent Expert they should maintain clear records of what they did during the execution of the Search Order and prepare an Independent Expert's Report, which should be provided to all parties and the Court
• they should ensure they are kept updated on a regular basis of the law relating to PSI as well as the do's and don’ts of assisting in the execution of Search Orders.