Marlwood Commercial Inc v Kozeny

When documents disclosed in civil proceedings are required under a Serious Fraud Office notice, the court must balance the public interest in the administration of civil justice against the public interests in investigating serious or complex fraud and providing international assistance.

Absent a specific risk of injustice, the balance will ordinarily favour compliance. This applies even where a foreign defendant brought the documents into England solely to comply with disclosure obligations. The court should ordinarily permit their production under rule 31.22 of the Civil Procedure Rules 1998.

The restriction on collateral use remains an obligation owed to the court. Section 3(3) of the Criminal Justice Act 1987 does not override it automatically.

The claimants brought English proceedings alleging fraudulent misrepresentations and misuse of funds connected with investments in the privatisation of Azerbaijani state undertakings. The foreign defendants brought documents into England to comply with civil disclosure obligations.

At the request of the New York District Attorney, the Secretary of State referred an overseas request for evidence to the Director of the Serious Fraud Office. The Director served notices under section 2(3) of the Criminal Justice Act 1987 on the parties’ solicitors, requiring production of the defendants’ disclosed documents.

Moore-Bick J permitted the claimants’ solicitor to produce the documents under rule 31.22 of the Civil Procedure Rules 1998 and refused the defendants’ application to prevent compliance. The defendants appealed. The central issue was how to balance the administration of civil justice against the investigation of serious fraud and international co-operation, particularly where a foreign litigant had brought the documents into England only for disclosure.

1. Appeal dismissed. The public interests in investigating serious or complex fraud and providing international assistance outweighed the general interest in controlling collateral use of the disclosed documents. The solicitors could comply with the notices, and permission under rule 31.22 of the Civil Procedure Rules 1998 was properly granted.

2. The Criminal Justice Act 1987 does not invariably override the public interest in the due administration of civil justice. A restriction imposed by rule 31.22 may provide a reasonable excuse under section 2(13) where permission for collateral use would properly be refused. The categories of public interest capable of furnishing a reasonable excuse are not confined to national security, diplomatic relations and central government administration.

3. The applicable exercise is one of balance. An applicant seeking release from the restriction on collateral use must ordinarily show cogent and persuasive reasons, special circumstances and an absence of injustice to the disclosing party. In the present statutory context, however, the investigation of a specific suspected serious or complex fraud carried substantial weight. The safeguards governing action by the Secretary of State and the Director also supported compliance.

4. A foreign defendant’s position and the fact that documents entered the jurisdiction solely for disclosure were relevant. They did not, without some additional risk of injustice or unfairness, amount to a reasonable excuse for non-compliance. There was no evidence of prejudice to the English litigation, unfairness in New York, or an impediment arising under Bahamian law. Foreign law and courts could ordinarily be trusted to determine admissibility and protect against undue prejudice.

5. A notice under section 2(3) may be served on a solicitor possessing documents for a client. The statutory reference to “any other person” encompasses agents, and solicitors may be the most practical custodians of disclosed documents. Legal professional privilege remains protected by section 2(9).

6. Section 3(3) of the Criminal Justice Act 1987 did not override rule 31.22. The rule controls collateral use and embodies an obligation owed to the court in support of the administration of justice; it is not merely an obligation of secrecy.

1. Court of Appeal (Civil Division): The appeal was dismissed in [2004] EWCA Civ 798. Permission to appeal to the House of Lords was refused, subject to a temporary continuation of the stay.

2. Commercial Court: Moore-Bick J granted the claimants’ solicitor permission under rule 31.22 of the Civil Procedure Rules 1998 to produce the documents to the Serious Fraud Office. He refused the defendants’ application to prevent both solicitors from complying with the notices.