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SHOW ME THE MONEY – FINDING AND FREEZING HIDDEN ASSETS

I. FINDERS, KEEPERS

A. THE OBLIGATION TO TELL THE TRUTH

1. The new Form E states as follows:

“Please fill in this form fully and accurately.....You have a duty to the court to give full, frank and clear disclosure of all your financial and other relevant circumstances...If you are found to have been deliberately untruthful, criminal proceedings may be brought against you for fraud under the Fraud Act 2006. The information given in this form must be confirmed by an affidavit. Proceedings for perjury may be brought against a person who makes or causes to be made, a false statement in a document confirmed by an affidavit”

2. The Form E is a sworn document and ends as follows:

“and confirm that the information given above is a full, frank, clear and accurate disclosure of my financial and other relevant circumstances.”

3. Part 21 FPR 2010 provides further guidance on disclosure and inspection.

B. WHAT OFFENCES MIGHT THE CLIENT COMMIT IF THERE IS A LACK OF DISCLOSURE?

4. The Fraud Act 2006 itself makes interesting reading. Section 1 (2) provides for three distinct offences namely fraud by:

(a) Making a false representation;

(b) Failing to disclose information;

(c) Abuse of position.

5. Clearly it is going to be section 1(2) (b) which will be most relevant to disclosure in Ancillary Relief (or Financial Remedies (FR) as it is now known ). Section 3 makes it clear that the intention of the defendant needs to be to make a gain for himself or to cause loss to another. Section 5 defines gain and loss which extend to money or other property [whether real or personal and whether intangible or a thing in action] and can be temporary or permanent. Gain also includes keeping what one has [!], getting what one does not have and loss includes not getting what one might get or parting with what one has.

6. It is obvious that in the context of an FR hearing most failure to disclose will therefore come within the Fraud Act 2006. The maximum penalty is 10 years imprisonment.

7. Perjury is another possibility under the Perjury Act 1911. Section 1 relates to the making of a material statement in judicial proceedings knowing the statement to be false whilst section 1(3) clarifies that this includes false statements made on oath which of course would cover a Form E. This carries a maximum penalty of 7 years imprisonment.

C. NO PRIVILEGE AGAINST SELF INCRIMINATION IN FR

8. The leading case as to whether there is a privilege against self-incrimination in FR is now R v K [2009] EWCA Crim 1640, which despite being a criminal case was decided by a Court of Appeal including Mr Justice Holman from the Family Division. It is highly relevant to all family practitioners and changed the law dramatically from what practitioners had understood the position to be in FR, where difficult issues which potentially might lead to criminal charges were being examined by the court or the other side.

9. Prior to R v K, it had been assumed on the basis of A v A [2000] 1 FLR 701 that financial remedies claims fell into the category of other civil proceedings, namely that there was an absolute right not to incriminate oneself and that equally therefore what was said/done in an FR could have criminal repercussions later down the line. Although strictly obiter, Mr Justice Charles in A v A said:

“In my judgment correctly it was not argued before me that the privilege against self-incrimination had been removed in respect of proceedings for ancillary relief, and it follows, that, as is generally the case in relation to the disclosure of material in civil actions and notwithstanding the duty to make full and frank disclosure therein (see Jenkins v Livesey [1985] 1 AC 424), parties to ancillary relief proceedings can assert the privilege. If this was not the case it would be a factor in the decision-making process as to further disclosure.”

10. The Court of Appeal has radically departed from this view, ruling in terms that given the nature of s25(1) MCA and the nature of the discretionary exercise that a court has to embark on, namely an assessment of the information to which the court must have regard under s25(1), that there can be no privilege against self-incrimination.

11. The case involved H who in his Form E, Questionnaire, open negotiations and without prejudice negotiations had made certain admissions which tended to incriminate him in relation to tax evasion. The Form E and Questionnaire were later supplied to the Inland Revenue by an “informer”.

12. Lord Justice Moore-Bick, having considered s25 and the wording on a Form E, stated at paragraph 31:

“The fact that a party is compelled by rules of court to disclose information and documents does not of itself abrogate the right to privilege against self-incrimination. On the contrary, a party to civil proceedings who is required to give disclosure pursuant to CPR part 31 is entitled on that ground to withhold production of documents that tend to incriminate him. Moreover, the Family Proceedings Rules do not expressly exclude the privilege, so in the absence of other considerations it would be difficult to argue that they had achieved such a significant result. The argument in the present case, however, is, and must be, that the rules, which are contained in secondary legislation and have the approval of Parliament, must have been intended to have abrogated the privilege, since the court could not discharge the duty imposed on it by section 25 unless the parties were required to disclose all relevant information, even if tending to incriminate them. In our view that argument is well founded...it would be impossible for the court to discharge its duty under section 25 of the Act if it were deprived of the information on which it is required to act..For these reasons we are satisfied that parties to such proceedings are not entitled to invoke privilege against self-incrimination in order to withhold information.”

13. Further along in the judgment the CA makes clear that this abrogation of privilege in FR does of course carry benefits as far as the criminal proceedings are concerned as any statements obtained under compulsion [which included Form Es, Questionnaires, comments made at open meetings ....] could not be used in criminal proceedings:

“the use of the admissions made by K in the ancillary relief proceedings would deprive K of the right to a fair trial to which he is entitled under Article 6 of the ECHR and must therefore be excluded by the judge ....” [para 43]

14. The CA also made clear that in relation to the admissions made in the open meeting these could also not be used as they provided orally information which should otherwise have been in the Form E and/or Questionnaire. Importantly the CA did however accept that in relation to any statements made which were truly “without prejudice” that:

“The protection which normally attaches to such communications covers whatever is said in the course of them, including admissions and that it is not possible to isolate some parts and treat them as falling outside that protection” [para 49]

15. The CA did however decide that given that such without prejudice statements were not made under compulsion but rather to advance negotiations, that there was no reason why in principle they could not be relied upon by the Inland Revenue as:

“the public interest in prosecuting crime is sufficient to outweigh the public interest in settlement of disputes” [para 72]....

16. Importantly the Red Book at r 21.2 [p1960] and also Rayden seem to have overlooked this vital case when considering the issue. It would be very doubtful if by virtue of the new FPR the position had actually changed in relation to the privilege against self-incrimination and FR.

D. THE DUTY OF DISCLOSURE EXTENDS TO THE SOLICITOR

17. It is important to note that there is a duty not only upon the client but also upon the solicitor putting together the Form E – see W v W [Financial Provision – Form E] [2004] 1 FLR 494:

“Solicitors advising the makers of Forms E have as Officers of the Court, an important responsibility to ensure that true and realistic figures are inserted in a Form E. And Deponents have a greater responsibility to ensure that their Form Es are truthful and honest. The rubric at the beginning of the form, warning of the consequences of falsehood, is not mere window dressing ....”

This was a case in which the solicitor had advised the client not to disclose the existence of a new account with his second wife on the basis that she might have a claim to it in a future financial remedies claim and so it was not relevant ....!

E. HOW LOW SHOULD YOU GO?

18. So, how far to go with disclosure – always remember the overriding objective and the need for commercial reality – see for example the case of S v B (Ancillary Relief - Costs) [2005] 1 FLR 474 in which W was penalised in costs for having pursued an enquiry into loan repayments H had made to his parents. Whilst the initial desire to investigate had been reasonable W then incurred costs entirely out of proportion to the amount at stake. Clearly though a “reasonable” investigation needs to be made of H’s assets to avoid an action for negligence – see Dickinson v Jones Alexander & Co. [1993] 2 FLR 521. The balance can sometimes be very difficult to find.

19. As Thorpe J stated in the case of P v P (Financial Relief – Non-disclosure) [1994] 2 FLR 381 at p383, often the process of disclosure is very much based upon hindsight and particular importance attaches to oral evidence.

20. Clearly in light of the overriding objective of FPR 2010 r1.1(2) which includes consideration of the proportionality of dealing with the case in relation to the nature, importance and complexity of the issues and also the expense, careful consideration must always be given to pursuing further disclosure. See also Boker –Ingram v Boker-Ingram [2009] 2 FLR 922 – the duty of full and frank and clear disclosure has never varied.

F. IS DISCLOSURE ALWAYS NECESSARY?

21. As to whether there still exists a “millionaire’s defence” per Thyssen [1985] FLR 1069 allowing a party not to provide disclosure by reason of the fact that they can meet any order, it is unlikely that such a defence does still exist post Miller and the obligation to consider all the s25 factors including the totality of the assets when measuring the fairness of a proposed order.

22. Clearly in Miller itself, a short marriage with £17 million assets, such a procedure was not considered to be appropriate so it would have to be a truly extraordinary case for no disclosure to be ordered. Perhaps this might include a pre-nup case with no children and large assets such as Crossley v Crossley [2008] 1 FLR 1467 in which whilst Form Es were exchanged, but no documents had to be attached and there was no other disclosure. To the extent that a client wishes not to provide disclosure, clearly a preliminary application would need to be made to the court to approve such an approach.

G. HOW LONG DOES THE DUTY LAST

23. Clearly the duty to disclose lasts until the proceedings are concluded – see CPR 1998 r31.11 which emphasises this common law rule. However, in addition, LJ Thorpe considered that such a duty to disclose documents might be extended as a “duty of candour” in financial remedy cases to a period of time after the making of the order – see Burns v Burns [2004] EWCA Civ 1258. Clearly there are also other disclosure remedies on enforcement such an application for an oral examination if necessary.

H. SELF HELP

24. Before the case of Imerman v Tchenguiz [2010] EWCA Civ 908 a practice had developed among family practitioners to advise W that if there was a fear H would not be honest on the Form E, then they could access documents belonging to H, whether they were confidential or not, provided force is not used. The practice was known as ‘self-help’ and the documents produced from it known as ‘Hildebrand documents’ see Hildebrand v Hildebrand [1992] 1 FLR 244.

25. In the pre-Imerman case of White v Withers LLP and Dearle [2009] EWCA Civ 1122, [2010] 1 FLR 859, Ward LJ described the Hildebrand rules in para 37 as thus:

“The family courts will not penalise the taking, copying and immediate return of documents but do not sanction the use of any force to obtain the documents, or the interception of documents or the retention of documents nor I would add, though it is not a feature of this case, the removal of any hard disk recording documents electronically. The evidence contained in the documents, even those wrongfully taken will be admitted in evidence because there is an overarching duty on the parties to give full and frank disclosure. The wrongful taking of documents may lead to findings of litigation misconduct or orders for costs.”

That said, Wilson LJ stated at paragraph 83 of the same judgment that;

“The Hildebrand ‘rules' need to be tested for compatibility with principles in other areas of law, including in particular the law of tort.”

26. It was clear therefore that while self-help was generally accepted, some judges were beginning to question the legality of the practice. Tughendat J in the case of L v L [2007] 2 FLR 171 had ordered the return of copies of H’s hard drive taken by W from his computer. Although Tughendat J did not go so far as to deem W’s actions unlawful, he stated that H had a real prospect of establishing that W had acted unlawfully.

I. IMERMAN V TCHENGUIZ

27. It is against this backdrop that the case of Imerman v Tchenguiz came before the Court of Appeal in July 2010. Only a summary of the facts will be given here but the case is worth reading in full.

28. Elizabeth Imerman was the sister of the well-known entrepreneurs Robert and Vincent Tchenguiz. Fearing that his brother in law would conceal his assets, Robert Tchenguiz, possibly with the help of others, accessed a server in an office which he shared with Mr Imerman and copied information and documents which Mr Imerman had stored there. From that material Robert Tchenguiz printed out eleven files and handed them to his solicitor, Mr Zaiwalla, who arranged for a barrister to sift the documents for those covered by legal professional privilege, which resulted in seven files of documents. Mr Zaiwalla then passed those files on to Withers, the solicitors acting for Mrs Imerman in her divorce, who had already issued Form A, giving notice of Mrs Imerman's intention to seek ancillary financial relief. Withers then sent copies of the seven files to the solicitors acting for Mr Imerman in the divorce proceedings.

29. On discovering what had happened, Mr Imerman sought an injunction against the Tchenguiz brothers and their solicitor to restrain any use of the documents and delivery up of a forensic report which had been prepared on their contents. The injunction was granted by Eady J in the Queens Bench Division however at the same Moylan J made an order in the ancillary relief proceedings to the effect that Withers could retain the seven files of documents. Both sides appealed to the Court of Appeal which found for Mr Imerman and ordered all files and copies to be returned to his solicitors.

30. The key points from the judgment can be summarised as follows:

(i) Although there is a general and continuing duty to make full disclosure of all relevant information in FR proceedings, this does not begin until Form E is lodged and there is no duty of general disclosure (discovery) of documents of the kind required in ordinary civil proceedings by the CPR. (For the new rules on disclosure in financial remedies hearings see FPR 2010, r9.14);

(ii) It would be a breach of confidence for W, without H’s authority, to examine, or to make, retain, or supply copies to a third party of, a document whose contents are, and were (or ought to have been) appreciated by W to be, confidential to H;

(iii) Courts will not condone the illegality of self-help consisting of breach of confidence (or tort) simply because it is feared that the other side will itself behave unlawfully and conceal that which should be disclosed;

(iv) Solicitors will not be penalised for the mere receipt of confidential documents belonging to the spouse but may be liable for any future retention of the documents;

(v) Possible sanctions remain for H who has failed to disclose – adverse inferences, costs sanctions, freezing orders and most importantly Anton Piller (search) orders.

J. HOW SHOULD SOLICITORS NOW ADVISE THEIR CLIENTS?

31. With the demise of self-help, solicitors should now review as a matter of urgency risk management procedures in financial remedies cases as well as the standard advice offered to clients. In particular the following should be noted:

a. Whereas before with Hildebrand documents solicitors only had to enquire about whether any documents obtained were subject to legal professional privilege, solicitors must now also enquire as to whether any of the documents are confidential.

b. In deciding whether a document is confidential, the solicitor must enquire as to whether the spouse would have ‘a reasonable expectation of privacy’ relating to the information contained within the document. Each case will turn on its own facts, for example, if H leaves his bank statement lying around open in the matrimonial home, in the kitchen, living room or marital bedroom, it may well lose its confidential character as against W. Equally, if the parties each had their own study, it would be less likely that W could copy the statement without infringing H's confidence if it had been left by him in his study rather than in the marital bedroom, and W's case would be weaker if the statement was kept in a drawer in his desk and weaker still if kept locked in his desk.

c. If documents are confidential, the solicitor must tell the client that they should return the originals and any copies that have been made. They should also warn them that if they fail to do so, they risk having an injunction imposed restraining them from passing the documents on or using them or an order requiring the delivery up of the documents. Possible breaches of criminal law may also follow such as burglary, theft, criminal offences under the Computer Misuse Act 1990 and the Data Protection Act 1998 and offences under the Fraud Act 2006. Possible tortious liability including trespass to goods, tort of conversion would almost certainly flow from the retention of such documents.

d. A claim for breach of confidence may be defeated by showing that the documents or information revealed unlawful conduct or intended unlawful conduct by the claimant.

e. Where the information has been passed on, whether by W or by those acting in her interest, to the solicitors acting for her in the FR proceedings, the court might think it right and indeed in appropriate circumstances necessary to go so far as to enjoin her from continuing to instruct those solicitors in the proceedings.

f. Although the client must return the originals and copies of the illicit documents, she may still be able to use the information she has previously seen in the documents in the FR proceedings. This would be after the Form E has been served and in circumstances where W is inviting the court to conclude that H’s disclosure has been inadequate or dishonest. A claim based on confidentiality is an equitable claim therefore a court still has discretion to allow the documents to be used depending on the facts of the case. The rights of privacy and confidentiality (but not any right of privilege) may be overridden by the competing public interest that any trial should be conducted on full evidence where the documents are relevant.

g. It must be remembered that Imerman was an extreme case of obtaining illicit documents and the court was always going to find that there was a breach of confidence and that the documents should be returned and not used, particularly as the action taken was before H even had an opportunity to disclose his assets in his Form E. There is likely to be more of a balancing act in cases where a spouse suspects concealment of assets by their ex-partner following service of Form Es, particularly if the spouse is able to recall the contents of the illicit documents which they were previously compelled to return.

h. The use in court as evidence of material which has been improperly obtained (whether in breach of confidence, tortiously, or even criminally) is still admissible however, just because it is admissible, it does not follow that the court is obliged to admit it. Under common law and indeed the CPR, the court has a discretion to exclude highly relevant evidence obtained in an underhand manner. (Jones v University of Warwick [2003] EWCA Civ 151).

i. One practical consequence of Imerman is that courts are now conducting a trial within a trial, known as an ‘Imerman hearing’ in order to determine issues relating to the judgment including whether confidential evidence exists in the case, how it was obtained and if it is admissible. This of course will ratchet up the costs of cases even more.

K. THE IMPACT OF THE 2010 FPR ON IMERMAN

32. The new Family Procedure Rules (FPR 2010) which came into force on 6th April 2011 do not greatly impact the issues raised in Imerman. As the Court of Appeal rightly stated, the Rules have never provided for a general duty of disclosure before the service of Form Es and FPR 2010 does not alter this position. That said, the new Rules have made a point of setting out the Overriding Objective at Part 1 which covers the duties of the parties and the court in swiftly, justly and cost-effectively disposing of the matter. There is also a greater emphasis placed on the court’s duty to actively manage cases by encouraging the parties to cooperate with each other and by giving directions to ensure that the case proceeds quickly and efficiently, amongst others. It will be interesting to see how the Family Courts reconcile their duty to deal with cases justly and efficiently with the decision in Imerman. It is hoped that in determining the admissibility of confidential material in Imerman hearings, the Family Courts will not only rely on the public interest in having the full evidence before the court but also in the Overriding Objective of dealing with cases justly and swiftly, in admitting confidential material.

L. SEARCH ORDERS

33. In the context of FR, search orders (formerly known as Anton Piller Orders) were considered ‘a rare weapon for use only in extreme or exceptional cases’. (Burgess v Burgess [1996] 2 FLR 34). In Imerman however the Court of Appeal noted that the extreme rarity in family cases of these orders was surprising, particularly given their relative frequency in other areas of civil litigation. The Court of Appeal stated that:

“In our view, at least in general, such applications should be seriously considered where there are substantial reasons for believing that a husband is concealing or dissipating assets, or intending to conceal or destroy documents. In such a case, subject of course to any other factors which are relevant, such as whether an order, and if so what order, is proportionate, a peremptory order to protect the wife's rights would often be justified.”

“We are confident that the judges of the Family Division can be relied upon to exercise these powers appropriately, indeed robustly.”

34. It would appear therefore that the Court of Appeal has given the green light to spouses to consider the use of search orders and indeed, to the Family Division to use their powers in ordering them more robustly. With this in mind, advice on search orders will now become a more regular feature in the advice given to clients where the dissipation of assets is suspected.

35. The origins of a search order lie in the High Court’s inherent jurisdiction but it now has statutory recognition by section 7 of the Civil Procedure Act 1997. It is an order which can only be made and supervised by the High Court. Detailed provisions concerning search orders and their execution are found in para. 7 of Practice Direction (Interim Injunctions), supplementing CPR Pt 25, and an example of a search order is annexed to that practice direction. Part 20 of the Family Procedure Rules 2010 and its Practice Direction 20A mirrors the CPR sections.

36. A search order is a without notice order which not only requires a party to provide disclosure but requires them to admit another party to their premises for the purpose of searching for the required material and seizing it. In the case of Anton Piller [1976] Ch 55, [1976] 1 All ER 779, CA, Ormrod LJ set out three essential pre-conditions for the making of such an order;

(i) An extremely strong prima facie case;

(ii) The damage, potential or actual must be very serious for the applicant;

(iii) There must be clear evidence that the respondents to the application have in their possession incriminating documents or things, and that there is a real possibility that they may destroy such material before any application inter partes can be made.

37. Reference should be made to the relevant sections of the CPR and the FPR 2010 in detail before making such an application as strict adherence to the correct procedure is a must. The key points of a search order however are set out below:

• Search orders have historically required ‘clear evidence’ by the applicant that the respondent has incriminating documents, however given the demise of self-help it is difficult to see how an applicant in FR proceedings can provide this without relying on documentation. Following Imerman if the applicant has seen the incriminating documents, they should be allowed to recall the contents for the purposes of the application, otherwise it is hoped that the Family Courts recognise the difficulty in providing clear evidence from documentation alone.

• Evidence must be in the form of an affidavit which must disclose very fully the reason the order is sought, including the probability that relevant material would disappear if the order were not made.

• It should be noted that search orders do not provide for the forcible entry onto the respondent’s premises, it merely requires a respondent to permit the applicant to enter and search the premises. If they fail to do so they could be found in contempt of court and/or have adverse inferences drawn for the non-compliance.

• It is not appropriate for the person applying for the order to be present during the search. The order must be executed by a ‘Supervising Solicitor’ with experience of such orders [a list of such solicitors is apparently held by the Law Society as well as by the London Solicitors Litigation Association]. A list of all material removed from the property must be made and a copy of the list given to the respondent. The Supervising Solicitor must explain the terms and the effect of the order to the respondent in everyday language and advise the respondent of their right to legal advice, to apply to vary or discharge the order, of their entitlement to legal professional privilege and privilege against self-incrimination.

• The order must be set out in the standard form which can be found annexed to the Practice Direction supplementing CPR 25. There could be costs implications if the order is set aside due to the incorrect form being used and the incorrect procedure being followed.

• The implementation of the order is likely to be costly and if it transpires at the end of the proceedings that it was an unjustified and unnecessary exercise, the court may penalise the applicant in costs as a result.

• The order can be made, in appropriate circumstances, for a search of premises outside of England and Wales (Cook Industries v Galiher [1979] Ch 439)

38. Following the strong endorsement by the Court of Appeal in Imerman, previous authorities on search orders should be approached with care, however a number of the more important authorities are cited below for reference:

Kepa v Kepa [1983] 13 Fam. Law 46 - In FR proceedings W stated that H was of substantial means but that throughout the marriage he had always been extremely secretive about his financial affairs. She alleged that he traded in and repaired jewellery and had a substantial amount in the house. H contended that his street trading had been hit by the recession and that he had only earned GBP 1,800 last year. H made no reference to jewellery trading or stock. It was held that H had given a very unsatisfactory account of his financial position and if the court was unable to assess his resources properly by way of an Anton Piller order W would suffer injustice as she would receive a smaller financial order.

Emanuel v Emanuel [1982] 1 W.L.R. 669 - Held that an Anton Piller order may be made in cases of matrimonial ancillary relief where there is a strong prima facie case that relevant documents are not likely to be produced and might be removed or destroyed. Case where H did not comply with AR order and sold property he had previously undertaken not to. H served six weeks for contempt and W was granted an Anton Piller order for the purpose of inspection and removal for copying of documents relating to H's income and capital.

Burgess v Burgess [1996] 2 F.L.R. 34 – husband held to have made an unjustified application for an Anton Piller order and was ordered to pay costs on an indemnity basis.

Araghchinchi v Araghchinchi [1997] 2 F.L.R. 142 - An AR order was made on the basis that the H would retain an interest in a commercial lease valued at £10,000 from which he would operate his business. W subsequently learned that the property had been sold for £150,000 and applied unsuccessfully for Anton Piller and Mareva relief pending the determination of her application for leave to appeal out of time against the ancillary relief order. Held that the orders sought were draconian and should only be made in exceptional circumstances. While H had concealed information at the AR hearing, there was no evidence to suggest that he was in possession of vital material which he might destroy.

M. DISCLOSURE BY THIRD PARTIES

39. The first issue to consider is whether the documents or evidence can be obtained in some other way. Clearly to the extent that the document is in the control or custody of a party they must call for such document. In addition, to the extent that there are interveners, they clearly are also under a duty to disclose. However, a court will not join a party solely for the purpose of obtaining disclosure – see Re T [1990] 1 FLR 1 though see also T v T (Joinder of Third Parties) [1996] 2 FLR 357 in which the trustees were in fact joined as parties in order to provide disclosure.

40. Beneficiaries do have the right to seek certain information and trust documentation from the trustees – Charman v Charman [2006] 2 FLR 422 and see also Schmidt v Rosewood Trust Limited [2003] UKPC 26. Clearly many company directors/shareholders also have the right to documentation about the company – all depends upon the control they have over the company. See also public information at Companies House.

41. FPR 2010 sets out the power to seek disclosure from Third Parties at Part 20.2 (1) (i) “Interim Remedies”–

(i) An order under section 34 of the Senior Courts Act 1981 or section 53 of the County Courts Act 1984 (order in certain proceedings for disclosure of documents or inspection of property against a non-party)”

It is important to note that Part 20.2 (3) states in terms that:

“the fact that a particular kind of interim remedy is not listed in paragraph (1) does not affect any power the court may have to grant that remedy”

All applications must be done in Part 18 format.

The reality is that there now appear to be the following 6 main options open to seek documents/evidence from third parties:

(A) Rule 21.2 FPR 2010 – discovery against non-party under a statutory right;

(B) Rule 24.2 - witness summons;

(C) Rule 24.7 – evidence by deposition;

(D) Bankers Books Evidence Act 1879 [as preserved by r 20.2 (3)];

(E) Section 34 of the Senior Courts Act 1981 or section 53 of the County Courts Act 1984 [as expressly preserved by r 20.2 (1) (i)];

(F) Rule 35.3 and 35.4 – provision of documents or witness evidence by mediator arising out of mediation of cross border disputes;

42. As to how far to go see Charman v Charman [2006] 1 WLR 1053 setting the limits for fishing exercises in respect of disclosure from third parties. Clearly the disclosure must be relevant to the issues. There is also no obligation to prove that the documents sought are in existence before the order is made. This is obviously important in the context of the evidence which might be needed to support such an application.

N. RULE 21.2 - THE NEW “INSPECTION” APPOINTMENT

43. Rule 21 deals with “Disclosure and Inspection of Documents” and applies:

“where an application is made to the court under any Act for disclosure by a person who is not a party to the proceedings.” [rule 21.2 (1)]

44. Rule 21 appears to have replaced the Inspection appointment under FPR 1991 2.62 (7) albeit that it does not provide a right in itself but reference needs to be made to a substantive Act [presumably s34 Supreme Courts Act 1981/s53 County Courts Act 1984/Bankers’ Books Evidence Act 1879].

45. Such an order will only be made where:

“disclosure is necessary in order to dispose fairly of the proceedings or to save costs.” [FPR r21.2(3)]

46. Rule 21.2(7) specifically states that it does not limit any other power the court may have to order disclosure against a non-party. Furthermore r21.3 now provides a specific mechanism for claiming to withhold inspection or disclosure of a document whereas the previous rule did not. The new rule 21.2 does not appear to cover applications for information held by a third party rather than documents. This rule is still therefore only appropriate where it is only documents which are being sought rather than cross examination of a witness. As this is an interim remedy, it must be assumed that such disclosure can therefore be ordered prior to the final hearing in line with the overriding objective.

O. WITNESS SUMMONS

47. FPR 2010 r 24.2 sets out the parameters for witness summons. The application is made to the court for a witness to produce either documents or for a witness actually to attend court. Importantly, given that the application is not made on notice to the proposed witness/person with the documents, this is a useful procedure as it forces the person to come to court to make any objections.

48. Rule 24.2(4) provides now in terms that the witness can produce the documents either on the day of the hearing or on another date, thereby meaning that the documents can be considered in advance of the final hearing. In such cases where there is a hearing which is not the final hearing, it is important to note that the permission of the court is necessary – r 24.3(2). This is also the case where the summons is issued less than 7 days before the date of the final hearing.

49. Clearly the advantage of a witness summons is that a witness can be forced to attend to provide evidence, not documents. The difficulty is that Courts are unwilling to order witnesses to attend solely for the purposes of cross examination – see W v W (Disclosure by Third Party) (1981) 2FLR 291. See also M v M (Financial Misconduct – subpoena against third parties) [2006] 2 FLR 1253.

50. A witness summons can be set aside. See for example Morgan v Morgan [1977] Fam 122 in which a subpoena against W’s father to give evidence about his wealth and his testamentary intentions was set aside as being oppressive and wrong on the ground that he was a stranger and should not have to divulge such private information. In this era of privacy and the HRA, presumably this would be even more relevant.

P. EVIDENCE BY DEPOSITION

51. Rules 24.7 – 24.12 have strengthened the effectiveness of the deposition procedure in relation to obtaining other evidence. Importantly, there is now a sanction at r 24.9 requiring a person to attend court, answer any question or produce any document if they fail to co-operate with the examination. See for comparison the very weak provisions at FPR 1991 r 2.29. Furthermore, the procedure is now set out in much greater detail and includes a separate power to insist that a [co-operating] deponent attends the hearing to give evidence – FLR 2010 r24.10(4). This beefed up power is likely to be better used in the future.

Q. BANKERS’ BOOKS EVIDENCE ACT 1879

52. This old statute is actually rather a useful device for obtaining bank statements from banks, Building societies and the Post Office. What it cannot be used for is obtaining other documentation from banks eg paying in slips, cheques and correspondence etc. Section 8 provides the Court with a broad discretion in relation to costs, including that costs are paid by the banks.It is clear that this power still exists under the new FPR as r 20.2 (3) provides for other interim remedies which are not listed.

R. SECTION 34 OF THE SENIOR COURTS ACT 1981 OR SECTION 53 OF THE COUNTY COURTS ACT 1984

53. These powers are expressly preserved by r 20.2 (1) (i) and are listed as possible orders for interim remedies. Given that they not only provide for disclosure of documents against non-parties but also for inspection of property there are likely to prove to be very useful.

54. Whilst s53 itself refers to the power being available in proceedings for personal injury or death, in fact by virtue of an amendment in 1998, this section applies to ALL County Court proceedings. A similar provision for the High Court is contained at s34 of the Senior Courts Act 1981.

55. The power is to order a non-party to produce documents [s53(2)] or for:

“(a) the inspection, photographing, preservation or custody and detention of property which is not the property of, or in the possession of, any party to the proceedings but which is the subject matter of the proceedings or as to which any question arises in the proceedings,

(b) the taking of samples of any such property as is mentioned in (a) and the carrying out of any experiment on or with any such property ...”

56. This Act with FPR 21.2 will presumably be the basis for all non-party disclosure from now on.

S. THE THIRD PARTY IS ABROAD

57. Orders for witness summons and other orders are directed at a Respondent personally and therefore cannot be directly enforced unless the Respondent is in England or Wales. The upshot is that for witnesses abroad there are two distinct categories – EU [excluding Denmark!] and non EU.

58. Where the country is not EU, all that can be done is for the English High Court to issue a “letter of request” for the evidence to be taken in accordance with r24.12 FLR 2010. Essentially this sounds very nice but has no teeth as it ultimately depends on the approach to be taken by the foreign judicial authority. In Charman v Charman [2006] 1 WLR 1053 the Bermudan Court refused to compel witnesses to produce disclosure. In Minwalla v Minwalla [2005] 1 FLR 771 the letters of request were extremely effective in relation to a trust in Jersey.

59. However, as to the EU States, there is a Regulation on the Taking of Evidence 1206/2001 together with a Practice Guide. The difficulty with the Regulation is that it is restricted in its coercive nature as whilst coercive measures can be taken in accordance with the domestic law of the requested state [Article 13], the direct taking of evidence [as opposed to disclosure of documents etc presumably] can only be given on a voluntary basis [Article 17].

T. LAND REGISTRIES

60. In England and Wales searches can only be made against the Land Registry against an address without an order of the court. In other jurisdictions it can be very easy, cheap and useful to search against name. An example is Spain which has almost the reverse system where there it is not possible to search against the address but very easy to search against a name.

61. If you wish to conduct a search against a person on the English Land Registry, the mechanism is the form PN1 available on the Land Registry website.The first step is to ask the person whose name you wish to search to agree to the same and for them to sign the form PN1 as anyone is entitled to search against their own name. A threat of subsequent court action normally does the trick.

62. If they will not agree to the same an application can be made to the Land Registry Registrar in relation to the PN1 under rule 11(3) of the Land Registration Rules 2003 if it can be shown that the applicant is “interested generally” in a property. Alternatively an application can be made to the court as against the Land Registrar as a third party to disclose such information. Rayden does not set out the exact format of such an application, but merely says that there must be a Court order expressly authorising a search of the Index of Proprietor’s Names. A possible mechanism would be an order under s39 of the Senior Courts Act 1981 for another person to sign the PN1.

II. FREEZING THE ASSETS

63. FPR 2010 Part 18 is the appropriate mechanism for seeking any type of freezing order whilst PD 20A sets out the requirements for applications without notice in general – taking into account the guidance given in Re S [2001] 1 All ER 362.

64. There now seem to be 4 possible options for a freezing injunction although it is unlikely that (c) or (d) would ever be necessary:

(a) s37 MCA 1973;

(b) rule 20.2 (1) (f) “Freezing injunction” [under s37 Supreme Court Act 1981 giving the High Court the power to grant an injunction in all cases in which it is “just and convenient”] – “an order restraining a party from removing from the jurisdiction assets located there; or restraining a party from dealing with any assets whether located within the jurisdiction or not”. NB the County Court also have this power under s38(1) County Courts Act 1984

(c) an injunction under the inherent jurisdiction of the High Court – as per the case of Khreino v Khreino [2000] 1 FCR 80 CA in which a freezing injunction was made against H and Third Parties by the High Court after judgment to freeze the proceeds of sale of a flat;

(d) rule 20.2 (1) (a) – an interim remedy consisting of an interim injunction – presumably in some other slightly different form to r20.2 (1) (f) ......!

65. Remember that in any event, only the level of W’s “best case” scenario in relation to the totality of the assets can be frozen ie NOT all of them! - Ghoth v Ghoth [1992] 2 All ER 920. Clearly this is only relevant if H has actually given some disclosure of assets otherwise he will only have himself to blame if there is a blanket order covering all of his assets. Consider therefore asking for an ancillary order for early filing of Form E/specific disclosure etc etc

U. SECTION 37 MCA

66. This has always been the poorer cousin as it is more restrictive as the Court needs to be:

“satisfied that the other party to the proceedings is, with the intention of defeating the claim for financial relief, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim”

This raises a number of serious hurdles:

(i) The need to prove an intention to defeat the claim – this necessitates evidence of a real intention, not simply historical bad behaviour – see Smith v Smith (1971) 4 Fam Law 80. See also Trowbridge v Trowbridge [2003] 2 FLR 231 – consider whether H had knowledge at the time of the claim for FR, the amount involved and the reasons given for the disposition;

(ii) The need to prove that they are attempting to dispose of the property at the time – this does not have to be to a Third Party and can include a transfer of assets in H’s name from a liquid to an illiquid form eg cash purchase of property outside the jurisdiction etc;

(iii) the restricted definition of property – though can include real property outside of England and Wales provided that the Court accepts that the order will be in some way enforceable in the other jurisdiction – see Hamlin v Hamlin [1986] 1FLR 61. Property does NOT include property which has not come into existence yet or which has not yet come into H’s hands – see Roche v Roche (1981) 11 Fam Law 243 – for example a pending PI damages claim. See also Crittenden v Crittenden [1990] 2 FLR 361 – property cannot include a company’s assets even where the parties own all the shares in that company. Pensions are also not included as such property.

(iv) The order cannot be directed at Third Parties;

(v) There needs to be an existing application for financial relief – ie a Petition with a prayer for FR at the very least – an undertaking may be capable of being given to commence a divorce and issue a Form A;

Rule 9.6 FPR sets out that Part 18 must be used for a s37 application.

V. FREEZING ORDER [IE MAREVA]

67. The alternative to s37 is a freezing order. Historically this may not have been so popular due to the tendency of the courts to impose under undertaking as to damages on such orders even in an FR hearing[see below].

68. The jurisdictional base for such an order is rule 20.2 (1) (f) “Freezing injunction” which presumably must incorporate reference to s37 Supreme Court Act 1981 giving the High Court the power to grant an injunction in all cases in which it is “just and convenient”. The rule itself at 20.2(1)(f) says it is – “an order restraining a party from removing from the jurisdiction assets located there; or restraining a party from dealing with any assets whether located within the jurisdiction or not”.

69. Essentially the court can protect any legal or equitable rights arising under statute ie under MCA 1973. An order should not create any rights beyond the statutory rights.

70. There is no need to prove any particular intention and there is no restriction on what can be injuncted. The test is on the “balance of convenience” as to whether the Applicant has a good arguable case and there is a real risk that the judgment would otherwise go unsatisfied.

71. It is important to note that most freezing injunctions prohibit dealings with specified property. If a concern is in relation to unsecured loans or borrowing against assets not bound by the order there needs to be added a general injunctive order prohibiting H from borrowing more than a certain sum. Otherwise H will in fact manage by the back door to defeat the object of the freezing injunction by reducing his net assets ...

72. See also CPR 25 which contains a very useful sample order and also White Book Volume 2 Chapter 15.

W. EFFECT OF FREEZING ORDER ON THIRD PARTIES

73. Courts are well aware that H may already have placed assets into a Third Party’s name – the order can therefore refer to H’s assets “whether in his own name or in the name of another and whether they are solely or jointly owned...” and including all assets within H’s control to dispose or deal with. [See sample order at CPR 25].

74. Third Parties can be specifically joined to such a freezing injunction but not a s37 MCA injunction. They will then clearly be subject to the order once served. Consider though issues as to undertakings as to damages.

75. The Family Division has adopted a pragmatic approach to the joinder of Third Parties in family cases and draws a distinction between those Third Parties which are effectively the alter ego of H or hold assets on H’s behalf and those which truly have a separate interest in the assets – see W v H (Family Division: without notice orders) [2001] 1 All ER 300 in which Munby J said that H’s company did not need to be joined as a party as he was content to pierce the corporate veil even at that juncture. The same is true in relation to all other bare trustees of H’s property.

76. An alternative is merely to serve the Third Party [such as a bank] and warn them that to be complicit in the breach of the same would be contempt of court. A Third Party with knowledge of the order can be in contempt even when H himself has no knowledge of the order – Z Ltd v AZ [1982] QB 558.

77. It is important to note that the duty of frankness and to produce copies of the information before the court and a note of the hearing extends also to its production to any Third Parties served with the order – see C v C [2006] 1FLR 936 – a bank not joined as a party was entitled to have a copy of the note to the Judge, affidavits and an attendance note of the hearing. This has now been legislated for at PD 20.8.1 which sets out in terms the scope of this duty.

78. The difficulty is that contempt of court proceedings cannot apply to Third Parties who are overseas and so outside the jurisdiction of the English courts. The order must therefore not attempt to regulate the conduct of abroad of persons who are not duly joined as parties to the English proceedings in respect of property outside the jurisdiction as this would be the English court claiming an extraterritorial jurisdiction which it does not have. Its jurisdiction is “in personam” not “in rem” ie against the parties themselves – wherever they may be.

79. In addition, it may be that a foreign law would be breached by a Third Party if they complied with the injunction, hence there must also be a provision to excuse compliance by foreign Third Parties [such as overseas banks] in compliance would put them in breach of the foreign law. This is known as the Baltic provision [Baltic Shipping Co v Translink Shipping Ltd [1995] 1 Lloyds Rep 673. It may therefore be necessary to seek orders in the foreign jurisdiction if the English order cannot be effectively enforced. This may also be a consideration against the English Court granting such an order.

80. There must also expressly be liberty to apply to any Third Party creditor with notice of the injunction to apply to discharge the same.

81. Interestingly the Third Party owes no duty of care to the applicant if it fails to abide by the order – Customs & Excise v Barclays Bank plc [2006] UKHL 28 in which the bank did not to compensate HMRC when it failed to police an injunction obtained by them and allowed the account to be emptied.

82. See also Dadourian Group International Inc v Simms [2006] EWCA Civ 399 which contains a Practice Note in relation to guidelines as to the exercise of discretion whether to grant permission to enforce a worldwide freezing order abroad and its impact on third parties.

X. UNDERTAKINGS AS TO DAMAGES

83. The PD20A also goes into detail in relation to freezing injunctions at paragraph 5.1. This paragraph suggests that under the new FPR 2010 ALL freezing injunctions in family cases must have an undertaking as to damages in relation to the other spouse “unless the court otherwise orders”. This is directly in line with CPR 25.

84. This of course would appear to undermine one of the advantages of seeking a s37 MCA 1973 injunction rather than a freezing injunction under the inherent jurisdiction of the court as historically undertakings as to damages were not required in practice. See for example comments in Rayden at 27.7 that “generally it will be inappropriate to exact an undertaking as to damages when an interlocutory injunction is made in ancillary relief proceedings where the person injuncted is the other spouse”. The thinking was that MCA s25 can redress any injustice – apparently this is no longer the thinking and will presumably act as a huge disincentive to many clients.

85. In addition, the PD 20A directs the court to consider whether there should also be an undertaking by the applicant to pay damages to third parties who might suffer loss as a consequence. This is likely to become rather an important consideration when weighing up whether to seek a freezing order at all.

86. Note that the new FPR 2010 at Part 33 provides a specific format for financial undertakings which should therefore be used in this context.

Y. LAND REGISTRY OPTIONS

87. It is also worth considering the options for restricting H’s dealing with real property contained in the Land Registration Act 2002. Notices and restrictions can be obtained at no cost and failure to do so may incur costs penalties.

88. A notice merely gives notice that a person has an interest in the land and essentially acts as a warning to any third parties. It does not actually stop the legal owner of the land from dealing with it in any way. A notice can be agreed or unilateral. A spouse’s matrimonial home rights under s30 Family Law Act 1996 is an “agreed” notice albeit not in the sense that the other side actually agrees with it being applied ....! It is important to note that such a right can in fact be extended beyond dissolution of the marriage by s35 of the Family Law Act 1996 but is only applicable to a property which was in fact the FMH.

89. A unilateral notice is made without notice to the owner although there is a procedure for cancelling the notice. The nature of the interest claimed needs to be set out and proof of the validity of the interest claimed can be sought by the owner.....An application for a property adjustment order is a pending land action within s5 of the Land Charges Act 1972 and as such there can be a notice on the register in respect of the same. The same is true in relation to TOLATA claims and claims for a beneficial interest under the Married Women’s Property Act 1882 etc

90. A restriction on the other hand actually prevents dealing with the land. The difficulty is that it can only be obtained by a person with a “sufficient interest” in the making of the entry. This includes cases where the legal estate concerned is a material asset and a property adjustment and/or lump sum is being claimed. There can be a notice and a restriction on the same piece of land.

91. Section 42(1) Land Registration Act 2002 sets out how the registrar should exercise his discretion as to whether to enter a restriction. One of the considerations is “protecting a right or claim in relation to a registered estate” This is likely to be the basis for most restrictions made. This is however a procedure for the legal owner to dispute the making of the restriction.

92. Interestingly enough the court can also make an order for the registrar to enter a restriction in the register – Land Registration Act 2002 s46 and s 132(3) (a). Such an order could be ancillary to the grant of a freezing order. The formal application for registration must be made on Form AP1.

Sarah Lucy Cooper
Articles and consultations authored by attorney reflect the state of law as of the date of their writing. The laws change daily. Users of this site are advised to consult attorney regarding their situation.
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