Partner James Clark and Paralegal Joanna Leslie examine disclosure orders in Fraud Intelligence

Partner James Clark and Paralegal Joanna Leslie explore the prohibition of collateral use of documents disclosed in English proceedings, analysing recent cases and discussing the ways in which disclosure orders can act as a powerful tool in the arsenal of litigators.

James and Joanna’s article was published in Fraud Intelligence, 23 January 2025, and can be found here.

Commercial legal disputes are often won or lost based on the contemporaneous documents.  The broad menu of disclosure orders available in England & Wales is one of the reasons that this jurisdiction is so attractive to litigants from all over the world.

Collateral purpose principle: background

It is widely recognised that disclosure is “an invasion of the litigant’s right to privacy and confidentiality” (Tchenguiz v SFO [2014] EWCA 1409 at para. 56, per Jackson LJ).  To mitigate the effects of that invasion and to encourage parties to comply with disclosure orders, the general rule is that a document disclosed in proceedings may only be used for the purpose of those proceedings (this is known as the prohibition on ‘collateral use’).

The prohibition

The prohibition is broad: it includes disclosed documents or witness evidence, and the information within them.  Civil Procedure Rule (“CPR”) 31.22 contains the rule applicable to disclosed documents:[1]

(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.

The standard form freezing injunction annexed to CPR Practice Direction 25A also contains an undertaking against collateral use, which offers respondents some comfort in circumstances where they are compelled to disclose their assets in short order, and usually before they have had the opportunity to challenge the making of the injunction (it is common for applicants to obtain freezing injunctions at a ‘without notice’ hearing to mitigate the risks of respondents dissipating their assets before the injunction is granted).

What’s the issue?

Frequently, parties obtain documents during English proceedings which they would like to use for other purposes.  For example, a disclosed document might reveal wrongdoing by the discloser which gives rise to potential further civil and / or criminal proceedings in this jurisdiction and / or foreign jurisdictions.

What’s the solution?  

As set out above, the general rule prohibiting collateral use is subject to express exceptions, including that the Court may give permission for such use.

However, the standard undertaking against collateral use which applicants for freezing injunctions must give does not contain the exceptions where: (i) documents have been read to or by the court, or referred to, at a hearing which has been held in public; or (ii) both parties agree to the intended collateral use (of course, such agreement is rare).   Accordingly, the only option available is applying for the Court’s permission to “use” the documents.

The test for obtaining such permission was established in Crest v Holmes [1987] AC 829, which confirmed that only very persuasive reasons will warrant disclosure of documents shielded by collateral use prohibitions.  An applicant must establish “cogent and persuasive reasons why the undertaking should be released”. The circumstances warranting the release should be exceptional, and it “should not occasion injustice to the person who gave the disclosure”.

JSC Commercial Bank Privatbank v Kolomoisky

The Crest test was considered by Mr Justice Trower in JSC Commercial Bank Privatbank v Kolomoisky (a dispute concerning the alleged misappropriation of monies from Ukraine’s largest bank prior to its nationalisation).

Privatbank sought permission to disclose two schedules of its Particulars of Claim to the Ukrainian Bureau of Economic Security (the “Schedules”).  Privatbank sought the English court’s permission in circumstances where it said that it was compelled to disclose the Schedules pursuant to the Order of Investigating Judge Romanyshena of the Shevchenkivskyi District Court of Kyiv, dated 16 May 2024 (the “May Order“), which was made under ongoing criminal proceedings in Ukraine.  Whilst the scope of the Ukrainian criminal proceedings and the issues being determined by the English court were not ‘on all fours’, there was some overlap.

Some of the information contained in the Schedules derived from the asset disclosure which the Defendants had given pursuant to the terms of a worldwide freezing order.  In exchange for obtaining that asset disclosure, Privatbank gave the standard undertaking against collateral use.

Mr Justice Trower observed that Privatbank’s application was unusual for various reasons, including that it was made after the conclusion of the trial (during which all of the information contained in the Schedules had come into the public domain), but before judgment had been delivered.

In the event, Mr Justice Trower concluded that there were “special circumstances” justifying the permission sought by Privatbank because of the following reasons:

1. Competing obligations

The May Order (the order of the Ukrainian court) carried significant weight, particularly when considered alongside the fact that the information contained in the Schedules had already entered the public domain.  Pursuant to the May Order, Privatbank was obliged under Ukrainian law to disclose the Schedules.  Special circumstances arise where a party is compelled to do competing things under a collateral use undertaking and a foreign court order requiring disclosure, as this puts them at a “double risk”.  As expounded by Mr Justice Bryan in PJSC National Bank Trust and another v Mints and others [2020] EWHC 3253 (Comm), where parties are stuck between competing orders, it would be unjust to expect them to choose whether to be in contempt of court in English proceedings or risk criminal sanctions in a foreign jurisdiction.  Mr Justice Trower decided that such double risk justified releasing Privatbank from its undertaking in respect of the Schedules so that it could comply with the May Order. 

2. Information already in the public domain

Mr Justice Trower found that “the entirety of the information contained in [the Schedules had] already come into the public domain”, including by way of submissions and evidence at the trial, which meant that those documents had already lost their confidence.  This in of itself was a persuasive factor in favour of granting permission.  (Interestingly, the Judge clarified that the documents sought to be disclosed were a statement of case and its schedules.  Ordinarily, the undertaking against collateral use would not extend to a statement of case at all, as CPR 5.4C(1)(a) permits that this is a document open for review by any member of the public.  However, there is a distinction between a statement of case and “documents filed with or attached to the statement of case, or intended by the party whose statement it is to be served with it” (in this case, the Schedules), to which the availability for public inspection is not permitted.)

3. Public Interest

Mr Justice Trower identified two significant interests that are engaged by an application to permit the collateral use of documents in support of a criminal investigation: (i) first, “the interest of the parties to the litigation reflected in the implied undertaking against collateral use”; and (ii) secondly, “the public interest in the investigation of crime”.  In this case, the balance weighed in favour of the public interest in the investigation of crime.

General Data Protection Regulation (“GDPR”) compliance – Article 44

Mr Justice Trower also considered the threshold for release in light of Article 44 of the GDPR, which prohibits the transfer of personal data outside the UK unless certain conditions are met.  The Defendants sought to rely on this in arguing against the application being granted, as they believed their rights under the GDPR would be compromised.

However, this was rejected by the court, as Article 49(1)(e) expressly permits the transfer of personal data if it is necessary for the establishment, exercise or defence of legal claims. The Information Commissioner’s Office guidance makes clear that the article 49(1)(e) exception applies where there is a request for information from an overseas prosecutor as part of potential formal legal action.

Conclusion

The disclosure orders available from the English court remain a powerful tool for litigants.  Whilst there is a prohibition on the collateral use of documents disclosed in English proceedings, there are exceptions to that prohibition and the Court will grant permission in “special circumstances” such that parties may be able to use the documents (or information contain therein) for purposes other than the proceedings in which the disclosure was given.

[1] CPR 32.12 contains similar provisions in respect of witness statements.