If the liquidators make an application for its disclosure, pursuant to section 236 of the Insolvency Act 1986, the person from whom the information was seized should be notified and, if he does not consent, he should be joined as a respondent so the court can hear his objections.
The Vice-Chancellor adjourned a section 236 application by the liquidators of the Bank of Credit and Commerce International SA (BCCI) for the disclosure by the Director of the Serious Fraud Office (SFO), of documents seized from Capcom Financial Services Ltd, and three former officers of BCCI, while attempts were made to contact them and offer them the chance to present any objections to the court.
The liquidators had also applied for the disclosure by the SFO of documents obtained from Price Waterhouse, BCCI's former auditors, pursuant to notices served under section 2(3) of the Criminal Justice Act 1987, and from Control Securities plc, its associated company Inarive Group (UK) Ltd, their subsidiaries and Nazmudin Virani, who before his arrest was chairman and chief executive of Control Securities plc ('the Control group'), using powers of search and seizure under the Police and Criminal Evidence Act 1984.
Price Waterhouse did not oppose an order being made in a form agreed by the parties, and the Control group did not object to an order being made subject to certain safeguards and conditions.
Edward Bannister QC and Susan Prevezer (Lovell White Durrant) for the liquidators; George Bompas (Treasury Solicitor) for the SFO; Roger Kaye QC and Paul Girolami (Herbert Smith) for Price Waterhouse; Peter Griffiths (D J Freeman) for Control.
SIR DONALD NICHOLLS V-C said the task confronting BCCI's liquidators was gargantuan. There was evidence of fraud on a massive scale in the conduct of BCCI's business, and the SFO, while investigating this, had obtained a large number of documents from a variety of sources. The liquidators applied for their disclosure under section 236 of the Insolvency Act 1986.
The material sought included documents seized from the premises of persons who were not parties to the application: from the home addresses of Mr Abedi and Mr Naqvi, two former BCCI officers, from a safe deposit box in the name of Mr Iqbal, another former BCCI officer, and from Capcom Financial Services Ltd, a broker through which many of BCCI's treasury transactions took place.
The liquidators contended that, on a section 236 application, the court was not concerned with the position of a third party whose documents were in the respondent's possession, or with any objection that third party might have. The court was concerned only to balance the interests of the liquidator with those of the person whose documents were sought. Accordingly, the liquidators submitted, there was no need for Capcom or the three BCCI officers to be told of, or joined in, the proceedings by the liquidators against the SFO.
The SFO went further, contending that as a matter of law it was at liberty to give assistance to liquidators, and might in its discretion make voluntary disclosure to them of documents which it had obtained pursuant to its compulsory powers.
The SFO was created by the Criminal Justice Act 1987. Its powers and functions comprised, and were confined to, those expressly or impliedly conferred or imposed on it by that Act. It obtained information to enable or assist it to carry out its primary functions of investigating serious fraud and instituting and conducting criminal proceedings relating to serious fraud.
Section 3 authorised disclosure of that information to certain other persons; but liquidators, provisional liquidators, administrators and administrative receivers were not included in the list. Nor, in his lordship's opinion, was there any justification for implying a general power for the SFO to disclose information, obtained in the exercise of compulsory powers conferred by the Act, to persons not named in section 3, without the consent of the person from whom the information was obtained.
The position was the same in respect of material obtained compulsorily under the Police and Criminal Evidence Act 1984. Such information was, in the hands of the SFO, subject to similar limitations on further disclosure as under the 1987 Act.
On an application for disclosure under section 236 of the Insolvency Act 1986, the court should, in exercising its discretion, take into account any prejudice a third party might suffer if production was ordered. 'Third party' here included any person other than the person who had possession or control of the documents. They should be no worse off than if the application had been made against them directly. They should be entitled to present to the court any objection they had to the production of the documents, and the court should take their objections into account.
In general, therefore, when a section 236 application was made against the SFO for disclosure of documents compulsorily obtained from a third party, the third party should be notified and asked if he objected. If so, he should be joined as a respondent to the application.
The present application should accordingly be adjourned, in so far as it related to documents of Capcom and other persons not parties to the application, to enable this to be done.Reuse content