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11 December 2018
The High Court recently considered applications for retrospective permission to make collateral use of documents disclosed under a pre-action disclosure order where there had been a breach of the implied undertaking as to the use of disclosed documents.(1) Although retrospective permission may be given, an application for permission should not be used to circumvent the usual procedure for obtaining consent to collateral use of documents.
The ECU Group manages multi-currency loan facilities for clients and had a longstanding relationship with HSBC, which managed its foreign currency trading. In January 2006, after three large stop orders were triggered, ECU began to suspect that HSBC traders were 'front running': making their own trades to move the relevant exchange rates in order to make a profit at ECU's expense.
In response to questions raised by ECU, HSBC carried out an internal investigation and in March 2006 stated that it had found no evidence of any wrongdoing. However, in mid-2016 two of HSBC's most senior former foreign exchange traders were indicted by the US Department of Justice on charges relating to front running and, in October 2017, one trader was convicted of fraud and conspiracy. The second faces extradition to the United States.
In December 2017, ECU made a successful application for pre-action disclosure of documents relating to the activity of HSBC's traders in January 2006.
Having received the documents, ECU used them (it argued, inadvertently):
It therefore applied under Civil Procedure Rule (CPR) 31.22(1) for retrospective permission to use the documents. CPR 31.22(1) formalises the implied undertaking to the court contained in common law not to use a disclosed document for a purpose other than for the purpose of the proceedings in which the document was disclosed:
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:
The court granted retrospective permission for ECU's use of the disclosed documents in limited communications with UK and US authorities (agreement had been reached between the parties in relation to the other documents). That permission was conditional on ECU's solicitors confirming by affidavit the nature and extent of the US law advice, the return of a USB stick containing the disclosed documents which had been provided to the US lawyers and the termination of the US lawyers' retainers in connection with the proceedings. However, permission was denied in relation to the provision of the witness statement to the journalist.
Some key takeaways of this decision include the fact that:
The High Court has provided a helpful reminder of the strict meaning of the word 'use' in the context of CPR 31.22(1). The rules regarding the collateral use of documents should continue to be taken seriously by parties but this case does give some comfort that if disclosed documents have been used in breach of the rules, the court may be willing to grant retrospective consent to the use of such documents. Parties are warned that any such application for retrospective consent should not be used to circumvent the usual procedure for obtaining consent to collateral use of documents, and it is not a guaranteed remedy.
For further information on this topic please contact Victoria Rogers or Geraldine Elliott at RPC by telephone (+44 20 3060 6000) or email (firstname.lastname@example.org or email@example.com). The RPC website can be accessed at www.rpc.co.uk.
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