Third Parties now subject to draconian Search Orders

6 April 2017

A search order is the most draconian order that the English civil courts can make. Such orders allow a Claimant’s solicitors without notice to enter a Defendant’s residential or business premises to search for, copy, remove and detain information and documents (hard copy and electronic).

Although it has been possible to obtain a freezing order against third parties since 1992, until recently the court has only been prepared to grant search orders against parties to proceedings (usually fraud proceedings). However, for the first time, the Court has upheld a decision to grant a search order against a third party: Abela and others v Baadarani (Third Party: Fakih) [2017] EWHC 269 (Ch).

The Law

The Court’s power to grant search orders can be found in Section 7(1) of the Civil Procedure Act 1997 (the “Act”):

“The Court may make an order under this section for the purpose of securing, in the case of any existing or proposed proceedings in the court –

(a) the preservation of evidence which is or may be relevant, or

(b) the preservation of property which is or may be the subject-matter of the proceedings or as to which any question arises or may arise in the proceedings.” (emphasis added – see below)

Judgment and Third Party Disclosure

The Claimants brought proceedings against the Defendant, Mr Baadarani, in 2009 and judgment was obtained against him in June 2015 for just over US$20 million. As part of the enforcement proceedings, the Claimants obtained disclosure from Mr Baadarani. This disclosure included a schedule of his assets and liabilities previously provided by him to the National Bank of Kuwait (“NBK”). The Claimants subsequently obtained a worldwide freezing order against Mr Baadarani which, amongst other things, required him to disclose all his assets.

The day after obtaining the freezing order, the Claimants obtained, on a without notice basis, third party disclosure orders against (1) NBK and (2) the parties who were to become the Respondents to the search order. The disclosure provided by NBK suggested that not only had the Respondents not properly complied with the third party disclosure order, but they had conspired with Mr Baadarani to backdate his schedule of assets and liabilities.

Application for Search Order

The Claimants applied, without notice, for a search order against the Respondents for documents relating to the Defendant’s assets. The Claimants relied on Section 7(1) of the Act and put forward two bases for their application:

  1. a proposed claim against the Respondents in conspiracy (which did not form part of the Judge’s decision); and
  2. the judgment which the Claimants had obtained, coupled with the disclosure orders.

In April 2016 Mr Justice Warren accepted that a search order could be made post judgment against someone against whom a third party disclosure order had been made and he granted the search order against the Respondents on the basis that it was necessary to preserve the documents to which the Respondents had access. The classes of documents set out in the search order were much wider than the classes of documents previously sought by the Claimants in the third party disclosure order.

The search order was executed in April 2016.

Application to Set-Aside Search Order

In February 2017 the Respondents’ application to set aside the search order was heard by Mr Justice Nugee. The Respondents put forward two alternative submissions:

  1. There was no jurisdiction under section 7 of the Act because once judgment had been entered against the Defendant there were no “existing or proposed proceedings” against him. Further, the proposed conspiracy claim could not be relied upon as “proposed proceedings” as the Claimants were not actively intending to pursue such a claim.

Nugee J rejected this submission because, for the purposes of the Act, proceedings against a Defendant do not come to an end with judgment. At the time of the application for the search order the Claimants were continuing to pursue Mr Baadarani to enforce the judgment and these further steps fell within the normal use of the word “proceedings”. Nugee J relied on North Shore Ventures Limited v Anstead Holdings Limited [2011] EWHC 1178 (Ch) in which it had been held that an application for a third party disclosure order may be made after judgment. He considered that there is nothing in the Act which suggests an intention to limit the availability of interim relief after judgment has been obtained.

  1. There is no authority to suggest that a search order can be granted in the absence of an actual or intended third party disclosure order. Warren J’s order had been made in order to preserve the material which the Respondents had been ordered to provide under the third party disclosure order, therefore, the scope of the search order had to track the scope of the third party disclosure order.

In rejecting this submission, Nugee J held that there was nothing in the language of section 7 of the Act which restricted the persons against whom a search order could be made and which prevented a search order being granted against persons who are not parties to the proceedings if they also hold relevant documents. Further, section 7 of the Act does not limit the material which can be sought from third parties. Nor did Warren J mean that a search order could only be made against a person against whom a third party disclosure order had already been made. For the avoidance of doubt Nugee J stated that there is no sense in implying a requirement that when the Court is asked to grant a search order it must at the same time also make an order for third party disclosure.

Supervising Solicitors

Due to the draconian nature of a search order, an independent Supervising Solicitor must be appointed by the Court to serve the search order on and explain the effect of the search order to the Respondents, to supervise the searches undertaken by the Claimants’ solicitors and the forensic IT consultants and to report to the Court on the execution of the search.

At Kingsley Napley we have substantial experience of obtaining, executing and supervising search orders at commercial and residential premises. At short notice we can assemble teams to attend at multiple sites to act as supervising solicitors.

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