Nikitin & Ors v Butler Llp & Ors

Mr Nikitin (and companies associated with him) and Mr Skarga applied, by notices dated 14 December 2006, for Norwich Pharmacal orders and pre-action disclosure against the Respondents (save, in the case of Mr Skarga, The Corporate Intelligence Service Limited). The Respondents are “private investigators” and the solicitors (Richards Butler) who are alleged to have been concerned in instructing them. The basis for the application is that it is alleged that the investigators, in investigating the personal and financial affairs of the Applicants, obtained access to personal data in breach of the Data Protection Act 1998 (“the DPA”) and obtained confidential information relating to the Applicants which has been misused.

The Applications have been heard together. They raise the same issues. To quote from the skeleton argument of Mr Tomlinson QC and Mr Doyle for Mr Nikitin:

“the aim of the present application is to obtain documentation and information in order to ascertain the full extent, scope and results of the unlawful investigations carried out by the Respondents into the personal and confidential affairs of the Applicants including:

(1)

information as to the identity of those involved in those investigations; and

(2)

information as to the unlawful means used to obtain the confidential information and personal data.”

It is said that the Applicants “require” this information

“in order to enable them to bring proceedings and take action against those responsible for the illegal activities; in order to enable them to ascertain what information has been obtained; to identify to whom the information has been disseminated; and to prevent further unlawful activity from taking place.”

The breadth of the terms of the Draft Orders sought in the Applications (which are in similar terms for each Respondent) is a reflection of this “requirement”. They seek the disclosure of documents relating to the investigation into the affairs of the Applicant and the provision of witness statements dealing with the oral instructions given, the identity of the investigators, the dates of their instruction and identifying the disclosures made of the information obtained.

The context of these Applications is an action, commenced in the Commercial Court in June 2005, in which the First Claimant is Fiona Trust & Holding Corporation (“Fiona”) and the present Applicants are Defendants. Fiona (and others) seek recovery from Mr Nikitin and Mr Skarga (and others) of over US$500 million on the basis of allegations of conspiracy to defraud and bribery in the management of the Russian maritime fleet. Fiona is a subsidiary of Sovcomflot which controls the fleet and is itself a Russian Government-owned corporation. Sovcomflot is also a Claimant in those proceedings. Ince & Co are the solicitors for the Claimants.

There have been numerous interlocutory battles in the Commercial Court. Some have been and others are yet to be resolved. A Freezing Order was made against Mr Nikitin and is sought against Mr Skarga. Both are resident in England. The Order against Mr Nikitin was made in August 2005. It was capped at $225 million. It was discharged in September 2005, by consent, upon Mr Nikitin providing security to the value of $225 million. In an application by Fiona (made on 7 July 2006) a freezing order was sought for the first time against Mr Skarga and a further freezing order sought against Mr Nikitin on the basis of an increase in the amount of the claim. Those applications have not yet been adjudicated upon. They were heard by David Steel J in October 2006, but the hearing was not concluded.

Mr Nikitin is a Russian businessman who owns or controls a large number of offshore companies involved in shipping. Mr Skarga was, until October 2004, the Director-General of Sovcomflot.

In the course of the applications in the Commercial Court the present Applicants learnt that Fiona and the other Claimants had engaged private investigators to obtain information. A substantial number of reports on the investigation (known as Project Sturgeon) were disclosed voluntarily albeit with considerable passages redacted (said to relate to other persons or corporations).

On 12 December 2006 the present Applicants made applications for disclosure by the Claimants in the Commercial Court. Those applications covered much the same ground as the present applications. Mr White QC, for Richards Butler, said there was a 90% overlap. Mr Tomlinson QC and Mr Dunning QC for Mr Nikitin and Mr Skarga submitted otherwise whilst acknowledging a significant overlap. The context of the application was that it was contended, in opposition to the freezing orders sought (relying on “clean hands” and, to an extent, non-disclosure), that:

“there is prima facie evidence that the Claimants have instigated investigations which have been conducted unlawfully.”

The Commercial Court applications were argued before Mr Justice David Steel on 18 and 19 December when he reserved his judgment. At the time the present applications first came before me (on 11 January 2007) the judgment of David Steel J was awaited. It was handed down on 19 January.

As I have stated, the present applications were made on 14 December. They were served the next day and so a few days after the disclosure applications covering much the same ground (albeit directed to different parties) had been made in the Commercial Court. A cursory reading of the judgment of David Steel J and the orders sought before him is sufficient not only to demonstrate that the disclosure sought was much the same but also that a key factor in both applications was an allegation of unlawful conduct in the acquisition and use of information in the investigations of which the Applicants complain. Unsurprisingly in those circumstances, when the applications first came before me it was the major submission of the Respondents that they should be adjourned pending the judgment of David Steel J and the outcome of an application by Richards Butler to transfer them from the Queen’s Bench Division to the Commercial Court to be dealt with by David Steel J after delivery of his judgment.

In my judgment, good case management, in the absence of any exceptional circumstances, plainly required and requires that one Court should have an overview of all matters relating to or connected with the Commercial Court proceedings and that Court should be the Commercial Court. At the resumed hearing of these applications on 24 January (they were adjourned part heard on 11 January) the parties acknowledged as much. The Applicants sought to explain the issue of these applications in the Queen’s Bench Division on the basis that they were able to obtain an earlier hearing date and it was questionable whether they were “commercial”. Neither point impresses me. If a matter can justifiably be said to be urgent, which, as will be seen, I do not think is the case, the Commercial Court will always do its best to accommodate it. It is inconceivable that any “jurisdiction” point would have been taken or, if taken, succeed. The consequence has been that this court has, as can now be seen, been taken through much material to which David Steel J was referred and with which his judgment shows he had to become and was familiar. Nonetheless, the matter proceeded before me on 11 January to an extent where it would have been arguably even worse case management for me not to complete the hearing and as there was insufficient time (half a day) on that day even to complete the submissions on behalf of the Applicants and as a resumed hearing could be fixed for a date after (as happened) it was expected that David Steel J’s judgment would be available, the submissions were completed following a further day’s hearing on 24 January. In the event, David Steel J refused the applications before him and so the “overlap” point, in terms of actual relief, fell away. The Respondents do, however, attach some importance to the judgment for the reasons referred to below.

The second-named Respondent, Hart Security UK Limited (“Hart UK”) is a company involved in security and private investigation work which the Applicants allege has been involved in the investigations into their personal and financial affairs and has obtained and used confidential information about them. Hart UK has a sister company, Hart Security Limited (“Hart Cyprus”) which is based and registered in Cyprus. Both companies are wholly-owned subsidiaries of Hart Security Holdings Limited which is also based and registered in Cyprus. The evidence includes a witness statement from a Mr Stuart who is Director of Land Operations and General Counsel at Hart UK.

The third-named Respondent, Modus International (forensics) Limited (“Modus”) is an English company. It, too, is involved in private investigation work. Modus has not sought to respond to the Applications (which have been served upon it) in any way since the evidence was served. “Modus International” is described as an affiliate on Hart UK’s website. A related company was incorporated in the British Virgin Islands, Modus International BVI Limited (“Modus BVI”). The evidence is that Modus BVI was struck off the register on 1 May 2005.

The Corporate Intelligence Service Limited (“CIS”) is the fourth-named Respondent to the Application of Mr Nikitin (and others). CIS is an English company. CIS is not a party to Mr Skarga’s Application. CIS has provided reports of private investigations to Ince & Co and others which are alleged to contain confidential information about the personal and financial affairs of Mr Nikitin. Mr Erskine, the sole director of CIS, made a witness statement in response to the Application.

There is a considerable volume of material before the Court. There are significant disputes about the facts and inferences to be drawn from them. Following the decision of David Steel J to refuse disclosure in the Commercial Court action, the major issues between the present parties have become whether “the test of necessity” is met such as to justify a Norwich Pharmacal order and, in respect of pre-action disclosure under CPR 31.16, whether the requirements of 31.16(3)(d) are met and an order is appropriate as a matter of discretion. Essentially, the Applicants submit that they need and are entitled to have information about precisely who did what to obtain what information of the kind complained about and the Respondents submit that the Applicants already have all they need to pursue claims if they truly are minded to do so and to report to the Information Commissioner under the DPA if that is their intention. They also submit that in reality the Applicants’ target is the Commercial Court relief sought in that action not any need to have more information to pursue claims against others.

It is, therefore, with the focus on these issues, that I propose to first address the relevant law and then to seek to summarise the evidence before expressing my conclusions and the reasons for them.

The parties are agreed that three conditions must be satisfied before an order can be made on this basis (preserved by CPR 31.18). They are set out in the judgment of Lightman J in Mitsui & Co Ltd v Nexen Petroleum UK Ltd [2005] EWHC 625 at paragraph 21. They are that:

It is the second of these requirements which is in issue, albeit Hart UK and CIS strongly deny any wrongdoing or being mixed up in any wrongdoing, whilst, as will be seen, the Applicants have asserted and assert that they have a strong and compelling case to the contrary. It is not in issue that the relief is available against those alleged to be wrongdoers as well as others, nor that it is available where the alleged unlawful activity took place outside the jurisdiction.

The second requirement does, however, require some elaboration. The information in question in Norwich Pharmacal itself ([1974] AC 133) was such that without it “no action can ever be begun because the appellants do not know who are the wrongdoers who have infringed their patent” and could not be obtained from any disclosure or witness summons (per Lord Reid at page 174). The jurisdiction remains an exceptional one, albeit it has been developed over the years: Ashworth Hospital Authority v MGN Ltd [2002] UKHL 29 at paragraph 57 per Lord Woolf.

In Mitsui, the decision was that it was not necessary to order a party, said to have become innocently mixed up in wrongdoing by E, to make disclosure of its dealings with E, because the information could be obtained from E by pre-action disclosure under CPR 31.16.

In the course of his judgment, at paragraph 19, Lightman J cited a number of authorities in support of the proposition that:

“Relief can be ordered where the identity of the claimant (sic) is known, but where the claimant requires disclosure of crucial information in order to be able to bring its claim or where the claimant requires a missing piece of the jigsaw.”

At paragraph 27, Lightman J referred, in the context of CPR 31.16, to a purpose of that rule being “to assist those who need disclosure as a vital step in deciding whether to litigate at all or to provide a vital ingredient in the pleading of their case.” I agree with Mr White that the reference in the judgment (paragraph 23) to an applicant being able “fully and properly” to plead a wrongdoing and sign a pleading alleging it are to be read in that sense.

Some of the arguments on behalf of the Applicants might be characterised as a submission that “because your conduct has been so bad and unlawful therefore you must tell us everything about it including the names of those who approached the holders of banking or other confidential information.” I cannot accept that submission. The questions are whether such information is vital to a decision to sue or an ability to plead and whether or not, even if it is, it can be obtained from other sources. The purpose of an order is to enable an applicant to take action which could not otherwise effectively be taken.

The Applicants referred me to the decision of Tugendhat J in Hughes v Carratu International Plc [2006] EWHC 1791. They submitted that the decision was authority for the proposition that it was not material that the claimed information could be obtained through the normal process of disclosure in proceedings. I do not think it is. Not only (it seems) was the point not argued, but I do not find it easy to follow whether the order that was made and the recorded submissions were made on the basis of Norwich Pharmacal or CPR 31.16. In any event, the case itself concerned the identity of the party who had instructed the enquiry agent whose activities were impugned. Thus the target of the Application in that case was the party who might be described as the “prime mover” in or the instigator of the wrongdoing. As will be seen, that is not this case.

So far as material, the rule provides that:

“(1)

This rule applies where an application is made to the court under any Act for disclosure before proceedings have started.

(2)

….

(3)

The court may make an order under this rule only where

(a)

the respondent is likely to be a party to subsequent proceedings;

(b)

the applicant is also likely to be a party to those proceedings;

(c)

if proceedings had started, the respondent’s duty by way of standard disclosure … would extend to the documents or classes of documents of which the applicant seeks disclosure;

and

(d)

disclosure before proceedings have started is desirable in order to

(i)

dispose fairly of the anticipated proceedings;

(ii)

assist the dispute to be resolved without proceedings; or

(iii)

save costs.”

In the present context, the Applicants would have to show that the Respondents would be defendants to proceedings they are likely to commence against them and that in those proceedings the documents they seek would be disclosed by them on standard disclosure. Granted those conditions are met, sub-paragraph (d) requires that it must be shown that there is a real prospect of such an order assisting the fair disposal of litigation if it is commenced, or of assisting the parties to resolve their disputes without litigation, or of saving costs. Granted the reality of one or more of those prospects, there remains an overall discretion whether or not to make an order: see volume I of the White Book at 31.16.3.

I do not think there is a need to set out the detail of the evidence as distinct from a number of conclusions derived from it and the submissions made by the parties about it. Where material I have sought to indicate a source or sources for what is stated:

I am wholly unconvinced by the case for the Applicants. They have, and indeed assert that they have, quite sufficient information to make claims against the Respondents if they are truly minded to do so. So, too, they could provide that information to the Information Commissioner. The sense of the Applicants taking proceedings, with the obvious difficulties of establishing any loss, the lapse of time and the lack of any basis for complaint for the last 16 months or so, seems to me to be hard to fathom. That does indeed suggest that the objective relates to the Commercial Court action and the Applicants’ wish to defend themselves against the very serious allegations they face. But they need no more to take effective steps. There are no continuing threats. They know the prime movers. In agreement with Mr White’s submission, I do not think this relief is intended to enable a victim of unlawful conduct to fine tune a pleading or identify every person of whatever standing who may have committed an unlawful act. I do think, on analysis, and even expressly, that is in reality what the Applicants are seeking.

In my judgment it remains the basic principle that disclosure of information occurs by the familiar procedures applicable to proceedings commenced between the relevant parties. Rule 31.16 provides for the exceptional circumstances to which it refers, but again in an adversarial or potentially adversarial context between applicant and respondent. Norwich Pharmacal relief is the third and last port of call restricted in its application in the respects I have sought to summarise.

If the Applicants have real concerns to know more about the investigations carried out in 2005, and if they wish either to claim against or report those who were responsible, then they are already well able to do so in respect of those (Sovcomflot and Fiona) who instructed and presumably paid for the investigations and information, the lawyers said to have been concerned in that process, and the investigators who carried them out and disseminated the information. There is no justifiable explanation for why those steps have not already been taken. In the course of such proceedings, if (which the evidence strongly suggests is not the case) any other corporations or persons of any significance were involved that should become apparent.

In my judgment the Applicants have wholly failed to establish the relevant necessity to justify the relief they seek. Although Modus have not responded to the Applications, the Applicants could suggest no reason why the outcome should differ in their case.

Mr White submitted that there was no application made against Richards Butler on this basis because the firm was not likely to be a party to subsequent proceedings and both Mr Nikitin and Mr Skarga had acknowledged as much in the evidence and in correspondence written on their behalf. Mr Tomlinson agreed. Mr Dunning did not, at least until Mr White demonstrated (as I think he plainly did) that his submission was correct. The issue does not therefore arise as regards Richards Butler.

The basis of CPR 31.16 is, of course, that proceedings against Hart UK, Modus and CIS are “likely” and that in those proceedings the documents and classes of documents sought by the Applicant would be disclosable. That of course is of some relevance to the Norwich Pharmacal application as the decision in Mitsui demonstrates. But I do not think the Applicants have begun to demonstrate that pre-action disclosure is “desirable” for any of the reasons stated in rule 31.16(3)(d). The proceedings can be fairly brought and pursued by the Applicants without further disclosure. The prospect of further disclosure assisting resolution of the dispute without the need for proceedings is, I think, fanciful. These applications and observance of any order that might be made upon them have served, and I think would serve, to increase costs not to save them.

That conclusion is fatal to the Applications. It will also be apparent from this judgment that I can also see no justification, as a matter of discretion, for making the orders sought. The Applicants have quite sufficient information to take proceedings against those who have the real responsibility for the matters of which they complain. If they do so they will receive in the normal way and time such disclosure as they are entitled to under the provisions of CPR 31.1 to 31.15. Again, no reason was put forward for any different outcome in the case of Modus.

I informed the parties at the conclusion of the hearing on 23 January that the Applications would be dismissed and my reasons would be put into writing. This judgment was supplied to the parties in draft on 29^th January 2007. The terms of the order to be made and any ancillary matters (if they cannot be agreed) will be considered when the judgment is handed down.