Faisaltex Ltd & Others v Chief Constable of Lancashire Constabulary & Anor

This is an application made by the eleven claimants in this matter for an injunction until trial or further order in terms, which will be examined in one moment. It relates to documents that were seized by the defendants in April 2008, pursuant to search warrants granted in respect of a number of premises. The claimants are firstly Faisaltex Limited, a trading company owned and managed by a number of members of the Patel family, and members of that family are the fourth to the eleventh claimants. The second claimant is Hindocha and Company Accountants, a firm of accountants who manage the accountancy affairs of the first claimant and have other business connections with them. The defendants are the Chief Constable of Lancashire and Her Majesty’s Revenue and Customs. Both the police and the customs have been engaged investigating criminal activity relating to suspected counterfeit goods and apparent VAT fraud.

The sequence of events that lead to this application is as follows. These proceedings are concerned with nine search warrants that were issued pursuant to Section 8 of the Police and Criminal Evidence Act 1984, between the 31st of March and the 3rd of April 2008, by His Honour Judge Brown, sitting at Preston Crown Court. Those nine warrants related to a number of different premises. Five were for residential premises connected to members of the Patel family, one was for the place of trade of Faisaltex Limited, two related to premises occupied by Hindocha and Co., and one related to the premises of Faisaltex’s solicitors, Hill Dickinson.

By way of example, and since it features most prominently in this application, the warrant in respect of Faisaltex Limited itself authorised the constables to search for a list of materials identified in a schedule to the warrant, which is described as follows.

“Material that is likely to be relevant evidence and be of substantial value to the investigation of the offence and does not consist of or include items subject to legal privilege, excluded material or special procedure, namely business and personal documents (sales invoices, sales orders, purchase invoices, purchase orders, packing lists, delivery notes, bills of lading, shipping documents, banking and payment information, details of customers and suppliers, contact listing, trade contacts, loans, VAT accounts, itemised billing, diaries, copy VAT returns, product testing and samples, computers and data retention items, that is memory sticks and palm tops, mobile telephones, confirmation of receipt of goods, year end accounts, income tax records, stock lists, stock-take reports, credit checks, due diligence files ancillary notes, corporation tax records, personal tax records, asset acquisition and disposal of correspondence). Items of clothing believed to be counterfeit and including labels, trademarks and packaging, any such item which is likely to be mistaken for a patent brand or trademark, vehicle documents, travel documents (including passports, tickets, etc.) safe deposit boxes, the whereabouts of access to same, any form of documents relating to stocks, shares, gilts, treasury bonds and loans, any other investment details both current and historical whether held in the UK or elsewhere, full particulars of any rent paid to the Patel family or connected companies, their servants and/or agents by any person in relation to any properties held in the UK or abroad in which they have an interest, and full particulars of any account into which any rent is paid or otherwise how such rent is applied. Any other material that would support a prosecution of the suspects for the offences of conspiracy to sell or distribute counterfeit goods, cheating the revenue or conspiracy to pervert the course of justice”.

Those warrants having been issued, they were executed by the police on the 3rd of April, and substantial quantities of material were taken from the various premises. On the 30th of June 2008 the claimants issued an application for judicial review to quash the warrants, and declaratory relief in respect of the searches, and also sought mandatory orders seeking restoration of all of the property taken and of the copies of documents that had by then been made. On the 29th of July the case came before me in the Administrative Court, pursuant to an application for interlocutory relief pending the hearing of the rolled up permission and substantive application for judicial review if any. In fact the parties were able to reach agreement that the material seized would not be accessed by the investigators pending the determination of the application for judicial review, save to enable the material to be loaded onto the defendants’ computers with a view to accessing in due course.

The application for judicial review was heard on the 21st and 22nd of October by the Divisional Court, and judgment was given on the 21st of November 2008. The case has the neutral citation number of [2008] EWHC 2832 (Admin). That substantial judgment of some 95 paragraphs sets out in more detail the relevant facts and the legislative regime, and this judgment in some measure should be read alongside that judgment for full appraisal of those facts and regime.

The result of the application was that the application in respect of the solicitors’ premises was successful, and the warrant in respect of those premises was quashed. All the other applications were unsuccessful, and in the light of that conclusion, permission in fact was refused in the light of the fact that there had been delay in making the application for judicial review in the first place.

Two particular aspects of this judgment are relevant in considering this present application. First, at paragraphs [69] to [79], the Divisional Court considered an argument deployed by the claimants that the warrants, and particularly the warrants in respect of the Hindocha and the Faisaltex, did not permit the police to seize computers on which there may be legal professional privileged (LPP) material, with a view to sorting out back at the police station whether there was indeed any LPP material on a hard disc or elsewhere on the computer, where there were nevertheless reasonable grounds to suspect that the computers contained material relevant to the criminal investigation as identified in the warrants.

The second aspect of the Divisional Court’s judgment is concerned with the subheading of “the execution of the warrants”. In that context the court considered that some of the claimants’ complaints about material being seized in excess of the terms of the warrant could only be established in a more fact-sensitive forum than was available in judicial review proceedings, and pointed out at paragraph [91] of its judgment to a line of authority that civil proceedings for damages for trespass afforded an appropriate remedy for excessive seizure, and in particular excessive seizure that may contravene the terms of Section 98 of the Police and Criminal Evidence Act. The court said as follows:

“In Fitzpatrick MT, Jowitt J., with whom Rose L.J. agreed, said this at page 579(d) to (f):

‘Judicial review is not a fact finding exercise and it is an extremely unsatisfactory tool by which to determine, in any but the clearest of cases, whether there has been a seizure of material not permitted by a search warrant. In my judgement a person who complains of excessive seizure in breach of section 16(8) should not, save in such cases, seek his remedy by way of judicial review but should rely on his private law remedy when he will have a tribunal which will be able to hear evidence and make findings of fact unfettered by Wednesbury principles. In an appropriate case the court in a private law action is able to grant interlocutory relief on a speedy basis on well recognised principles so that in all but the clearest cases of a breach of section 16(8) judicial review has only disadvantages and no advantages when compared with the private law remedy.’

A similar point has been made in a number of other authorities. We agree, we can see no reason why civil proceedings could not establish the extent of any excessive seizure. It was argued by Mr Jones that no civil remedy is available if a police officer acts within the scope of an apparently lawful warrant, see McGrath v the Chief Constable of the Royal Ulster Constabulary [2001] UKHL 39 2001 2AC 731 at paragraph 12. That is so, but there is a civil remedy that it goes outside the scope of a warrant and Section 19 of the Police and Criminal Evidence Act. For example, by seizing material covered by legal privilege, even if at the time of the seizure he was acting on the bona fide belief that the particular seizure was authorised by the warrant. That was established by the decision in Bramley MT, see in particular Kennedy L.J., page 586(f) to (g), with whom Turner J. agreed. We are satisfied that judicial review proceedings are not an appropriate mechanism for resolving the large number of issues of fact as well as of law, which are likely to arise when determining whether excessive seizures have taken place in the execution of these warrants.”

Taking their cue from these observations, the claimants in due course on the 12th of March 2009 issued a claim form seeking damages to trespass to property and goods. No particulars of claim have yet been served, but the brief details of claim state as follows,:

On the same day that the claim form was issued, a notice of application for interlocutory relief was sought with the draft order in the following terms.

“1.

The first and second defendants, their officers, employees and agents be restrained until conclusion of these proceedings or further order from

1.1

reading, copying, accessing or otherwise using any document seized pursuant to the search warrant executed on the 3rd of April 2008 at the premises listed below, or any copies or images thereof;

1.2

using any note of information or record (including those that have been digitally stored) of information taken from the documents referred to at paragraph 1.1 above.”

There were certain provisos for handling material and storing it.

In pursuing this application, Mr Jones QC for the claimants, indicated that it was prompted by the fact that correspondence between the parties from autumn 2008 until shortly before the claim forms were issued had failed to resolve a practical means by which the claimants’ claim to legal LPP in the documents presently retained by the defendants could be determined without compromising the privilege concerned. The defendants had indicated that the process of copying the material onto computer discs was at an advanced stage, and the next stage of analysing the material by the investigators was about to begin. The analysis stage, of course, had been stayed pending the judicial review proceedings, to which reference has been made.

It is appropriate also to point out that considerable quantities of material have already been returned, some either unconditionally, or some on the basis that copies have been retained by the defendants. The court was informed, for example, that some 80% of the extensive material taken from the accountants, Hindocha, is said to have been returned. A quantity of other material taken from residential premises has been returned, as apparently it is now not considered to be relevant to the investigation. However, the paper records of many years trading in textiles at Faisal House, the headquarters of the first claimant, is said to be a very substantial quantity indeed. The court was informed that something in the region of half a million pages of documentary material exist and is retained, and a very substantial amount of material held in electronic form on computers also exists.

Having described the background to this application it is possible for the purpose of dealing with this application for injunctive relief to reduce the claimants’ case to two very broad submissions.

First it is said that even accepting that the warrants were lawfully issued in respect of the premises where warrants were not quashed by the Divisional Court the searches and seizures conducted under the authority of the warrants were excessive. By way of example, Mr Jones QC points to a quantity of children’s material taken from the residential premises, and the sheer scale of the material taken from Faisal House. In respect of the latter, it is submitted in particular that if an officer seized the material when they had reasonable grounds to believe that amongst it was LPP material, they were acting unlawfully. It is said that as a consequence of that excess of seizure, the searches become unlawful, and indeed the entry becomes unlawful, so that all the material taken, whether within the scope of the warrant or not, is unlawfully detained and therefore there is a strong prima facie case of trespass to all the property that has been taken that would sound in damages. However, if the material as a whole has been unlawfully seized and is being read, analysed by investigators over many years, damages are not an adequate remedy, and the case is sufficiently clear at this stage for relief, where a balance of justice favours relief until trial or further order. It is submitted that the terms of the injunction sought reflect the broadly similar approach in the undertaking that was given pending the judicial review proceedings.

Second, the claimants submit even if the broader submission just outlined above does not justify an injunction in the terms sought, then the practical arrangements contemplated by the defendants for identifying whether LPP exists are so defective or unreasonable as to be effectively unworkable and provide no effective protection for the LLP rights of the parties. An injunction should , therefore, be granted prohibiting the investigators having access to any of the material in which maybe found LLP material until a better protocol can be agreed by the parties than is the case at present.

By contrast, the defendants submit that this is manifestly not a case for an injunction for the following reasons:-

In order to identify the argument with a little greater particularity, notwithstanding the earlier citation of statutory authority within the Divisional Court’s judgment, it is necessary to briefly turn to the crucial parts of the legislative scheme upon which the claimants base their case. The starting point is Section 8 of the Police and Criminal Evidence Act 1984, which has the heading ‘Power of the Justice of the Peace to authorise entry and search of premises”. It reads as follows:-

“(1)

If on an application made by a constable a justice of the peace is satisfied that there are reasonable grounds for believing--

(a)

that a serious arrestable offence has been committed; and

(b)

that there is material on premises … which is likely to be of substantial value (whether by itself or together with other material) to the investigation of the offence; and

(c)

that the material is likely to be relevant evidence; and

(d)

that it does not consist of or include items subject to legal privilege, excluded or special procedure material; and

(e)

that any of the conditions specified in subsection (3) below applies … he may issue a warrant authorising a constable to enter and search the premises.”

Therefore, when the matter is before the Justice of the Peace or indeed the Crown Court Judge to issue the warrant in this case, minds have to be applied at that stage to whether the material that is sought, or there are reasonable grounds for believing exists, does consist of or include items subject to legal privilege.

The warrants having been issued lawfully in this case, one can then proceed to Section 15, under the heading, ‘Search Warrant Safeguards’, subsection reads:

It is convenient then to go on to Section 19 of the Police and Criminal Evidence Act under the heading ‘General Power of Seizure’. Again, subsections 1 to 3 are not material. Subsection 4 may be noted since it formed part of the submission that was deployed by the claimants before the Divisional Court and is in these terms:

“The constable may require any information which is… stored in any electronic form and is accessible from the premises to be produced in a form in which it can be taken away and in which it is visible and legible [or from which it can be readily produced in a visible and legible form] if he has reasonable grounds for believing [various matters including] –

….(b) it would be necessary to do so to prevent it from being concealed, lost, tampered with or destroyed.”

Subsection 6 reads:

“No power of seizure confirmed on a constable under any enactment (including an enactment contained in an Act passed after this Act) is to be taken to authorise the seizure of an item which the constable exercising the power has reasonable grounds for believing to be subject to legal privilege.”

That again is a subsection, which is central to the claimants’ arguments.

The claimants submit that if a constable seizes something which he has reasonable grounds to believe is subject to legal privilege, he or she thereby exceeds the authority of the warrant to search for material and therefore breaches or fails to comply with the requirements of Section 68, with the consequence that the whole search, seizure and indeed entry is unlawful, having regard to the terms of Section 15.1.

In support of that broad submission, the claimants rely on certain observations of Jowitt J. in the case of the R v the Chief Constable of Warwickshire, ex parte Fitzpatrick, reported at [1999] 1WLR 564. However, it is common ground that a material part of that reasoning, in particular applying the Section 8 test which is to be considered by the Justice of the Peace in authorising the warrant to the constable in executing it, was expressly disapproved, Jowitt J. dissenting, by the Divisional Court in the case of the R v Chesterfield Justices, ex parte Bramley [2000] QB 576, 584. Since that is the more recent authority, and expressly departed from the earlier case, that, in my judgment, is the authority that should guide this court on this topic so far.

Nevertheless, the claimants themselves rely on a passage in the Chesterfield Justices’ case, ex parte Bramley, at page 585 G. Having noted the terms of Section 19.6, Kennedy L.J., giving the leading judgment said this:

The claimants submit that that was the state of affairs on the evidence, which must have existed at least in the search of Faisal House, the business premises of the first claimant. They point in particular to the terms of the operational order issued to a great many officers who were to take part in these coordinated searches on the relevant day. At paragraph 14 of the order it is said:

The claimants also point out at the end of the order that the officers deliberately chose not to use an alternative procedure. It is said in the order:

The defendants submit that the passage in Chesterfield Justices ex parte Bramley, that the claimants rely on, has been superseded by subsequent decisions dealing with the legitimacy of seizing computer hard discs generally in similar statutory context. It is also pointed out that that submission did not find favour in the Divisional Court in the instant case, where a number of those decisions had been identified and quoted by the Divisional Court. Paragraph [79] of the Division Court’s judgment in this matter is in the following terms:

I can well see that it is highly convenient in the interests of the administration of justice that if police officers are authorised to search for and to seize material within the terms of a warrant that may exist upon a computer, they ought to be able to seize the computer, even if it is known or believed that there may also be LPP material on it, and that any sorting of the LPP material from the relevant material relating to the criminal investigation can be done later. If that possibility was not available, clearly criminals could hide data in solicitors’ offices or in their business computers, wherever there is an intermingling of LPP and other material relevant within the terms of a particular warrant. The claimants say that may be so, but Section 50 of the 2001 Act is the procedure, and that was expressly disavowed in this case.

It seems to me that there is some tension in the Divisional Court judgment between the conclusions at paragraph [91] and [79], as to whether a computer with LPP material on it can be seized. Although at paragraph [79] the Divisional Court was concerned with relevant material. The authorities it cites, which go back indeed to the common law case of Reynolds v the Metropolitan Police Commissioner, [1985] QB 881 , also refer to relevant material. The claimants point out that apart from distinguishing between relevant and irrelevant material under the warrant, that there is the different express terms of Section 19(6) concerning LPP material which is what the court in Chesterfield was commenting upon.

The claimants satisfy me that there is a serious triable issue as to whether he is entitled to damages if the police seize a computer which is known to contain LPP material on it along with other material which is in within the scope of its warrant. However, in my judgment, that issue does not support the broad injunctive relief the claimant seeks in justifying the return of all of the material, or its non-access pending a resolution of the claim for return. I reached that conclusion for four reasons.

First, it does not follow that if LPP material is seized in contravention of Section 19(6) of the Police and Criminal Evidence Act 1984, that Section 16(8) is not complied with. The terms of the statute, and in my judgment, the judicial learning explaining it since the decision in Fitzpatrick, points to what the individual officer is actually searching for when executing the warrant. As long as the individual officer is searching for material included within the warrant, he is, in my judgment, acting within the terms of the warrant, and the search is in accordance with the warrant for the purposes of Section 16 (8). He is therefore given the authority to enter the premises and search. It is only if he is deliberately searching for something outside the property identified in the warrant that the protection under Section 16(8) bites, with the consequences identified in Section 15(1).

Second, it does not follow that because a computer may contain both warrant material, that is to say, relevant material authorised to be searched for and seized under a warrant, and LPP material, that a person is not intending to search for and seize the warrant material, therefore the whole seizure is not unlawful even if there is liability for damages if LPP material is seized.

Thirdly, precisely what is in the state of mind of an individual officer who seizes a particular computer or indeed documentary material is a question of fact, which will have to be investigated at trial and cannot be resolved by the general search instructions to which the claimants make particular reference and place considerable reliance upon. And even if those search instructions may have been too broad, that does not necessarily mean that the officers who took hold or particular material were not looking for material that they were entitled to look for under the terms of the warrant.

Finally, as has already been anticipated, wherever there are questions of fact, which will need to be resolved, they will have to await trial and cannot conveniently be disposed of on the papers on the state of the evidence before the court today. In this respect therefore, the practical disadvantage in considering excessive restraint questions in judicial review proceedings is also reflected in similar practical disadvantage before this court today. I accept, of course, that the Divisional Court has pointed out that ordinary civil proceedings, including in an appropriate case an injunction application, are available as a matter of principle to restrain seizure, but for the reasons I have sought to identify, it is not an appropriate case where the outcome as to whether something is in fact unlawful or not turns upon investigation in more detail of particular documents searched by a particular officer or as indeed a particular object such as computers. The evidence does not persuade me that there is an inference that the officers were deliberately searching for excluded material as opposed to warrant material.

I therefore turn to the second broad limb of the claimants’ application, namely that the practical arrangements made to date are so defective as to require the relief sought until better arrangements can be agreed, or in the absence of agreement, imposed by a judge in a case management hearing pursuant to the management of the civil proceedings that the claimants now bring.

Although a great deal of evidence has been filed on the question by the claimants, their solicitors and by the defendants, I do not accept that taken as a whole, the evidence supports an injunction in the terms sought on this basis at this time. There is no reason to believe that the defendants have the slightest interest in accessing or retaining LPP material wrongfully, even if it is wrongful that they have possession of it at all. It appears to the court that the outline arrangements identified in the defendant’s correspondence and evidence before the court are capable of providing a reasonably effective procedure. As the court understands it, that procedure is in the following four parts.

First, if material that was known or believed to be LPP has in fact been taken, it is blue- bagged, that is to say it is put in a bag, the contents of which cannot be seen by the investigators, and is stored separately. Second, independent counsel, members of the bar instructed to assist precisely on this question then are able to inspect that material and give their own opinion on whether LPP as defined in Section 10 of the 1984 Act is made out or not. In the course of the final formulation of an opinion there is an opportunity for the claimants to submit that material is LPP, and they will be able further to identify in advance anything which they submit is LPP once they get hold of the documentary material in an electronic form, or the electronic material in the revised form that they have sought from the defendants and which the defendants have indicated that they would or have given it to them. So either by raising the claim independently or through the independent counsel procedures, the claimants will have an opportunity to make informal representations through their solicitors on the issue of whether LPP does apply to a particular document or file or part of the computer. And the final piece of the procedure is that if despite representations the claimants remain dissatisfied as to the view of the defendants as to whether LPP is made out, then indeed the claimants can apply to the circuit judge under Section 59 of the Criminal Justice and Police Act 2001, and the Crown Court Rules made to give effect to that right.

The claimants submit that bringing the Crown Court judge into the question in order to determine what is LPP or not complicates and duplicates what may need to be determined in due course in these civil proceedings. I disagree. The civil proceedings are primarily for damages to be assessed at the end of this process, where a number of events and issues are yet to happen and to be unravelled. If there is a clear ruling by the circuit judge on what is or is not LPP, then that will serve to clarify the issues, and indeed as pointed out by the defendants, might enable the claimants to mitigate any loss they may have by prolonged detention of material which the defendants should not either have obtained or retained, and it does indeed enable the execution of the warrant authorised by the crown court to be supervised by it according to law by the responsible authority contemplated by the Act of Parliament.

Although the claimants are not enthusiastic about the performance to date of the independent counsel, their complaints were not accepted by the Divisional Court on that question, and independent counsel has been a practical feature of the solution of this kind of problem that have been endorsed by the courts in more than one case. Indeed, it is pertinent to note that in the papers before the court, following the Divisional Court’s quashing of the warrant with respect to the claimants’ solicitors, another application was made by the defendants for production orders to the Crown Court at Preston, and that gave rise to a preliminary issue raised by the claimants as to whether that was a possible proceeding in the case. The ruling of Judge Cornwall, dated the 9th of February 2009, is before the court, and he gives a number of reasons why the use of an independent counsel mechanism is appropriate. He said this:

This therefore leaves the simple logistical questions of whether the claimants and their solicitors can process the material now being supplied in the various electronic or computer formats by the defendants in time to be able to make claims of LPP before such documents may inadvertently come before the attention of the investigators. There is, as indicated, disputed evidence as to how practical searching software that has been supplied is, and how practical the timescales indicated by the defendants are.

The defendants point out that the claimants have already had some months in respect of the material that was on the computers that were returned to them,. Although it is accepted that there may have been modification of the computers by subsequent use, so that does not exactly mirror that which was retained by the defendants, they have now received images of the same form as the material retained by the defendants. There is in principle a search engine facility available in which the claimants could instruct their solicitors as to the names of all legal advisors who may have given legal advice that may in due course come within the definition of LPP material within the statute, which they could enter into the search engines The evidence as to the practical difficulties in the search engines being unable to identify the relevant material is somewhat speculative at this stage, and is not based on concrete experience because the electronic searching by the solicitors has not really been undertaken.

The defendants have continued to refine the proposals in the protocol, and the present proposals are that the material is supplied in portions on disc form, and that in respect of each portion a period of 30 days to respond to each portion to make claims of LPP is reasonable in all the circumstances. Given, one, there is independent counsel available to assist on the elucidation of LPP, two, the fact, as the court accepts, that the investigators have no interest in looking at material that is LPP unless and until it has been decided authoritatively that it is not LPP, and three that the claimants will be able to make a significant contribution to the process of identifying material which they claim to be LPP, I do not see why these arrangements would not be reasonably practicable if given effect.

There was earlier a question as to the costs of instructing solicitors by the claimant to perform this task, but there is nothing in the statute that requires the defendants to pay for legal assistance for the claimants to object to the material that the defendants submit has been seized and removed in accordance with the terms of the warrant. Of course, if the claimants’ primary claims are right and the material has been wrongfully seized and removed, then it may well be that the cost of identifying precisely what has been wrongfully seized and removed will be recoverable in due course as an aspect of a damages case, and so the costs matter is not now central in the claimants’ case for an injunction.

As to the software problems, it seems to the court that wait and see is by far the preferable approach, if notwithstanding the general assessment already given it turns out that there are particular problems in the search tools, or teething problems in getting a system that will enable the search to be conducted with reasonable expedition and efficiency, there is no reason why the parties cannot discuss the matter amongst themselves to see whether a more efficient search tool can be found.

The court of course understands that searching through a large quantity of material is a task of some magnitude and some potential complexity and difficulty, but the core material which might be the subject of LPP should by one of the various mechanisms identified to date come to light, and if that means that independent counsel are called upon to exercise the judgment more often than might otherwise have been the case, well so be it. It is not a sufficient basis to stop the process of sifting and getting underway with analysis of the material that is within the warrants and which is potentially relevant to whether a criminal offence has been committed by anyone that would result in charges from beginning.

I would certainly expect the defendants to respond pragmatically and sensibly to any evidence of real problems, which the claimants may have in implementing the system identified. Beyond that the court considers that the defendants have a very serious and weighty point indeed that the history described earlier in this judgment date has resulted in twelve months elapsing nearly since the search, and no analysis of what has been seized under the terms of lawfully issued warrants has been undertaken yet. It is certainly time for that process to get underway to enable the public authorities to perform their important duties in the public interest.

In my judgment, therefore, the relief sought is far too broad, and is not necessary to protect the interests of the claimant pending the trial of the issues that I have identified in the earlier part of this judgment. In all the circumstances therefore, this application is refused.