English court mirrors Hong Kong SAR approach to seal and gag and third party disclosure orders

The Commercial Court of England and Wales, in a recent judgment, opted to bifurcate – or separate – applications for the two orders sought by Cancrie Investments Limited SARL (Cancrie), as the most effective way to ensure it would be able to enforce a judgment against an individual, Zulfiqur Al Tanveer Haider. 

Kate Henry, civil fraud specialist at Pinsent Masons, said “Parties seeking third-party disclosure with an applicable seal and gag order should take heed of the judgments in this case and consider making bifurcated applications. This is the approach that has previously been followed in Hong Kong SAR and the BVI and can help strike the balance between assisting court orders to be brought into effect and policed, while also preventing dissipation and tipping off and allowing necessary parties to be present at application hearings where possible. The judgments also demonstrate the importance of applicants demonstrating a real risk of asset dissipation and seeking disclosure of an appropriate ambit.”

Third-party disclosure orders compel a third party who is not a party to proceedings, such as a bank or a corporate administrator, to provide certain information or documents about the case to the court. If an application for third-party disclosure is made ‘without notice’, the application is heard without the defendant in the main proceedings being present so that they are unaware of the proceedings. Seal and gag orders are often granted alongside without notice third-party disclosure orders to prevent the third-party from telling the defendant about the impending disclosure order. This dual approach is intended to stop the defendant from taking steps to frustrate the purpose of the disclosure order.

In this case, Cancrie assigned a judgment debt ordered against Haider following a UAE court finding that he was liable for the sum of around £81,671,000. Cancrie then sought to enforce the judgment in England and Wales. As part of this process, a worldwide freezing order (WFO) was granted to prevent the dissipation of assets by Haider.

After the WFO was put in place, Haider had failed to disclose valuable assets – despite public records confirming his ownership; had attempted to sell the only substantial asset he had admitted to owning without informing Cancrie; and had provided his ordered asset disclosure late, without any explanation, and without having been sworn.

Cancrie originally attempted to seek ‘wrapped-up applications’ for seal and gag orders and a third-party disclosure order at the same time, both without notice to Haider and EFG Bank, the third-party against whom the disclosure order was being sought. EFG Bank was a bank with which Haider was known to have an extensive banking relationship, including, but not necessarily limited to, cash accounts, a lending facility, and investment portfolios.

Mr Justice Butcher, hearing the wrapped-up applications, decided that they should not be heard in private in the wrapped-up form. He also questioned whether the wrapped-up applications should be heard without notice, at least to EFG Bank. Cancrie sought and obtained adjournment of the wrapped-up applications accordingly.

Cancrie then brought fresh, bifurcated applications, which it requested to be heard in private. The first application sought seal and gag orders and the second application sought a third-party disclosure order.

Cancrie’s seal and gag application was heard by Mr Justice Bryan in private, with a private judgment to follow. This was on the basis that to hold the hearing in public would defeat the object of the application. If Haider was to find out that the hearing had taken place, he would potentially realise that Cancrie was searching for assets and there was a risk that he would attempt to further dissipate his assets or place them beyond reach of Cancrie, given his past behaviour in the proceedings

Mr Justice Bryan granted the seal and gag orders as they were held to be necessary in this case. He also confirmed that the need to ensure that court orders are respected and effective outweighs the usual need for transparency and public proceedings. The seal and gag orders were put in place until the conclusion of the hearing of Cancrie’s third-party disclosure application. This was because EFG Bank would then have the opportunity to oppose any further extension to the seal and gag orders at the hearing of the third-party disclosure application.

Jennifer Craven, civil fraud expert at Pinsent Masons, said: “The granting of initial seal and gag orders in private and without notice to a defendant provides the right balance between ensuring that court orders can be adequately affected, and the principles of open justice. It is important that where a party, such as the victim of a fraud, is seeking to investigate and identify additional information from another party or alleged fraudster, it considers the ways in which it might usefully secure court orders that enable it to obtain information without tipping off the other. A potential fraudster, otherwise armed with the knowledge that information is being gathered, may well seek to destroy or conceal information that would assist in identifying the whereabouts of valuable assets, potentially dissipated by fraudulent means. These orders are a clear example of the English court’s power to grant extremely effective remedies in support of a party’s investigation”. 

Mr Justice Bryan granted Cancrie’s third-party disclosure application on the basis that it was a targeted request and sought enough information to assist the company without crossing the line into ‘fishing’ for evidence of breaches of the WFO. Additionally, the judge held that the third-party disclosure application was just and convenient and necessary in the interests of justice as Haider’s behaviour in the proceedings had demonstrated a real risk that assets would be dissipated. Any inconvenience and cost to EFG Bank was likely to be limited.