Collateral use undertakings: High Court grants permission to disclose schedules to claim in response to foreign court order

The High Court has allowed a party's application for permission to disclose schedules to its particulars of claim, which contained information the defendants had provided in response to a worldwide freezing order and which was subject to a collateral use undertaking in the proceedings, to a foreign investigator in response to a foreign court order: JSC Commercial Bank Privatbank v Kolomoisky [2024] EWHC 1837 (Ch).

Where a party discloses documents during litigation, the recipient is prohibited from using the documents, or the information they contain, for any purpose outside the proceedings in which they are disclosed. This common law principle is reflected in CPR 31.22, and there is a similar rule for witness statements at CPR 32.12. These restrictions are subject to certain exceptions, including (in broad terms) where the document or witness statement has been used at a public hearing – but the court can direct that the restrictions remain in place even in those circumstances.

An undertaking against collateral use is also contained in the standard form freezing injunction annexed to CPR Practice Direction 25A. This provides that the applicant will not, without the court's permission, use any information obtained as a result of the order for the purpose of any other civil or criminal proceedings. Unlike the collateral use restrictions at CPR 31.22 and 32.12, however, it is not subject to an exception where the information is referred to at a public hearing. Parties therefore need to ensure they obtain a specific release from the undertaking if they wish to use the information for the purpose of other proceedings.

The present case illustrates how the court will approach an application to release collateral use restrictions where a party is required to disclose information in response to a foreign court order. While the burden is on the applicant to show special circumstances justifying release of the restrictions, the risk of criminal sanction in a foreign jurisdiction may well amount to a sufficiently special circumstance justifying release. Further, where the information has effectively entered the public domain by being referred to extensively in open court, that will be an important factor in favour of granting the release – even if there is no automatic release in the circumstances of the case (including where, as here, the restrictions were contained in an undertaking in a freezing injunction).

The decision is also of interest for the court's comments on whether a schedule to a statement of case which merely particularises some part of the party's case forms part of that statement of case for the purposes of CPR 5.4C. That rule provides that a statement of case is publicly available without needing to obtain the court's permission, but not any document "filed with or attached to" it. The judge expressed some doubt as to the court's conclusion in HRH Duchess of Sussex v Associated Newspapers [2020] EWHC 2160 (Ch) that a schedule of this sort would not be available without the court's permission, but did not need to decide the point. The judge's doubt on this point suggests that there may be some uncertainty as to whether parties can prevent particulars of their claims or defences becoming public by including such particulars in a schedule rather than the main body of the document.

Background

In 2017, a Ukrainian bank issued a claim in the English court against various defendants including its former majority shareholders, Mr Kolomoisky and Mr Bogolyubov (the "Majority Shareholders"). The bank alleged that the Majority Shareholders had masterminded a large-scale fraud against it.  

After a 2023 trial, but before judgment, the bank received an order in May 2024 from a Kyiv District Court related to ongoing criminal proceedings against Mr Kolomoisky in Ukraine (the "May Order"). The May Order required the bank to allow the Ukrainian Bureau of Economic Security ("BES") to have access to various documents, including the bank's English court claims with all associated schedules.

The bank considered that it needed the English court's permission to disclose two specific schedules to the particulars of claim (the "Disputed Schedules"), which contained information originating from asset disclosure given by the Majority Shareholders in response to a worldwide freezing order, despite that information having been referred to extensively at trial. The freezing order had contained a standard form collateral use undertaking to the effect that the bank would not, without the court's permission, use any information obtained as a result of the order for the purpose of any other civil or criminal proceedings. Further, an English  court order in July 2022 had stipulated that the Disputed Schedules would not be considered public domain information due to being read to or by the court (including at trial), and would remain subject to the collateral use restrictions under CPR 31.22 and/or CPR 32.12.

The bank applied for permission to disclose the Disputed Schedules to BES, which the Majority Shareholders opposed.

Decision

The High Court (Trower J) allowed the bank's application for the reasons set out below.

The court acknowledged that, usually, the restrictions contained in CPR 31.22 and CPR 32.12 no longer apply when a document or witness statement enters the public domain by being read to or by the court at a public hearing. However, due to the collateral use undertaking given at the time of the worldwide freezing order, and the July 2022 order disapplying the public domain exception in CPR 31.22, the court's permission was required.

The court referred to the test established in Crest Homes [1987] AC 829 as to when permission should be granted to use documents that are subject to a prohibition on collateral use. According to this test, an applicant must establish cogent and persuasive reasons to justify the release of the undertaking. There must be special circumstances warranting such release, and it should not result in injustice to the party who originally disclosed the information (here the Majority Shareholders).

Special circumstances for granting relief?

Against that background, the bank relied on four points as establishing special circumstances for why the relief should be granted.

1. Service of the May Order on the bank

The bank submitted that the court will normally release a collateral undertaking in response to a request from criminal authorities.

The court recognised that this was an important factor. As per National Bank v Mints [2020] EWHC 3253 (Comm), claimants should not have to face a stark choice between the risk of being in contempt of court in English proceedings or the risk of criminal sanction in a foreign jurisdiction. Such a double risk creates a sufficient special circumstance capable of justifying a release from the undertaking against collateral use, having regard to all the other circumstances of the case.

In the present case, there was some question as to whether the bank was under an immediately enforceable obligation to produce the schedules to BES. Even if it was not, however, there was a very strong possibility that the bank might be put in a position where it was required to comply at any time.

The court distinguished the present case from ACL v Lynch [2019] EWHC 259 (Ch) (see our blog post), where the court refused to release a claimant from a collateral use undertaking due to a subpoena from a US grand jury. In the court's view, there were some important points of distinction with ACL: (i) in that case, the judge considered it likely that the party to the English proceedings was not actually bound by the US court's order; (ii) that was a pre-trial application and the court was concerned about the US's prosecutor's attempt to obtain disclosure of witness statements which had not yet been adduced in evidence, which would be highly prejudicial to the defendant; and (iii)  the court was concerned about the subpoena's wide terms and made a finding that the US court itself had not been involved in its formulation.

The court rejected the argument that there was a weak case for the Ukrainian court to compel production in the present case. The Ukrainian judge was very clear that the documents concerned were of material importance for ascertaining the facts of the crime independently as well as in conjunction with other evidence. The court was not able to challenge that conclusion, including because it appeared to be well-founded.

Overall, the court accepted that the May Order was not a trump card, but found that it had very considerable weight.

2. Public interest in the investigation of fraud

The bank submitted that the fact the investigation of fraud in the Ukrainian criminal proceedings was in the public interest was itself a factor weighing heavily in favour of exercising the court's discretion to allow disclosure. In assessing the weight to be attached to this factor, it was important that the May Order stated that the documents referred to were relevant to the criminal proceeding.

The court agreed with that submission, which it said was supported by the Court of Appeal's decision in Marlwood Commercial Inc v Kozeny [2004] EWCA Civ 798: "in the absence of any special factor in the individual case, the public interest in the investigation and prosecution of serious fraud outweighs the general concern of the courts to control the collateral use of documents produced compulsorily on disclosure".

3. Information already in the public domain

The court was satisfied that with a few de minimis exceptions the information in the Disputed Schedules had come into the public domain as a result of being referred to at the trial. This alone was a powerful consideration and a strong reason why permission should be granted, as the public policy considerations against collateral use have much less significance after the material has entered the public domain at a public hearing.

The court also considered the argument that the Disputed Schedules were part of the claimant's particulars of claim and therefore open to public inspection under CPR 5.4C, which allows public access to a statement of case – but not any documents filed with or attached to it – without the need for the court's permission.

The judge noted that one might assume the Disputed Schedules were part of the statement of case, given that they simply detailed the allegations made in the particulars of claim. However, the Majority Shareholders relied on HRH Duchess of Sussex v Associated Newspapers, referred to above, in which the court held that such a schedule would not be open to public inspection without a specific application under CPR 5.4C. While the judge expressed some doubt about that conclusion, where the schedule is "a straightforward particularisation of some part of a party’s case", he proceeded on the basis that the Disputed Schedules were not available to the public as of right under CPR 5.4C, given that the court was able to grant or refuse permission whatever the answer.

4. No specific prejudice or injustice to Majority Shareholders

The court acknowledged the risk of the Majority Shareholders suffering some prejudice in their private and confidential financial information being shared with the BES, but this was not prejudice that amounted to injustice as per Crest Homes. That information was already in the public domain, which was a very strong factor in support of the underlying undertaking being released. The present case differed from ACL, in which releasing the undertaking would have facilitated one side to do what the court called "peering into the defendant's case" at a stage in the proceedings in which that would have given the claimants an unjustified advantage.

No requirement for mutual legal assistance arrangements

The Majority Shareholders argued that the May Order should have been sent by way of international Letter of Request, given the comity issues that arise, and it was improper to use the May Order to secure access to documents held by the bank's lawyers in England.

The court rejected that submission. The May Order did not circumvent any mutual legal assistance arrangements. It was made by a Ukrainian judge, for a Ukrainian criminal investigation, seeking information from a Ukrainian bank. Although the Disputed Schedules had not been sent to the Ukraine, it was inevitable that much of the information they contained would already have been in the hands of the bank in Ukraine. In any event, the Disputed Schedules were already in the bank’s possession and control, as it could have required its solicitors to send them to Ukraine at any time.

Whether any available process should have been used in a particular case is part of the balancing exercise and will often be an important part of that exercise, but its weight will depend on the circumstances. In the present case, it did not outweigh the cogent and persuasive reasons provided by the bank for why the court should grant the application.

Compliance with the GDPR

The Majority Shareholders argued that granting the application would be incompatible with their rights under the GDPR, and specifically article 44 which prohibits the transfer of personal data outside the UK unless certain conditions are met.

The court rejected that submission on the basis of article 49(1)(e) which allows for the transfer of personal data if it is necessary for the establishment, exercise or defence of legal claims. In the present case, the relevant claim was the proceeding which led to the May Order, which was an order of a foreign court seeking information with a view to the fraud investigation into Mr Kolomoisky's conduct. This interpretation of article 49(1)(e) aligned with the Information Commissioner's Office guidance, which makes clear that the exception applies if the data controller and another person involved in a legal claim have received a request for information from an overseas regulator with a view to potentially taking formal action.

Further, the court noted that since the information was already in the public domain, the presence of personal data in the Disputed Schedules did not weigh heavily in the balancing exercise when determining the right order to make.

Conclusion

Having regard to the terms of the May Order, the information contained in the Disputed Schedules, and the fact that it was already in the public domain, the court found that the public interest in investigating the alleged fraud substantially outweighed the courts' concern to control the collateral use of documents disclosed under compulsion. As a consequence, the bank had shown special circumstances for the permission it was seeking and granting that permission would not result in any prejudice amounting to injustice to the Majority Shareholders.