Financial Remedy: Confidential and Illegal Material

Divorce & Matrimonial Finance

25 February 2020

The purpose of this article is to (a) review the guidance set out by the Court of Appeal in the case of Imerman v Tchenguiz and others; Imerman v Imerman [2011] 1 All ER 555 which was heard on the 10th to 12 of May 2010, judgement being handed down on the 29th of July 2010 and (b) to comment on developments and case law following the Imerman decision.

The facts in the Imerman case were briefly that, fearing that the Husband would conceal his assets, one of the Wife’s two brothers (“the defendants”), with the possible help of others, accessed a server in an office they shared with the Husband and copied information and documents stored by the Husband.  From that material, they printed out 11 files and handed them to their solicitor.  The defendants’ solicitor arranged for a barrister to sift the documents for those in respect of which it was thought the Husband could claim legal professional privilege, which resulted in 7 files of documents.  Those 7 files were then passed on to the Wife’s solicitors (who had already issued a Form A giving notice of intention to seek ancillary financial relief in the Family Court) and copies of the 7 files were also sent to the Husband’s solicitors.

The Court of Appeal in Imerman dealt with 3 interlocutory (cross) appeals namely:

  • an appeal by the defendants against Eady J’s decision in the Queens Bench Division whereby they were restrained by Eady J from communicating or disclosing to third parties including the Wife and the defendants’ solicitor any information contained in the documents and from copying or using any of the documents or information contained therein. The defendants were also ordered to hand over all copies of the documents; and
  • an appeal by the Husband against Moylan J’s decision in the Family Court in respect of the financial remedy proceedings, which ordered that the 7 files be returned to him so he could remove any material for which he claimed privilege but which then had to be returned to the Wife for use by her in the matrimonial proceedings; and
  • a cross-appeal by the Wife against Moylan J’s decision seeking (a) more control over the process by which the Husband could assert privilege and (b) reversal of Moylan J’s refusal to restrain the Husband from disposing of certain memory sticks.

The Court of Appeal duly (i) upheld Eady J’s decision in the Queens Bench division and (ii) varied the order/s made by Moylan J in the Family Division [para 153]. The consequence of this was that the Court of Appeal ordered that subject to one set of documents being held by the Husband’s solicitors (in case those documents included documents disclosable in the ancillary relief proceedings) the defendants had to return all copies of the documents and were enjoined from communicating any of the information they had gleaned therefrom. The reasoning behind this was that the judge hearing the ancillary relief application would, upon deciding it would be fair and proportionate to do so, be able to see all or any of the documents.

In the course of its judgement, the Court of Appeal in Imerman held in particular as follows:

  • Spouses can claim the right of confidentiality (with the normal rules of equity applying) against each other [para’s 74 & 84-89] with each case depending on its own facts;
  • A claim for breach of confidentiality may be defeated by a defence of unlawful or intended unlawful conduct [para 142];
  • In respect of the so-called Hildebrand (Hildebrand v Hildebrand [1992] 1 FLR 244) rules, there is no legal basis for such rules save for the retention of the narrow rule/ratio as to the time at which copy documents obtained in breach of confidence or illegally should be disclosed to the other spouse [para’s 41 – 42 & 120];
  • Although the admission of improperly obtained material (whether in breach of confidence, tortuously or even criminally) is permissible, the Court has a discretion to exclude it [para 170] and will consider the relevance in light of all the circumstances including the evidence and its case management powers [para 174 -177].

It will be noted that in Imerman the actions of the defendants and the Wife were deemed to amount to pre-emptive “self- help” and the Court held that the rules and the judge’s application of the rules must be robust to prevent such conduct [para 137] given that in the appeal the Wife was not entitled  to the confidential material at the stage that she obtained it.

The Appeal Court analyzed the Family Proceeding Rules 1991 (which have now been replaced by the Family Procedure Rules 2010 which came into force on the 6th of April 2011 some 9 months after the judgement was handed down) and distinguished between (i) the disclosure of relevant facts and matters; (ii) the discovery of relevant documents; and the evidence required to establish the relevant facts [para’s 25-33].  The Court also observed that judges (in financial remedy proceedings) have far greater control than they have under the CPR in normal civil proceedings, over which documents should or should not be produced in evidence [para 34].

Towards the end of the judgement, the Court of Appeal observed that on its analysis of the law in this case, it was unlikely that questions as to the use of unlawfully obtained documents would arise in the future [para 174].  However, the Court indicated that the question for the Court in the future would be, the extent to which the Wife’s recollection of information derived from unlawfully obtained documents may be deployed to establish the inadequacy of the Husband’s disclosure [para 174].

The Court concluded its judgement [para 174] by re-iterating that in ancillary relief proceedings the Court has a discretion whether or not to admit unlawfully/wrongly obtained evidence and that it in exercising that power, “the Court will be guided by what is ‘necessary for disposing of any application for ancillary relief or for saving costs’ and will take into account the importance of the evidence, the conduct of the parties, and any other relevant factors, including the normal case management aspects”. The Court observed that ultimately it is required to carry out a balancing exercise, which is easy to state in general terms but often difficult to effect in individual cases in practice [177].

As is apparent from its judgement, the Court of Appeal also touched on parties’ article 8, 6 and 10 Convention Rights [para 154] and their rights under the criminal law and Data Protection Act 1998 [para 92-94 & 102-104].

It will be noted that since the Imerman case, the Supreme Court has dealt with the duty of parties’ (ongoing) duty of full and frank disclosure (and material non-disclosure) in the context of consent orders in the cases of Sharland v Sharland[2015] UKSC 60 and Gohill v Gohill  [2015] UKSC 61 and the Data Protection Act 2018 came into force on the 25th of May 2018.

Turning to case law post Imerman, two cases in particular, illustrate the application of the law.

The first of these is the case of Thum v Thum [2019] EWFC 25.  This was for the Wife’s enforcement application on the 16th of April 2019 relating to a disclosure order which had been made at the First Appointment (“FDA”) on the 5thof December 2018.  At the FDA the issue had been certain documents stored on a flash drive which the Wife found in the parties’ joint safety deposit box in Zurich.  It was password protected.  The Wife alleged that the stick was in an envelope on the front of which the password had been written.  This was disputed by the Husband who alleged that the Wife must have accessed the flash drive using a technology specialist.  The Wife agreed to deal with the flash drive and its contents as if they were Imerman documents.  On the Husband’s behalf it was accepted that disclosure of Wife’s list (para 10) of documents would be given save for one document.  Disclosure by the Husband was duly ordered by 4 pm on the 7th of December 2018.  The Husband failed to comply with the Order for Disclosure.

At the hearing of the Wife’s enforcement application, Mostyn J indicated [para 10-11] that even though the disclosure order had not been opposed, the para 10 documents still had not been produced.  The Court went on to observe that “the Court finds itself in the absurd situation where these documents are sitting on the flash drive which is in the possession of the husband’s solicitors as well as on a copy of the flash drive held by the Wife’s German lawyers but still they have not been produced either to the Wife’s English solicitors or to the court.  The reason that they have not been produced is because the husband flatly refuses to comply with my order without good reason…… He has deployed a variety of excuses, none of which, in my judgement, is tenable” [para 10 -11].

After dealing with the Husband’s reasons for non-disclosure which included commercial confidentiality and/or the risk of civil and/or criminal sanction if he were to comply with the Disclosure Order, Mostyn J held as follows [para 33]:  “I am completely satisfied that the husband faces no risk whatever were disclosure of the documents to be made.  I am completely satisfied that the conduct of the husband amounts to improper filibuster, mounted in bad faith, consistent with his attitude and conduct from the very dawn of this case”.

Mostyn J accordingly granted the Wife’s enforcement application and ordered [para 35] that in order to cut through the “nonsensical” position that the Court found itself, disclosure of the para 10 documents should be made from the flash drive retained by the Wife’s German solicitors.

The second case is that of Akhmedova v Akhmedova [2020] 4 WLR 15.  The facts were that on the 20th of December 2016 a final order was made by Haddon-Cave for the Husband to pay the Wife £453,567.152 in settlement of her financial claims.  The Husband failed to pay the sum awarded and disengaged from the proceedings.  The Wife initiated a range of enforcement proceedings and on the 30th of September 2019 applied for directions as to how to treat a bundle of financial documents provided to her by a former employee of the Husband which had or may have been illegitimately obtained and which may have attracted confidentiality and/or legal professional privilege.  The Husband did not appear nor was he represented.

Knowles J handed down judgement on the 22nd of November 2019.  In respect of the directions, the Court summarized the law and in particular referred to the Imerman at [17 read with 29-52].

In granting the Wife’s application, Knowles J took into account all the circumstances of the case when exercising her discretion [33-42] including the Husband’s contempt of the court’s orders and disengagement of the process which meant that he could not be expected to give any or any proper disclosure and the fact that the Wife did not deliberately omit to seek directions in the hope of obtaining some improper advantage.

Knowles J dealt with the effect of impropriety [19-23] and the issue of privilege [24-27 and (lack of proper) service [28].

Knowles J also went on to deal with the guidance set out in the case of UL v BK (freezing orders:  safeguards: standard examples) [2013] EWHC 1735 (Fam) [18, 30, 31 and 43-48].  In the UL case the Wife had obtained an ex parte freezing injunction and also had accessed confidential documents of the Husband’s which had been stored in his safe.  The Husband’s case was that the Wife’s application for a freezing injunction had violated every known principle governing a freezing application.  The Husband gave an undertaking not to dispose of the assets pending the resolution of the financial remedy proceedings.  Mostyn J gave guidance in respect of freezing injunctions generally [51-53] and specifically in respect of illegally obtained documents [54-56].

As Knowles J indicated [18] para 56(iii) – (iv) of the UL case includes guidance to solicitors who receive confidential or improperly obtained documents and deals with the situation where the other party is unrepresented, which is:  (a) solicitors are to return the documents to the other party’s solicitors who (as officers of the court) can then ensure that they are preserved and that proper disclosure is given, or (b) in the event that the other party does not have solicitors, to obtain directions from the court, such directions which may include the party seeking disclosure to pay for an independent lawyer to deal with the disclosure issue [43-48].

Knowles J also at para’s 48 – 52 of her judgement deals with the fact that at  the time of her judgement (ie, 22nd of November 2019) there was a difference between civil search orders and such orders in the Family Division especially in respect of how issues relating to privilege were handled.  At para’s 49 and 50 Knowles J observed:  “It is clear that in both forms of order, the supervising solicitor undertakes to provide ‘an explanation that the respondent may be entitled to avail himself of the privilege against self-incrimination and legal privilege’.  However the Family Division order (Order 3.2) has no equivalent of para 11 of PD25A Order in that it has no regime for handling claims of privilege”.

Knowles J then went on to hold that “The Format of Order 3.2 seems to me to be wrong in principle.  It would be desirable for Order 3.2 to contain a paragraph in the same terms as paragraph 11 of the PD25A Order [para 50]”.  Knowles J concluded her judgement with the observation that the omission of the appropriate paragraph 11 was probably inadvertent and suggested that appropriate provisions in (the Civil Procedure) PD25A should be incorporated in  (Family) Order 3.2 to remedy any inadvertent omission [52].

Following on from the Akhmedova case and Knowles J’s suggestion in respect of the omission in respect of search Order 3.2, Mr Justice Mostyn issued a revised version of Order 3.2 of the Search Order on the 14th of January 2020 to remedy the omission and align it with its Civil Procedure counterpart.

Pulling the strands together as will be noted from the above, it really important for practitioners to be aware of the law and the latest developments and their associated duties – both to their clients, the Court and the other side.













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