Article by Celso De Azevedo - Cyber-attacks, Theft of Confidential Information and Norwich Pharmacal Orders
In Stokoe Partnership Solicitors v Grayson & Ors  EWCA Civ 626, the Court of Appeal considered the test for ordering the cross-examination of an individual, prior to trial, on the content of his sworn affidavit which had been provided pursuant to a Norwich Pharmacal order.
The Claimant, a UK-based criminal law firm, had been the victim of cyber-attacks after taking on the case for a detainee who had been imprisoned for fraud in the UAE. The proceedings concerned allegations against several Defendants in connection with cyber-attacks, hacking of the Claimant’s bank account and theft of confidential information.
In two linked sets of proceedings, Norwich Pharmacal orders were obtained against two Defendants. The orders required the individuals to disclose documents and information in sworn affidavits to enable the Claimant to identify the ultimate wrongdoer and plead a case against the wrongdoer, concerning the cyber-attacks.
In view of apparent inconsistencies between the two sworn affidavits, the Claimant applied to the High Court to cross-examine the two Defendants on the content of their affidavits. The High Court observed that pursuant to CPR Part 32.7(1), a Court may order the cross-examination of a Defendant in relation to his sworn affidavit prior to trial. However, this exceptional power is subject to the requirement specified in section 37 of the Senior Courts Act 1981, namely that such an order for cross-examination must be “just and convenient”.
On that basis, the High Court denied the Claimant’s applications to cross-examine the two Defendants. The Claimant thereafter sought to appeal that decision in relation to one of the Defendants, ‘G’, who was a private investigator and allegedly involved in the cyber-attacks.
Grounds of Appeal
The Claimant’s grounds of appeal were as follows:
(i) The first instance judge’s first and principal reason for refusing the application for cross-examination was that “cross-examination on the affidavit would pre-empt cross-examination at trial” which, as a result, cannot satisfy the “just and convenient” requirement. In the appeal, the Claimant contended that:
a. the Claimant should not be disadvantaged “merely because they have issued timely substantive proceedings” against the Defendant;
b. there was no date for the trial;
c. there was no guarantee that G would give evidence at trial;
d. the cross-examination would simply focus on the identity of the ultimate wrongdoer, not on whether G’s actions were wrongful; and
e. the Claimant was prepared to undertake not to use any material obtained in cross-examination against the Defendant at any future trial.
(ii) The judge’s second reason was that the pleaded case against G “is limited in scope” to past attempts to obtain confidential information and without clear evidence that these attempts were ongoing. In response, the Claimant argued that the nature of the substantive case against G was irrelevant since the purpose of cross-examination was to enable the Claimant to determine the extent of the wrongdoing and bring proceedings against the ultimate wrongdoer.
(iii) The judge’s third reason for refusing to order cross-examination was that there was limited material available that contradicted the content of the sworn affidavit and which could be used in cross-examination. Furthermore, an order for cross-examination was more appropriate in asset tracing cases where there was documentary or digital material which conflicted with the content of a Defendant’s sworn affidavit. The order was less appropriate where cross-examination was simply being sought to allow proceedings to be commenced against an ultimate wrongdoer. In the appeal, the Claimant responded that G’s previous answers were presented in “an extremely technical manner” and that the purpose of cross-examination was “to elicit more complete answers” in order to reveal the identity of the ultimate wrongdoer.
(iv) The judge’s fourth reason was that it was “highly relevant” that the Claimant could use CPR Part 18 to make an application for a Court order to obtain further evidence from G. In response, the Claimant argued that CPR Part 18 is not an appropriate substitute for cross-examination when the veracity of an affidavit is in issue.
The Decision of the Court of Appeal
The Court of Appeal upheld the High Court’s decision, denying the appeal on the basis of the first and most important reason given by the first instance judge, namely that “cross-examination on the affidavit would pre-empt cross-examination at trial” and, as a result, it cannot be “just and convenient” to order cross-examination on a Norwich Pharmacal affidavit where the individual to be cross-examined (i.e. G) is a party to substantive ongoing proceedings concerning overlapping issues.
Amongst the authorities reviewed, the Court of Appeal referred to the freezing injunction case of Jenington International Inc v Assaubayev  EWHC 2351 (Ch), where the first instance Court noted (at paragraph 74) that:
“Under all heads the cross-examination that is to be allowed must be clearly focused on identifying assets belonging to the defendants against which the worldwide freezing order should bite. No ancillary cross-examination affecting the merits of the claim will be permitted. That is not the purpose of what is being allowed. I will be astute to ensure that the cross examination does not become excessive or oppressive or counterproductive and that the claimants do not obtain a collateral advantage in the substantive litigation by being allowed to pursue the disclosure process to this exceptional next stage.”
The Court of Appeal highlighted that there were very few examples of cross-examination being ordered on an affidavit sworn pursuant to a disclosure order in the Norwich Pharmacal jurisdiction as compared with cases of freezing and search orders. It referred with approval to a passage from “Matthews and Malek on Disclosure (5th Edition, 2017)” where the authors wrote:
"Even if there is no jurisdictional bar to ordering cross-examination of a deponent on his affidavit or disclosure statement, the exercise of such power is reserved to extreme cases where there is no alternative relief. In general, the only circumstances whereas cross-examination to documents and disclosure may be appropriate at an interlocutory stage is in the context of freezing and search orders, where it may be crucial to establish what has happened to and the location of assets prior to trial."
The Court of Appeal also held that:
(i) It did not accept the Claimant’s “overarching allegation” that in making an order for disclosure by affidavit, the door was automatically open to cross-examination on that affidavit.
(ii) An undertaking by the Claimant that any material obtained in cross-examination on the affidavit would not be used against G at trial would not be effective in practice. The Claimant could subsequently seek permission from the Court to use such material in proceedings against the Defendant.
(iii) The first instance judge was correct that it was “highly relevant” to whether cross-examination would be “just and convenient” that it was open to the Claimant to make an application under CPR Part 18 for an order requiring the Defendant to provide further information.
(iv) The Court did not agree that the case against G was “limited in scope”. Further, in a separate concurring judgment, Lord Justice Peter Jackson added that when the judge described the Claimant’s pleaded case against G as “limited in scope”, he “did not refer to the most serious of the allegations, which concerned hacking into the Claimant’s bank account”.
It is noteworthy that the Court of Appeal approved the Judge’s view that it was “highly relevant” that the information being sought from G could be obtained by the Claimant through the mechanism of an application under CPR Part 18 for an order requiring G to provide further information.
In fact, after the High Court’s judgment, further information was obtained from G pursuant to an order made under CPR Part 18. Despite taking this “fresh evidence” into account in its judgment, the Court of Appeal did not address whether there were any inconsistencies between the further information and the content of G’s sworn affidavit that would have permitted an order for the cross-examination of G before trial.
Further, despite considering that the case against the Defendant was not “limited in scope”, and (per Lord Justice Peter Jackson) that there were “most serious” allegations of hacking into the Claimant’s bank account, the Court of Appeal unanimously dismissed the Claimant’s appeal.
Therefore, this authority provides confirmation that even if there are serious allegations against the Defendant, the Courts will not generally permit the cross-examination of a Defendant prior to trial, where the matters for cross-examination overlap with the issues in substantive ongoing proceedings. Crucially, the Court of Appeal noted that the Defendant was not an innocent third party, since he was “a defendant to a claim against him seeking damages and other relief for conspiracy with others to injure the Claimant”.
Bearing in mind these comments, where appropriate, Claimants may consider it strategically advantageous to commence a claim against an individual who has provided a sworn affidavit, only after making an application to cross-examine that individual on the affidavit and cross-examination has been conducted.
Accordingly, in future, the Courts are likely to be more sympathetic towards granting an order for the cross-examination of an individual on the content of his affidavit sworn pursuant to the Norwich Pharmacal jurisdiction where, for instance:
(i) the individual is not the Defendant in current proceedings and there is material that contradicts the content of his sworn affidavit, or
(ii) in asset tracing cases (even if there are ongoing proceedings against the Defendant) where there is available evidence which contradicts the content of the Defendant’s sworn affidavit, but only if the application for cross-examination is made after the Defendant has failed or refused to provide the information ordered pursuant to an application under CPR Part 18.
Importantly, this Court of Appeal authority illustrates, once again, that the Courts have been ready to adapt traditional legal remedies in order to locate assets and identify perpetrators in complex cases involving cyber-attacks, hacking and digital theft of confidential information.
By Celso De Azevedo
Tel: +44 (0)20 7421 80512
Celso De Azevedo is a highly experienced international cyber, reinsurance and commercial dispute resolution barrister and qualified New York Attorney. He is regarded as a leader in the fields of high value international litigation and arbitration.
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