Guernsey Law Reports 2007–08 GLR 73
GARNET INVESTMENTS LIMITED v. BNP PARIBAS (SUISSE) S.A. and GOVERNMENT OF REPUBLIC OF INDONESIA
ROYAL COURT (Carey, Lieut. Bailiff): May 23rd, 2007
Civil Procedure—disclosure—Norwich Pharmacal order—party innocently mixed up in wrongdoing of another has duty to assist victim by disclosing as much information as justice requires to assist victim in obtaining remedy—order not limited to identifying wrongdoer but may be used to discover methodology of wrongdoing, tracing, location and preservation of funds
Civil Procedure—disclosure—Norwich Pharmacal order—designed for use mainly in support of proprietary rather than merely monetary claims—if applicant seeks to trace source of or dealings with assets, court to be wary that information not stale and unhelpful—pursuit of wrongdoer’s contacts only permitted if court requires strict concealment of identity to prevent prejudice and possible victimization
Civil Procedure—disclosure—Norwich Pharmacal order—test of necessity—procedure of last resort only available if disclosure necessary to start proceedings against wrongdoer and impossible to obtain information by other means—application premature if proceedings not imminent
Injunctions—freezing order—risk of dissipation—applicant has reasonably heavy burden of showing sufficient risk that assets likely to be dissipated if order not made or continued—if funds in bank unofficially frozen by Financial Intelligence Service as suspected proceeds of crime, lifting of unofficial freeze would place at risk of dissipation—if continuing pressure
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to withdraw funds, formal freezing order necessary to ensure available to meet later proprietary or other claims
The plaintiff company brought an action against the defendant bank to secure the repayment of funds held in its accounts with the Guernsey branch of the bank.
The plaintiff, whose beneficial owner (“P”) was the son of the former President of Indonesia, had deposited substantial funds with the bank for investment, the value of which was now €36m. Suspecting that the funds may have been obtained as a result of P’s corrupt or criminal conduct, the bank disclosed its position to the Financial Intelligence Service of the States, in performance of its duties under the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999. When the plaintiff attempted to withdraw the funds, the bank sought the consent of the FIS, which persistently refused to give it, effectively but unofficially freezing the accounts. The Government of Indonesia was joined as a third party, obtained an ex parte interim freezing order in respect of the funds and, under the Norwich Pharmacal principle, sought the disclosure from the bank of extensive information about the beneficial ownership of the plaintiff, the provenance of its funds, payments in and out of its accounts, the identities of persons making or receiving such payments, and the plaintiff’s other assets.
At the inter partes hearing for the continuation of the freezing order, the Government submitted that it should remain in place as without it there was still a real risk that the funds might be dissipated. The informal control exercised by the continued refusal of the FIS to consent to withdrawals from the accounts was based on the supposition that the funds were the proceeds of criminal conduct and, if this were not established and it was forced to retract its opposition, a freezing order would remain necessary to safeguard the funds against the plaintiff’s continued demands for withdrawal and ultimately to meet any broader civil obligations P might have to the Government.
On its application for disclosure by the bank of information concerning the affairs of the plaintiff, (a) the Government relied on the Norwich Pharmacal principle—it was the victim of wrongdoing in which the bank had, albeit innocently, become mixed up, giving it a duty to assist the wronged person by disclosing as much information about the wrongdoing as justice required; (b) the information sought was necessary to support the Government’s proprietary claim against the plaintiff and P, since there was no real evidence where the funds originated and, even if originating with P, no evidence of where he had obtained them; (c) the duty of disclosure extended to tracing, locating and preserving funds paid in or out, identifying all those connected with the plaintiff’s transactions and establishing the metho
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the plaintiff, though it was uncertain whether it would be able to supply any additional information not available to the bank
At the inter partes hearing for the continuation of the freezing order, the plaintiff submitted that the court had been wrong to make the ex parte order and it would be wrong to continue it, since the Government had not shown an arguable case in favour of a freezing order and in particular had not satisfied the burden of showing a real risk that the funds would be dissipated if the order were not continued. Moreover, since it had already been guilty of considerable delay (from 1998 to 2006) in bringing substantive proceedings against P, it had caused prejudice to him and weakened its own case against the plaintiff.
On the application for disclosure, (a) the plaintiff opposed the grant of Norwich Pharmacal relief against the bank, maintaining that it was not necessary at this stage—there was no “real prospect” that any information obtained would be likely to lead to locating and preserving assets to which the Government was making a proprietary claim, since much of it would inevitably be stale and unhelpful; (b) requiring disclosure might strike a balance unfair to the bank in terms of cost, invasion of privacy and breach of confidentiality to others; (c) there was no evidence that disclosure—a remedy of last resort where third parties were involved—was necessary because other helpful sources of information were absent; and (d) it was not appropriate to order disclosure by the plaintiff itself, since it should normally be ordered only against the party against whom the freezing order had been made (the bank) and it would have to consult the bank for details of the information sought.
Held, continuing the freezing order and making a limited order for disclosure against the plaintiff:
(1) The freezing order would be continued, as the Government had shown an arguable case for continuance, based on the credible evidence of its principal witness, and had satisfied the relatively heavy burden of showing a sufficient risk that the funds would be dissipated if the order were lifted. Although at the present time, the FIS remained unwilling to consent to withdrawals from the accounts, that situation might change, as the FIS was only concerned with controlling the funds as the possible proceeds of criminal conduct and it might later transpire that they were not such proceeds. Other broader civil claims by the Government would then potentially be prejudiced: the court accepted that P controlled the plaintiff company and operated its bank accounts and there was evidence of continuing pressure from the company to be allowed to withdraw its funds. It was important that the people of Indonesia, through their current Government, should have the opportunity to lay claim to funds allegedly dissipated through misappropriation and corruption. Proceedings, probably in Indonesia, should be progressed against P without any of the delay already shown and the accounts should therefore remain frozen to ensure that any future judgment obtained against P could be honoured (paras. 39–45).
(2) The court was not, however, satisfied that the Government had at
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this point of time established a proprietary claim against the plaintiff or that it was necessary to make a Norwich Pharmacal order for disclosure by the bank solely to assist it to establish such a claim. The proceedings gave the appearance of being essentially monetary rather than proprietary, aimed at recovering damages from P for his tortious self-enrichment at the expense of the Government, and it was less usual for disclosure orders to be made in support of mere monetary claims. Moreover, (a) the information sought was highly unlikely to show where the funds originated—the primary evidence would have to be sought in Indonesia, even though there was some suggestion of later money laundering through the sale of some of P’s business interests; (b) the Government had not met the test of necessity, since disclosure was not necessary to start proceedings either here or in Indonesia and there was no evidence that it was impossible to discover the information by other means; (c) much of the information disclosed would be stale and unlikely to give any effective leads; (d) without formal protection being put in place, it would be potentially oppressive to reveal to the Government the identities of those dealing with P and the plaintiff, thereby identifying to it persons whom it might believe had been involved in corrupt practices; and (e) the claims against P were still at an early stage and any disclosure might later be shown to be unfair if the freezing injunction failed. No order would therefore be made for disclosure by the bank (paras. 66–77).
(3) The position regarding disclosure by the plaintiff was different but not compelling. It was not in fact clear that the Government needed any further information to be able to proceed against P in either Indonesia or Guernsey and its application for Norwich Pharmacal relief had therefore been framed too widely. If it were to start proceedings against P, which it should do with greater speed than it had shown so far, it was more likely that information about his funding of the plaintiff would be better obtained in Indonesia and that tracing could start there on the basis of that information. It was reasonably clear that little clarification of the source of the plaintiff’s funds would be offered by the plaintiff itself. As there was no evidence that the plaintiff was beneficially owned by anyone other than P, the court would require it to confirm authoritatively that it in fact held funds belonging to P and also reveal what other assets it held and had held. That some of this information was likely to be stale and unhelpful and that it might have to seek the bank’s assistance for copies of records did not preclude ordering disclosure. The identities of persons dealing with the plaintiff nevertheless had to be protected and should be concealed if it were necessary to show that they had provided or received funds. All information was to be provided on oath and disclosed as soon as it had been obtained, with the Government being given the right to apply for further disclosure as appropriate (paras. 79–86).
Cases cited:
(1) Arab Monetary Fund v. Hashim (No. 5), [1992] 2 All E.R. 911, dicta of Hoffmann, J. applied.
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(2) Bankers Trust Co. v. Shapira, [1980] 1 W.L.R. 1274; [1980] 3 All E.R. 353; (1980), 124 Sol. Jo. 480, applied.
(3) Berkeley Hotel Co. Ltd. v. Berkeley Intl. (Mayfair) Ltd., [1971] F.S.R. 300; [1972] R.P.C. 237, referred to.
(4) Brazil (Federal Republic) v. Citibank NA, 2006 JLR 478; on appeal, sub nom. Macdoel Invs. Ltd. v. Brazil (Federal Republic), 2007 JLR 201, dicta of Jones, J.A. applied.
(5) Grupo Torras S.A. v. Al Sabah, [1995] 1 Lloyd’s Rep. 374, referred to.
(6) Haiti (Republic) v. Duvalier, [1990] 1 Q.B. 202; [1989] 1 All E.R. 456, observations of Staughton, L.J. considered.
(7) Laemthong Intl. Lines Co. Ltd. v. Artis, [2004] EWHC 2226 (Comm); on appeal, [2005] 1 Lloyd’s Rep. 688; [2005] 2 All E.R. (Comm) 167; [2005] EWCA Civ 519, referred to.
(8) Messenger Ins. PCC Ltd. v. Cable & Wireless PLC, Royal Ct., Judgment 50 of 2005, August 16th, 2005, unreported, distinguished.
(9) Mitsui & Co. Ltd. v. Nexen Petroleum UK Ltd., [2005] 3 All E.R. 511; [2005] EWHC 625 (Ch), dicta of Lightman, J. applied.
(10) Norwich Pharmacal Co. v. Customs & Excise Commrs., [1974] A.C. 133; [1973] 2 All E.R. 943, applied.
(11) Thane Invs. Ltd. v. Tomlinson, [2003] EWCA Civ 1272, distinguished.
(12) Tracey v. Seed Intl. Ltd., Royal Ct., November 3rd, 2003, unreported; on appeal, sub nom. Seed Intl. Ltd. v. Tracey, C.A., Judgment 55 of 2003, December 18th, 2003, unreported, followed.
(13) Van Leuven v. Nielsen (1993), 15 GLJ 79, referred to.
(14) Zambia (Republic) v. Meere Care & Desai, [2007] EWHC 952 (Ch), referred to.
R.G. Shepherd and C.H. Edwards for the plaintiff;
Miss K. Le Cras for the defendant;
S.H. Davies for the third party.
1 CAREY, LIEUT. BAILIFF:
History of the matter before the issue of proceedings
The plaintiff is a company incorporated in the British Virgin Islands. The defendant was at the material time conducting banking business through its branch in Guernsey. I am told that the defendant no longer operates here. The plaintiff first started to do business with the defendant around 1998 when it placed substantial funds with the defendant for investment. The present value of such funds is in the region of €36m.
2 In 2002, the plaintiff asked the defendant to pay away substantial sums from these accounts and so directed it. In the period since the account was opened by the defendant, the defendant had learnt more
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about the beneficial owner of the plaintiff, a Mr. Hutomo Mandala Putra, and that Mr. Putra and his family members may have been involved in corrupt or criminal conduct whilst his father, a Mr. Soeharto, had been President of Indonesia. The defendant considered its duties under the provisions of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999 and disclosed its position to the Financial Intelligence Service (“FIS”) of the States of Guernsey. On receipt of the payment requests, the defendant sought consent from the FIS. This body was unwilling to give such consent. In the light of the continued refusal of the defendant to honour requests for the withdrawal of funds by the plaintiff, the plaintiff commenced an action against the defendant in this court on March 3rd, 2006. The cause recited the facts that I have outlined in the previous paragraph. The plaintiff’s advocate pleaded the fact that Mr. Putra was the beneficial owner of the plaintiff company. Defences were filed on March 31st; again the facts relating to the defendant’s dealings with the FIS were pleaded. The funds were effectively frozen because of the refusal of the defendant to comply with instructions to pay them away without the approval of the FIS.
3 On July 21st, Advocate Le Cras for the defendant sought a stay of the proceedings and directions concerning the possible involvement of the Indonesian Government and in particular raised the possibility that that Government might wish to lay claim to the funds of the plaintiff company. At an adjourned hearing on September 13th, the way that I decided that the matter should proceed was that Miss Le Cras should write to the Embassy of the Republic of Indonesia in London in the form annexed to the Act of Court, notifying the Government of these proceedings and enquiring of it whether it wished to assert any claim to the funds held by the defendant.
4 At this stage, H.M. Comptroller, who had been interested in the matter on behalf of the FIS, appeared, although he was not in any way instructed by the Government of Indonesia. There were delays but eventually progress was possible on December 15th last. By that stage, Mr. Strappini had been instructed on behalf of the Government and a discussion took place before the court as to how the matter would proceed. Mr. Strappini made no secret of the difficulties that the Government was in at getting its case together. In the circumstances, I agreed to adjourn the matter until January 22nd to enable him to give the matter further consideration and obtain instructions.
5 On January 22nd, Mr. Strappini lodged, on behalf of the Government, an application for an injunction, in effect continuing to freeze the funds and also an application for the Government to be permitted to join the proceedings as a third party. At the same time there was an application before the court dated December 12th from Mr. Edwards on behalf of the
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plaintiff, seeking the release of funds to assist with certain litigation and the defence of these proceedings. At that hearing I granted on an interim basis a freezing injunction. I acknowledged that the plaintiff had not been heard on the merits, but I considered there was sufficient risk of dissipation if the FIS were to withdraw its objection to releasing the funds, to justify interim relief. I also permitted the Government to be joined as a third party to these proceedings. The issue of withdrawing moneys to pay legal fees was adjourned sine die. There was some “toing and froing” concerning the terms of this interim order but in the end it was redacted in a form satisfactory to all the parties. The matter was stood over until March 8th with certain directions being given for lodging of further papers by specific dates between January and March.
6 I resumed the hearing on March 8th. On the advice of Mr. Strappini, the Government of Indonesia had obtained fresh counsel and Mr. Davies of the firm of Ogiers appeared to represent the third party. He also filed an application for further relief in accordance with the principle in Norwich Pharmacal Co. v. Customs & Excise Commrs. (10), for disclosure against the defendant bank. It was directed that the inter partes application for the injunction to continue and the orders relating to ancillary matters should be dealt with together at a hearing in May.
7 There was to be a preliminary hearing to review the matter prior to the substantive hearing on May 14th. This was put off and took place on May 3rd. Left outstanding from that hearing was the issue of whether Mr. Edwards would wish to cross-examine Mr. Sabda on behalf of his client. He was directed to notify the court by lunchtime on May 8th if this was required. The court duly received such notification and convened on the afternoon of May 8th to consider the matter further. The upshot of this short hearing was that clearly Mr. Edwards was not in a position to indicate the parameters of any cross-examination because he had not had time to get full instructions. It was therefore left that the matter would be further considered at the opening of the main hearing on May 14th.
The issue of risk of dissipation
8 At the hearing on March 8th, Advocate Shepherd on behalf of the plaintiff wished to try to persuade me that I could curtail these proceedings by finding in his favour on one particular point. Mr. Davies submitted, quite fairly, that these issues should all be dealt with at the substantive hearing but I was attracted—as I always am—to considering any issue that could, if successfully argued, bring an end to proceedings without further expense. I accordingly agreed to hear Mr. Shepherd. His short point was that the third party had failed to show that there was any risk of dissipation of the assets, which formed the subject of the application for the freezing order and that therefore one of the key criteria for granting relief had not been met. Mr. Shepherd’s point centred on the fact, to which I have
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already alluded, that the defendant clearly was not going to pay away any of the funds it was holding on behalf of the plaintiff without the consent of the FIS, in accordance with the provisions of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999. I rejected this argument without calling on Mr. Davies to address me but Advocate Shepherd felt that he had left the door open to revisit the arguments at the substantive hearing. I ruled that in the absence of any new argument, I had adequately dealt with the point, but I agreed that I would include in this judgment my reasons for rejecting the argument that the application was flawed, because the third party had shown no risk of dissipation.
9 Mr. Shepherd based his argument on the judgment of the Court of Appeal of Thane Invs. Ltd. v. Tomlinson (11), which gives support to the point that freezing orders are serious infringements of defendants’ rights and liberties and therefore to be granted with caution. The facts in the Tomlinson case were very different to those here and there was a concern that no evidence had been shown when the ex parte order was applied for, that Tomlinson had either assets or that such assets he had were at real risk of being dissipated in the absence of an injunction being granted.
10 The facts of the further case cited by Mr. Shepherd, Laemthong Intl. Lines Co. Ltd. v. Artis (7), are complex and again involve a scenario different from that before me. The issues of dissipation in the latter case are dealt with in the judgment of Colman, J. ([2004] EWHC 2226 (Comm), at paras. 58–59) and he also analyses the decision in Thane (ibid., at para. 60). The short point to be gleaned from this judgment is that where a prospective defendant is a company of substance (as was the position described in para. 59) the standard of proof required to establish a risk of dissipation is relatively high.
11 None of this seems to me to have a great deal of relevance when considering the facts of the case before me. The plaintiff clearly wanted to withdraw substantial sums from the accounts with the defendant in late 2002, by which stage the defendant had become concerned and referred the matter to the FIS. That body is only dealing with issues relating to criminal conduct and the proceeds of crime and not the broader issues that arise in civil litigation for damages in tort or contract or breach of constructive trusts. I accept that the FIS continued to refuse the defendant consent to pay out these funds. However, all that could change and it is clear from the conduct of the plaintiff that it is anxious to take its money away from the defendant.
12 Mr. Shepherd also referred to the support that he claimed could be drawn from analogous proceedings which have been recently considered in this court in Messenger Ins. PCC Ltd. v. Cable & Wireless PLC (8). In that case, Messenger Insurance was a locally-regulated insurance company, which was made the subject of an administration order under the
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supervision of the Royal Court. Cable & Wireless were making serious allegations that moneys which Messenger had received in one of its cells (a further and unusual complication here was that Messenger was a protected cell company) had been removed from Cable & Wireless in circumstances in which it could allege a proprietary claim to those moneys.
13 That particular dispute was being litigated both in Guernsey and in the United Kingdom with a large number of different interests being represented. The Bailiff, after some hesitation, as was clear from his judgment, took the view that he could safely lift the freezing order that had been made here in favour of Cable & Wireless, on the basis that Messenger’s affairs were properly subject to competent administration in accordance with an order of this court and that the interests of Cable & Wireless were thereby protected. Again, the facts of that case had no similarity to the facts here.
14 It is clear that if, for some reason, the FIS takes the view that under the 1999 Law it can no longer justify restricting movement of the moneys held by the defendant on behalf of the plaintiff, the defendant would in all likelihood be obliged to comply with the plaintiff’s instructions to pay the money away. It does not follow from any action the FIS might take, that any possible claim by the third party cannot be proceeded with, as the basis on which it will be making a civil claim to these funds is inevitably wider than that on which the FIS asserts a right to refuse to authorize release.
15 I did not see that there were any grounds for upholding the plaintiff’s claim that the third party had not satisfied the burden of showing that there was a real risk of dissipation and accordingly I did not consider it necessary to call on Mr. Davies to address me.
Application to cross-examine Mr. Sabda
16 The substantive hearing opened on May 14th. Mr. Edwards reverted to his application to cross-examine Mr. Sabda. Helpfully, he had filed an application, supported by a short skeleton, restricting his application to two areas of Mr. Sabda’s third affidavit of April 26th, 2007, namely:
“(a) Paragraphs 1–5 in relation to the question of whether—
(i) these proceedings have been brought with the proper authority of the Government of the Republic of Indonesia; and
(ii) Mr. Sabda has been properly authorized by the Government of the Republic of Indonesia to give evidence on its behalf.
(b) Paragraphs 8–17 in relation to the question of the reasons for the delay in bringing proceedings against Mr. Hutomo.”
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17 Both limbs of the application were opposed. Mr. Edwards submitted with regard to (a) that the fundamental point was that evidence was required to show that despite the Government’s appearing in the person of the Republic’s Ambassador in London, to whom the original invitation to intervene had been directed, I needed to be satisfied further that the central government, if I may call it that, in Jakarta had authorized that proceedings be taken on its behalf and, secondly, that Mr. Sabda was authorized to appear on its behalf by affidavit. The witnesses, Mr. Sabda on behalf of the third party and Mr. Kaligis on behalf of the plaintiff, who were both lawyers, appeared to have differing views on the meaning and effect of s.30(2) of Law No. 16 of 2004. So far as (b) was concerned, the plaintiff claimed that the true reasons for the delay were not those canvassed by Mr. Sabda and that cross-examination was necessary, although Mr. Edwards was not prepared to elucidate in advance the points he wished to ask Mr. Sabda.
18 Mr. Davies reminded me of the unusual nature of the application and that there was clear English authority that permission to cross-examine should only be permitted in exceptional circumstances (Grupo Torras S.A. v. Al Sabah (5) and Berkeley Hotel Co. Ltd. v. Berkeley Intl. (Mayfair) Ltd. (3)).
19 With regard to para (a) of the application concerning authority, I declined to allow cross-examination. I took the view that I should not go behind the apparent authority of the accredited Ambassador of Indonesia, who was clearly instructing Mr. Davies on behalf of his Government. So far as Mr. Sabda was concerned, he is merely a witness called by his Government and no issue under our law as to his standing and competence to give evidence seemed to arise. In any event, if there was to be a dispute as to what the law of Indonesia was on the matter, I should have the benefit of the views of an independent expert witness rather than having to reconcile the evidence on law of the only two opposing witnesses to fact, who happened to be lawyers.
20 With regard to (b), I was not prepared to give permission for an unspecified line of questioning of Mr. Sabda on delay. I first invited a further affidavit from Mr. Kaligis in which he would answer the third affidavit of Mr. Sabda on the subject of delay and offer whatever further observations on the subject he wished to make. In this way, the party prejudiced by the continuation of the freezing order would in effect have the last word. This Mr. Kaligis did and the matter was closed without further requests for cross-examination of Mr. Sabda on the day.
The third party’s case
21 As this was an in effect the first inter partes hearing of the application to extend the freezing order that is already in existence, it fell
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to Mr. Davies, acting for the third party, to open in support of the continuation of the freezing order. The evidence in support of his application is to be found in three affidavits sworn by a Mr. Sabda, who is a senior lawyer on the staff of the Attorney General of Indonesia.
22 [The learned Lieutenant Bailiff set out in some detail the evidence of Mr. Sabda. In essence, the Government of Indonesia asserted that from 1967 onwards, the financial irregularities in which Mr. Putra, as the President’s son, was involved, extended over a wide spectrum of illicit profiteering from State-owned industries, corruption on a massive scale, the manipulation of the oil and gas industries for his own benefit, profiteering by his own companies, fraudulent land deals, diverting funds by large commissions for services of little value, and borrowing from State banks without any prospect of repayment. The learned Lieutenant Bailiff continued:]
23 As I have said, the Government’s claims are many and varied. The likely defence to claims, as foreshadowed by Mr. Kaligis, would appear to be that either it is not Mr. Putra but some other individual or company that has benefited, or that there has been no corruption of which the third party can complain.
24 Mr. Davies turned to address me on the proprietary claim that the Government felt that it could mount in respect of the moneys held by the plaintiff. He drew attention to the fact that nowhere in Mr. Kaligis’s affidavit, which I will consider further when I deal with the plaintiff’s case, is there any mention of the source of the funds held by the plaintiff. The position over this changed as the hearing progressed, as affidavits were filed from Advocate Shepherd and from a Mr. Kadir. Mr. Kadir is apparently an associate of Mr. Putra’s and has been a director of the plaintiff since February this year. He was, however, closely involved in earlier dealings with the plaintiff as a result of his directorship in a Bahamian company called V Power Ltd.
25 The situation presented in these affidavits is that a sizeable part of the assets of the plaintiff were derived from the sale of Mr. Putra’s interests (held at that time through V Power) in the Lamborghini car company, which was bought by Audi in 1998 and the sale of shares in Super Bikes International, which owned rights to hold a series of motor bike grand prix events throughout the world. The Super Bike shares had been owned by another company of Mr. Putra’s—Motorbike International Ltd.—which will feature again later in this judgment. These affidavits are not accepted by Mr. Davies as presenting the full picture and in any event Mr. Kadir has not been a director throughout the existence of the plaintiff company and Mr. Shepherd can only assert his belief that the copy minutes with which he has been provided are compete and correct. The minutes do reveal a further £8m. was lent to the company by Mr. Putra.
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Even if the bulk of the moneys represent the proceeds of sale of legitimate businesses, the question is still left in the air as to where Mr. Putra got the funds to invest in the businesses in the first place. Mr. Davies argues strongly that there is evidence from which I can conclude that his client’s claim against the plaintiff can be regarded as proprietary.
The law
26 Mr. Davies went on to address me on the legal principles that should govern my approach to continuing the freezing order. The first and most important point is that I must be satisfied that the Government has a good arguable case for the substantive claim against Mr. Putra. Mr. Sabda’s affidavit details several areas where the Government would claim to be able to bring proceedings against Mr. Putra, although it seems that they have not got very far in prosecuting these up to the present time. The other requirements are that there are assets in the jurisdiction, which of course in this case we know there are. There has also got to be a risk of dissipation. I have already ruled on this point, so no further comment is required.
27 In addition, there are further factors that should influence my discretion whether or not to grant a freezing order. The first one, of which Mr. Edwards makes considerable play, is the delay that has occurred in pursuing the Government’s claim against Mr. Putra. A number of cases were quoted in argument. I do not need to discuss those relating to apparent acquiescence by the applicant, as that issue does not arise here. There has, however, been a delay in bringing substantive proceedings and even if there is no argument as to acquiescence, the authorities clearly show that one of the issues for the judge to take into account is the prejudice that has been caused to the respondent as a result of the delay in bringing an application. Another factor that will cause a judge to exercise his discretion against an applicant for a freezing order is where there has been material non-disclosure.
28 When Mr. Davies dealt with the issue of delay, he accepted that little action had been taken since 1998 to recover moneys which the government claimed were due from Mr. Putra. Mr. Sabda in his affidavit describes briefly the political history of Indonesia since 1998 and points to some of the difficulties that the successive governments and even more successive Attorneys General have had to face in the meantime.
29 Mr. Sabda is perhaps even more candid in his third affidavit (at para. 15):
“This current case is historic for the country of Indonesia, and is evidence of this Government’s commitment to eradicate corruption in society. This trial marks the first time in the post-Soeharto era that
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the Government has attempted to secure and retrieve ill-gotten assets of the Soeharto family. There are many obstacles. Most importantly, evidence and documents have been misplaced, destroyed and have disappeared, during the reorganization of the Government and the nearly complete restructuring of the banking system. For example, there was a fire in the Bank of Indonesia offices that destroyed many documents. Even now corruption, while lessening, remains pervasive. Nevertheless, the Government, which has signed and ratified the UN Convention against Corruption, remains determined with the assistance of its foreign counterparts to track down and recover the funds to which it is entitled. It would therefore be a major setback if it were to be prevented from pursuing these proceedings in Guernsey.”
30 With regard to material non-disclosure, Mr. Davies commented on the complaint of Mr. Edwards in his skeleton, centred on paras. 133–139 of Mr. Kaligis’s affidavit, but I felt that it was more appropriate to leave Mr. Edwards to address me on this and let Mr. Davies deal with the matter in his reply. As I will record when I come to deal with the plaintiff’s case, a substantial point that Mr. Edwards sought to develop was the failure by Mr. Sabda to disclose the contact with the Indonesian Government in 2004 and 2005 evidenced in correspondence between the Government and the defendant relating to Motorbike International. Mr. Edwards did not actively pursue other complaints of material non-disclosure, quite sensibly, as in order to resolve them I would have to adjudicate on substantial conflicts in the evidence of the two contending witnesses, Mr. Sabda and Mr. Kaligis.
The plaintiff’s case against the continuation of the freezing order
31 Mr. Edwards, on behalf of the plaintiff, has produced an affidavit from a Mr. Kaligis. This gentleman is evidently a very senior and well-established legal practitioner in Jakarta and acts not only for Mr. Putra but also for his father. He challenges the evidence of Mr. Sabda and says basically that none of that evidence can be relied upon. The interesting thing about Mr. Kaligis’s evidence, if one reads his affidavit closely, is that at no stage does he deny the gist of the allegations of Mr. Sabda, concerning the alleged corruption that persisted in the Soeharto years. What he takes issue with is matters of detail and suggestions of non-disclosure and bad faith on the part of Mr. Sabda. Rightly, he draws attention to the fact that there are no proceedings against Mr. Putra at the present time in Indonesia.
32 Both Mr. Sabda and Mr. Kaligis give quite a lot of attention to what was said in Time magazine and other publications concerning the Soeharto family. Apparently, the former President sued Time magazine
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for libel and failed in his action. However, a number of allegations made by Time magazine were not proved and Mr. Kaligis naturally wishes to draw attention to findings which are favourable to his client’s family. I do not think I need involve myself in an in-depth review of these articles or the libel proceedings. As Mr. Edwards says, the news items contain hearsay, albeit that the material annexed to the various affidavits when taken as a whole, does assist me to get an overall picture of the problem which the third party is facing and the wrong that it claims that the Republic of Indonesia has suffered as a result of the activities of the Soeharto family and Mr. Putra in particular.
33 As I have mentioned, one matter that Mr. Kaligis does raise and which gives rise for concern at first sight, is correspondence between the defendant bank and the Ministry of Justice & Human Rights in Jakarta. Mr. Kaligis’s evidence on this is to be found in paras. 106–115 of his affidavit. What happened appears to have been that the plaintiff had approximately $10m. which emanated from Motorbike International. I have had evidence concerning this entity contained in Mr. Kadir’s affidavit, although I accept that his evidence is challenged by Mr. Davies. Motorbike International Ltd. was a company of Mr. Putra’s and it in turn owned 50% of the shares in Super Bike International Ltd. According to Mr. Kadir, Motorbike received a total of $18,500,000 for these shares and Motorbike transferred $10,250,000 to the plaintiff on February 12th, 1999 and remitted a further $1,680,491 to the plaintiff on June 30th, 1999.
34 The correspondence exhibited by Mr. Kaligis starts with a letter of May 10th, 2004 from the law firm of Ihza & Ihza to Mr. Zulkarnain Yunus, the Director General of General Law Administration of the Department of Justice & Human Rights. The gist of this is that the defendant is asking for confirmation that the Government will lay no claim to the funds in the account of Motorbike International Ltd. with the defendant. The letter is replied to by the Director General on May 28th and confirmed in a letter from the Minister on June 4th to the effect that no proceedings are traceable concerning Motorbike International Ltd. in any court in Indonesia and therefore “there is no legal reason for the Government of Indonesia to enquire the fund [sic] that belongs to Motorbike International at BNP Paribas, or perform a legas suit [sic] to BNP Paribas.” Curiously, the letter ends with the statement that “BNP Paribas has no rights to retain the fun [sic] of Motorbike International Limited, unless there is any respective court decision which is final and binding.”
35 There is then a legal opinion furnished by Mr. Yunus addressed to BNP Paribas Guernsey Ltd., the upshot of which is that Mr. Putra has never been reported to be involved in any criminal law suit of money laundering.
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36 There is further correspondence from BNP Paribas dated February 1st, 2005 and that is replied to by the Ministry of Justice & Human Rights acting through a Mr. Hamid Awaludin, the Minister. This says that, based on official information from the Financial Transaction and Analysis Centre of Indonesia dated February 28th, 2005, the following respective names—Mr. Putra, a Mr. Sudjaswin and the deponent to the affidavit in these proceedings, Mr. Kadir—are not the subject of any suspicious transaction reports in Indonesia in relation to moneys held in the name of Motorbike International Ltd. by BNP Paribas in Guernsey.
37 The letter goes on to say that there are no civil or criminal proceedings in Indonesia against Motorbike International Ltd., including its directors or its shareholders, and there is no court order or judgment in Indonesia concerning the company and that there is no legal reason for the Government of Indonesia to enquire into its funds.
38 Also exhibited is an affidavit dated May 4th, 2006 from Insp. Bligh of the Guernsey FIS. This recorded the decision of the defendant no longer to treat the Motorbike funds as suspicious and pay them away. Although I cannot find it in the papers submitted by Mr. Davies, I am quite certain that I saw that affidavit during the course of last autumn when the issue of the writing to the Indonesian Government about this matter first arose. Mr. Sabda’s explanation as to why the Ministry of Justice & Human Rights responded in this way is not easy to follow. Although he does not directly say so, he is, as I take it, suggesting that the people who signed the letter in the Ministry of Justice were in some way connected with Mr. Soeharto and his family or otherwise open to influence (see paras. 72 and 73 of his third affidavit), and that they were not authorized to act in the matter. Whatever the truth, I will have to decide whether the fact that this correspondence was exchanged and money was apparently released in respect of the Motorbike transaction, should persuade me that the overall claim of the Government against Mr. Putra, alleging wrongdoing, making a proprietary claim against the assets of the plaintiff and seeking a freezing order should be rejected.
Discussion and conclusions on application for continuation of the freezing order
39 I first have to decide whether the Government has shown an arguable case for a freezing order in respect of the assets of Mr. Putra, or, in the alternative, a direct proprietary claim against the funds of the plaintiff as representing the property of the Government. Both claims give rise to difficulty. The second and its relative strengths and weaknesses is going to be more relevant when I come on to the issue of disclosure. To continue the freezing order, I must be satisfied that there is an arguable case on one or other of these claims. Civil proceedings
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against Mr. Putra would, it appears, inevitably have to be conducted in the courts of Indonesia. Mr. Sabda does make the point that under Indonesian law a criminal suit has to be concluded before civil proceedings are commenced. This appears to be the explanation for the apparent inactivity against ex-President Soeharto because the papers show that he is not medically fit to stand trial on criminal charges. As I commented in the hearing, one has to ask why, if the ill-gotten gains of the President and his family are as great as contended—despite the prospective defendant being a frail 79-year-old man, who is, at least for the time being, incapacitated from formally standing criminal trial—robust action has not been taken to deprive him, his family and any cronies, as they are described, of the fruits of their corrupt rule. That is, however, by the way.
40 No criminal proceedings have started against Mr. Putra, save for the PT Goro prosecution referred to earlier. However, the enrichment which would appear to have taken place on this occasion is typical of the kind of conduct that is alleged throughout the third party’s submissions. As Mr. Kaligis says, no civil action has been commenced against Mr. Putra. Nothing said by him assists me in concluding that there is not still a clear civil as opposed to a criminal claim for the loss that Bulog suffered.
41 However, notwithstanding the delay and deficiencies exposed in the evidence that is presented to me by Mr. Sabda and the complaints of Mr. Kaligis that many of the claims have not been fully particularized and quantified, the case presented by the third party does, in my judgment, reach the threshold of an arguable case. The people of Indonesia, in my view, should have the opportunity through their Government of laying claim to the funds of the plaintiff in Guernsey on the alleged grounds that they have been proceeds of misappropriation and corruption in which Mr. Putra has been involved over a great many years. The action must be progressed, with considerably more vigour than appears to have been displayed up until the present time. Mr. Sabda, if he is the officer of Government charged with conduct of this claim, clearly needs a great deal of help in investigating and perfecting proceedings. I do not accept that omissions in Mr. Sabda’s evidence amount to material non-disclosure and in particular I reject the complaint about failure to draw attention to the Motorbike correspondence which emanated from another part of Government in 2005.
42 Interestingly, Mr. Edwards produced, shortly before the end of the hearing, a judgment of Peter Smith, J. in the Chancery Division dealing with a large number of claims brought by the Attorney General of Zambia against a collection of companies and individuals from the former President of that country downwards (Zambia (Republic) v. Meere Care & Desai (14)). These bodies were alleged to have stolen money from
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Government coffers during the period of that President’s rule. Fortuitously, there were funds and defendants within the jurisdiction of the English courts and no doubt the best that London could offer in solicitors and barristers were deployed in presenting the case, which resulted in a judgment running to some 1,140 paragraphs.
43 Sadly, no such level of endeavour has been apparent so far from the Indonesian Government. The respected Advocate Strappini, whom the Government first instructed, withdrew, acknowledging that the size of the task was beyond the resources of his small practice, and a larger practice now represents the Government.
44 Mr. Strappini made a very interesting and revealing comment when he was acting, to the effect that the problem facing the Government was that the Soeharto family, by virtue of the fact that they had a lot of money still in their possession, had great influence in Indonesia. Mr. Davies perhaps was restrained from giving evidence in this way and it might be difficult for Mr. Sabda to be as candid on the record in an affidavit. I mention these undertones simply in support of the view that I have taken that, with all the perceived deficiencies that Mr. Edwards can point to in the case, the freezing order should continue. I consider that Mr. Sabda is a credible and reliable witness as to the general malaise that existed and I do not therefore feel it necessary to rely on material like newspaper articles to enable me to accept Mr. Davies’s contention that the Government has an arguable case. Many of the corrupt practices have apparently been terminated following the end of the Soeharto regime, although as we have seen in the case of the Pertamina from the purchase of the shares in Perta Oil Marketing, the power of Mr. Putra to influence events seems to have subsisted after his father fell from grace.
45 I am considerably troubled by the attitude revealed in para. 15 of Mr. Sabda’s affidavit. It is not appropriate for the Government of Indonesia, having been notified by this court of the existence of the proceedings by the plaintiff against the defendant and the fact that there had been admissions that the money had been that of Mr. Putra, to give the appearance of trying to use this small jurisdiction as the lead forum for taking proceedings against Mr. Putra. I will come on in a minute to look separately at the position of the plaintiff but, as I have indicated, the most appropriate forum for these claims would appear to be the Indonesian courts in a direct action against Mr. Putra by the Government, and of course the Government have currently restricted Mr. Putra’s movements, which will make it all the more difficult to fairly conduct proceedings in a jurisdiction such as this. Because of the peculiar situation that has been revealed by the papers, I cannot allow a freezing order to continue without some oversight of the progress of the civil proceedings, which appear to be so long overdue if the Government is indeed genuine in its
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determination to bring Mr. Putra to account. I will at the end of this judgment, therefore, be laying down terms on which the order is to continue, but continue it will.
The proprietary claim against the plaintiff
46 New evidence has been introduced which, if it is true—Mr. Davies says is inadequate—throws doubt on his suggestion that the money in the plaintiff came straight from Indonesia shortly after the fall of Mr. Soeharto. It seems that Mr. Putra was attracted to motor cars and motor sport. We have heard how he was closely involved in the national car project. His wealth apparently enabled him to invest in Lamborghini and in Super Bikes Ltd. and Mr. Kadir and Mr. Shepherd suggest in their affidavits that a large part of the money in the plaintiff came from the sale of those enterprises. It can be argued that the fact that the money may have emanated from the sale of legitimate businesses does not put paid to any claim that the money that was originally used to purchase those interests was the proceeds of wrongdoing and corruption.
47 As Mr. Sabda says (in para. 16 of his third affidavit), nowhere does Mr. Kaligis point to Mr. Putra’s wealth as being derived from sources other than as alleged by the Government. However, that is a long way from proving that the money in the plaintiff is the property of the Republic. The strength of a proprietary claim in many of the applications that come before this court is often very clear, for example where the dishonest director in a foreign jurisdiction empties his company’s bank account and transfers it straight away to a nominee in these Islands. The position is nothing like so clear here, involving as it does moneys that may have been in Mr. Putra’s pocket and under his stewardship from the days when he became old enough to have a bank account.
48 To establish a proprietary claim there will always have to be an element of tracing and I am not satisfied at this stage that the third party has successfully established a prima facie proprietary claim to the moneys held in the plaintiff. However, I am satisfied that the moneys in the plaintiff are Mr. Putra’s and that he is the person who has had control over the affairs of the plaintiff, including operating its bank accounts, and therefore the moneys in the plaintiff should be frozen in order to ensure that any judgments against Mr. Putra in respect of any monetary claims that may be established against him personally are not rendered nugatory.
The third party’s applications for disclosure
49 When he first appeared in these proceedings, Mr. Davies tabled an application on behalf of the third party for both the plaintiff and the defendant to give disclosure relating to the affairs of the plaintiff. This application changed as the hearing progressed.
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50 [The learned Lieutenant Bailiff then set out the details of Mr. Davies’s revised application, which included the request for the plaintiff and defendant respectively to supply full information as to the past and present ownership of the plaintiff, copies of all documents relating to the plaintiff’s bank account details and account documents, with the plaintiff to supply in addition details of all its assets worldwide exceeding £1,000. The learned Lieutenant Bailiff continued:]
51 Mr. Davies wanted such an order regardless of whether I was minded to extend the freezing order. Mr. Davies approaches this request on traditional lines. So far as the order against the defendant is concerned, he bases his application on Norwich Pharmacal principles. He submits that the court should be satisfied that the third party is the victim of wrongdoing and that the defendant has, albeit innocently, become mixed up in wrongdoing and that Lord Reid’s words in Norwich Pharmacal (10) apply ([1973] 2 All E.R. at 948):
“[The authorities] seem to me to point to a very reasonable principle that if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers.”
52 The Jersey courts have had to consider the application of these principles in Brazil (Federal Republic) v. Citibank NA (4). This case centred on a request for information to help trace moneys that had been corruptly received by the Mayor of São Paolo in connection with some big civil engineering projects, so there was some similarity with the facts of the case before me. The Royal Court made orders against five Jersey financial institutions for disclosure.
53 The opposition to the application came not from the financial institutions themselves, but from the companies whose affairs were the subject of the enquiry. (Again, in the case before me, the defendant bank, appearing through Miss Le Cras, takes essentially a neutral view, although she does wish to be heard on the practicalities of the programme for implementation of any order I make. It was therefore for the plaintiff to make the running in opposing Mr. Davies’s request and this part of the argument fell to be developed by Mr. Shepherd on its behalf.)
54 On appeal, the Jersey Court of Appeal upheld the decision of the court below to grant disclosure. After quoting the Lord Reid principle, Jones, J.A. said this (2007 JLR 201, at para. 27):
“It is instructive to notice that Lord Reid does not enunciate the principle in terms of the rights of the person who is seeking disclosure. Instead, he points to a duty owed to that person by the
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person who holds the information. That duty is to assist the ‘person who has been wronged,’ and it arises because the person who holds the information has come by it in the course of, albeit unwittingly, facilitating the wrong. It is performed by giving ‘full information.’ The particular information that was sought in Norwich Pharmacal . . . was the identity of the wrongdoer and it is to be expected that the principle would be expressed by reference to the facts of the case under consideration. But, in our opinion, the scope of the principle is not extended if the purpose of the disclosure which is sought in any particular case is, for example, to determine the location of embezzled funds or the methodology of the fraud, rather than the identity of the wrongdoer. In our judgment, where disclosure is sought from a defendant who is alleged to have become innocently mixed up in wrongdoing, the determinative question in any particular case is whether justice requires discovery to be ordered.”
55 A recent example of this court’s approach to disclosure orders is to be found in the judgment of Rowland, Deputy Bailiff in Tracey v. Seed Intl. Ltd. (13). The Court of Appeal commended the Deputy Bailiff’s judgment and confirmed the disclosure order made, subject to a small addition. The Court of Appeal dealt with the relevant questions arising in that case. With regard to making disclosure orders where there is no proprietary claim, the court (per Southwell, J.A.) said this (at para. 44):
“The power to grant interim orders created by the 1987 Law is not to be limited to support of proprietary claims, although no doubt it may be easier to persuade the Royal Court to grant a disclosure order when the claim is of a proprietary nature. The Guernsey courts should follow in this regard the approach taken in the Republic of Haiti case by the English Court of Appeal.”
56 The Court of Appeal also endorsed the principle of granting disclosure orders with an ambit wider than that of the associated freezing order. In this case, the circumstances were again very different. The plaintiffs, who were medical men in the United States, had invested in wine through what appeared to be a mala fide organization in Holland, which then appeared to have moved around the world money representing the proceeds of these investments. Money had come to Guernsey and was frozen. The Deputy Bailiff took the view that justice required information be given concerning possible payments on to accounts in other parts of the world.
57 Norwich Pharmacal (11) was concerned with the pursuit of importers (at that stage unidentified) of counterfeit drugs. However, the reference that is often made is to “identifying the wrongdoer.” Here, the third party knows the identity of the wrongdoer, Mr. Putra, but Mr. Davies says that on the Jersey and other authorities he is still entitled to
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Norwich Pharmacal relief in order to trace other moneys that may have come into the accounts of the plaintiff and been paid away and also to establish the methodology of the wrongdoing, whatever that means in this particular context.
58 Mr. Davies claims that the defendant has a duty to provide full information so as to assist with identifying all other persons connected with the transactions on the account in question. He seeks the information to locate and preserve what he describes as traceable funds and to decide whether the third party has grounds to bring actions against the plaintiff, Mr. Putra or other wrongdoers elsewhere. Correctly, he says that it is not an obstacle that the information held might not conclusively identify potential defendants other than the plaintiff and Mr. Putra, or the current location of traceable funds. He then goes on, rather curiously, to say that the courts should take a realistic view of how international frauds are conducted and be satisfied on these particular facts that the information sought is likely to assist in the recovery process.
59 Mr. Shepherd on the other hand opposes the grant of Norwich Pharmacal relief at this stage. He accepts wrongdoing may have been identified and that Mr. Putra would, in those circumstances, fall within the category of being the wrongdoer. However, he does not consider that making an order against the defendant is necessary. He calls in aid the judgment of Hoffmann, J. in Arab Monetary Fund v. Hashim (No. 5) (1). This is really a case applying the principles of Bankers Trust Co. v. Shapira (2). Hoffmann, J. said this ([1992] 2 All E.R. at 918):
“What are the limits of the Bankers Trust jurisdiction? They must, I think, be deduced from the reasoning upon which that jurisdiction, like the Norwich Pharmacal jurisdiction, is distinguished from the ‘mere witness’ rule. It rests upon the proposition that unless the assets in question can be located and secured, the ultimate determination of ownership of those assets may be frustrated by their removal or dissipation and there will be no point in calling on the third party at the trial to produce the required documents or give the requested information. In my judgment, therefore, the first principle of the Bankers Trust case is that the plaintiff must demonstrate a real prospect that the information may lead to the location or preservation of assets to which he is making a proprietary claim.”
60 He continued (ibid., at 919):
“Even if the application prima facie falls within the Bankers Trust principle, I consider that the potential advantage of the order to the AMF must be balanced against the detriment to the person against whom the order was sought, not merely in terms of cost (for which he is ordinarily compensated on an indemnity basis by the terms of
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the order) but by way of invasion of privacy and requiring breach of obligations of confidence to others.”
Hoffmann, J. also made reference (ibid.) to the relative staleness of the matters upon which information is sought and this again is a point that Mr. Shepherd makes.
61 My attention was drawn by both counsel to various parts of Macdoel (4). Reference is made (2007 JLR 201, at para. 46) to disclosure orders being “a strong thing” to order, adopting the words of Lord Denning in Bankers Trust, and (ibid., at para. 48) to “[disclosure being] only ordered if there is no other source of information that will assist the person wronged.”
62 Similar sentiments concerning necessity are to be found in the judgment of Lightman, J. in Mitsui & Co. Ltd. v. Nexen Petroleum UK Ltd. (9) ([2005] 3 All E.R. 511, at para. [24]):
“In my judgment despite the argument of Mr. Carr QC that there is no authority directly in point, it is clear that the exercise of the jurisdiction of the court under Norwich Pharmacal against third parties who are mere witnesses innocent of any participation in the wrongdoing being investigated is a remedy of last resort. (It is the claimant’s case that the defendant is such an innocent third party.) The jurisdiction is only to be exercised if the innocent third parties are the only practicable source of information. The whole basis of the jurisdiction against them is that, unless and until they disclose what they know, there can be no litigation in which they can give evidence: see e.g. Lord Kilbrandon in Norwich Pharmacal [1973] 2 All E.R. 943, at 973, 975, [1974] A.C. 133, at 203, 205. Whilst there is a public interest in achieving justice between disputing parties, there is also a public interest in not involving third parties if this can be avoided: see [Sir] John Donaldson M.R. in Harrington v North London Polytechnic [1984] 3 All E.R. 666, at 670–671, [1984] 1 W.L.R. 1293, at 1299. The jurisdiction is both exceptional and only to be exercised when it is necessary: Lord Woolf C.J. in Ashworth Hospital Authority v MGN Ltd. [2002] 4 All E.R. 193 at [57]. The necessity required to justify exercise of this intrusive jurisdiction is a necessity arising from the absence of any other practicable means of obtaining the essential information.”
63 A further point made by Mr. Davies is that there is no facility for pre-trial discovery in Guernsey and that is a ground militating in favour of making an order.
64 Mr. Davies is also asking for a disclosure order against the plaintiff. He makes the point that he has some doubts as to whether the plaintiff will be able to give full information and in particular whether it will have
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on its records its transactions with the defendant. I know not, but if there were to be an order to require disclosure from the plaintiff but not the defendant, then the plaintiff could produce what it can and if it is not adequate, reconsideration can be given to making a disclosure order against the defendant, which was the banker and investment manager for the plaintiff. In the normal way, an applicant for a freezing order is fully entitled to ask for a disclosure order against the party injuncted. The applicant may have little information as to what assets are being covered by the freezing order and of course where the freezing order is the first against a particular respondent, frequently worldwide disclosure orders are made.
65 Mr. Shepherd advances a further argument that even if such disclosure orders are justified, either against the defendant or against the plaintiff, it is premature to do so having regard to the state of the proceedings against Mr. Putra.
Discussion and conclusions concerning the application for a disclosure order
66 It is clear from what I have said about the application for the freezing order and my decision to agree to its continuation, that this is a very unusual case stemming from positive action on the part of the defendant and this court to inform the Government of Indonesia of the existence of assets belonging to Mr. Putra in this jurisdiction. Unusually, the third party knows the value of the assets subject to the freezing order because the cause puts a value on them, namely €36m. It appears that more than that sum was originally paid into the company and there is a hint that there have been losses in investments which may be the subject of separate proceedings between the plaintiff and the defendant.
67 The account of the plaintiff has been frozen in the hands of the defendant since 2002 when the defendant felt it appropriate to make a suspicious transaction report to the FIS. I have an uneasy feeling that, having been given the information as to the existence of assets here belonging to Mr. Putra, the Government of Indonesia has jumped at the situation and now is endeavouring to treat Guernsey as the lead jurisdiction in which to pursue Mr. Putra. I have referred (at para. 45 above) to hints at this disclosed in Mr. Sabda’s third affidavit.
68 I am not sure about Mr. Davies’s point that the position over pre-trial discovery should colour my thinking—justice appears to have been achieved in Van Leuven v. Nielsen (13), notwithstanding that lacuna.
69 Having found that the proprietary claim is not established at this stage, the question is whether Norwich Pharmacal relief should be ordered against the defendant so as to assist in identifying assets
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belonging to Mr. Putra, which lie outside those injuncted, and the identities of other persons who may have become mixed up in his wrongdoing. It is clear from a number of authorities that disclosure orders intended to assist with tracing assets are to be given more rarely in monetary claims than in proprietary claims, but in Republic of Haiti v. Duvalier (6), where there was clear evidence of attempts to hide assets on the part of the defendants, Staughton, L.J. recognized the somewhat hybrid nature of the application then before him ([1989] 1 All E.R. at 465). Rowland, Deputy Bailiff followed this reasoning in Seed (12), which decision was endorsed by the Court of Appeal.
70 Whilst I can see the attraction of the argument that disclosure is claimed to be necessary to attempt to gather evidence in order to establish the proprietary nature of the claim in cases of long-term kleptocracy—the colloquialism used to epitomize regimes such as those involving Soeharto, Duvalier, Chiluba (ex-president of Zambia) and the like—I am not satisfied in the particular circumstances of this case that it would be appropriate to order disclosure against the defendant solely in order to assist the third party in establishing a proprietary claim.
71 I note the direction from the Court of Appeal in Seed to follow Duvalier and I take that as including an invitation to treat the application as one that concerns what Staughton, L.J. described as a somewhat hybrid claim. However, in this case I consider this is essentially a monetary claim at this time directed at recovering damages from Mr. Putra for his tortious acts over many years enriching himself at the expense of the Republic.
72 There are five reasons for my conclusion that, in view of the claim being monetary, discovery against the defendant at the present time is not appropriate.
73 First, information gathered here from the defendant is highly unlikely to show where precisely the original funds, which have got into the account, came from. The primary evidence of this must be found in the country where all this wrongdoing happened in the first place, and where all the acts of corruption were generated. When this is assembled it may be possible to infer that, like the drug trafficker with no legitimate sources of income who is unable to explain where the money to fund his Porsche came from, the inference for the court will be that all Mr. Putra’s assets are derived from criminal behaviour. In fact, what evidence the court has so far indicates that a considerable part of the funds received by the defendant, albeit they may originally have been tainted as the proceeds of corruption, have apparently been laundered over a period of time in funding a couple of legitimate businesses.
74 Secondly, in my judgment, the test of necessity developed in Norwich Pharmacal (10) is not met. Disclosure is not necessary to get
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proceedings under way here or in Indonesia (see per Lightman, J. in Mitsui (9)). It is further not shown to me that it is necessary to give this information because there is no other means of discovering the information that Mr. Davies is seeking to acquire.
75 Thirdly, the information is going to be stale and is unlikely after this period of time to yield any effective leads (see per Hoffmann, J. in Arab Monetary Fund (No. 5) (1)).
76 Fourthly, I am further very concerned about the suggestion that the Government should have access to names of other parties who, in its view may have been involved in corrupt practices. One of the problems we have here is that with a corrupt President and first family, irregularity in behaviour towards the finances of the State can easily have percolated through to every level of the community, and indeed Mr. Sabda makes reference to this in his affidavit. I do not consider it appropriate for any names of individuals who have got mixed up in this jurisdiction with Mr. Putra’s fairly limited financial dealings in the plaintiff, in that they have advanced to or received from the plaintiff moneys, should, without any formal protection, have their names disclosed to the third party, which as a Government would be enabled to put it to a wide variety of uses. It would be oppressive if, having regard to the large number of people who must have become entangled in the alleged wrongdoing of the Soeharto years, a few names were extracted as a result of this enquiry in Guernsey and that such persons were to be given special treatment by the Indonesian authorities. Such persons may not enjoy the level of influence and ongoing protection that Mr. Putra and his family appear to have enjoyed.
77 Fifthly, despite the safeguards concerning names, the proceedings against Mr. Putra have a long way to go and any disclosure could be shown to have been unfair if at a later date the injunction falls.
78 Following on from these five points, I remind myself of the novel situation here where the third party appears to make this application as a direct result of a notification from this court. It is important that banks and financial institutions here do disclose to the authorities situations in which they have grounds for concern as to whether the funds held for a particular customer are indeed the proceeds of crime or other wrongdoing and that they should make disclosures. Although they would be first to say that they do not want to be havens for international criminal activity, all financial institutions here and their clients are very sensitive to issues of confidentiality and I am particularly anxious not to order any names to be divulged unless absolutely necessary for the prosecution of civil proceedings against Mr. Putra and his company, particularly when it is the defendant who made the original disclosure that invited the intervention of the Government. That is why Mr. Davies’s current application is too
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wide. I am not therefore persuaded that the justice of the case—the determinative question, according to Jones, J.A. in Macdoel (4)—requires me to grant any order directly against the defendant in the terms sought or otherwise.
79 I continue to give consideration to what, if any, disclosure should be ordered against the plaintiff. If no disclosure order is made, the Government will know that there are €36m. of the plaintiff’s funds with the defendant but will not be aware of anything else concerning the plaintiff’s activities. Normally, of course, an application for a freezing order would not have even this amount of information at the start of proceedings for an order. As I said when considering an order against the defendant, I cannot see that the third party requires any more information in order to start proceedings against Mr. Putra in Indonesia or, in the special circumstances prevailing here, if it wishes to establish a proprietary claim against the plaintiff in Guernsey.
80 As I have indicated, I do not accept what Mr. Davies says to the effect that information is of necessity required in order to establish whether the Government has a proprietary claim or not. I have already alluded to the long history of the apparent wrongdoing by Mr. Putra and the difficulties over identifying after such a long period of time any particular sum of money being the property of the Republic of Indonesia. More to the point—and again as previously indicated—I cannot see how any information that the plaintiff may have can help clarify the provenance of its funds. Far more relevant would be the obtaining of information from Mr. Putra and other bodies in Indonesia concerning where his funds have gone and then seeking to trace them in the various jurisdictions where they have ended up.
81 Mr. Davies asks for the disclosure of information from the plaintiff in order to identify other wrongdoers and persons who have damaged the Republic of Indonesia by looking at the accounts of the plaintiff. I come back to the point that it is a “strong matter” to order a bank in this jurisdiction to give information about customers other than the target of this particular freezing order, who is Mr. Putra. Mr. Davies is also asking for information concerning the beneficial owners of the plaintiff throughout its existence. Again, the original information furnished to the Government indicated that the only person involved with the plaintiff was Mr. Putra.
82 I see no reason for any disclosure order against the plaintiff to be used to find out about persons other than Mr. Putra, who may have had dealings with the company. I see no reason to allow questioning about the beneficial ownership of the plaintiff. Both these areas seem to me to be pure fishing so far as the Government is concerned.
2007–08 GLR 99
83 Having established that the plaintiff is a repository for funds belonging to Mr. Putra and having had information from Mr. Shepherd and Mr. Kadir, I am just persuaded that the plaintiff should be required to confirm that evidence through a longer term director or somebody who can speak with greater authority than Mr. Kadir and Mr. Shepherd and also depose as to what other assets the plaintiff has held during its existence. I fear that most of this information will be stale but that is not in my view fatal to the request. Mr. Davies casts doubt on the ability of the plaintiff through its directors to provide accurate information and if it has not got records of its bank accounts, which may well be the case, as it does seem on the face of it that Mr. Putra was acting as the signing authority and that the directors may not have been fully briefed on what he was doing. The plaintiff may therefore have to seek assistance from the defendant to provide duplicates of bank accounts since the incorporation of the plaintiff and I would hope that the defendant would use its best endeavours to furnish these to the plaintiff for onward transmission to the third party.
84 Mr. Shepherd suggested that this information should not be disclosed at this stage and that we should await the first review of the freezing order, which I am proposing will take place in six months’ time. He is worried concerning any damage that may be caused to innocent parties through the furnishing of information at this stage, when one could envisage the situation in six months’ time when the court would be faced with a possible situation where no progress has been made with the action against Mr. Putra and the court was minded to lift the freezing order.
85 I am not so minded. If the contents of Mr. Kadir’s and Mr. Shepherd’s affidavits are correct, which they claim to be, the plaintiff will have nothing to lose by filing at this stage evidence from someone who can speak with knowledge of the plaintiff’s activities throughout its existence, confirming that indeed the only funds with which the plaintiff has been concerned are those referred to in the minutes and which have landed up with the defendant for investment. I note from Mr. Kadir’s affidavit that there is talk of separate proceedings being brought by the plaintiff against the defendant in connection with the performance of the defendant in relation to matters of investment management. That may be an area where it would be appropriate for information to be requested. I would just add that it is possible that the person who is giving oath will indeed be able to give further evidence on other payments to the company and payments out of the company which have not been disclosed by Mr. Kadir or Mr. Shepherd. If that be the case, then that information too should be forthcoming at the present time. All these matters will clearly have an effect on the potential value of the plaintiff’s assets in the longer term and also the amount which the Government can look to recover in due course.
2007–08 GLR 100
86 As will be apparent from what I have already said concerning individuals other than Mr. Putra, they are entitled to protection from being identified for the reasons I have explained. And if they appear in the accounting records of the plaintiff as the source or destination of funds, the plaintiff’s officer who is furnishing the information may identify them by letter. All information provided must be confirmed on oath and it will of course be open to the Government on showing grounds to apply for further disclosure as appears appropriate.
87 I confess that I have not found the issues in this unusual application easy. I repeat my thanks to counsel for the helpful and measured way in which they made their written and oral submissions. Following the delivery of this judgment, with the assistance of counsel, an order incorporating its terms was made on May 24th, 2007 and included the grant of leave to appeal to both the plaintiff and the third party.
Orders accordingly.
2009
Law Report
None
Guernsey Law Reports 2007–08 GLR 73