James Fletcher examines the High Court’s refusal to grant the claimants’ application for an interim injunction to prevent HMRC from reviewing, making use of, copying or transmitting material seized via search warrant. James Fletcher appeared for the defendant, HMRC in this case.

Intertrade Wholesale Ltd and others v Revenue and Customs Commissioners and another [2018] EWHC 3476 (QB)

What are the practical implications of this case? 

In appropriate cases, interim relief may be granted against public bodies in ongoing judicial review claims. Injunctions or declarations in private law actions may be more difficult to obtain where the party’s earlier judicial review claim against that public body has been unsuccessful. However, the grant or refusal of an application for an injunction involves the exercise of discretion and evaluation of the particular facts in each individual case.

The chances of persuading a court to grant an injunction will be increased if the injunction sought is proportionate, given the underlying claim. Where a party is seeking a very wide-ranging injunction, the strength of the underlying claim is an important factor. If the underlying claim is not very strong then a wide-ranging injunction is likely to be disproportionate. For that reason, the terms of any injunction sought need to be focused.

In relation to issues of identification of material that is potentially protected by legal professional privilege (LPP), engagement between the parties and seeking an agreed methodology is the best course. This case suggests that where there appears to be a reasonable proposal to deal with issues of LPP, the court is unlikely to grant a wide-ranging injunction as alternative protection. Moreover, the case suggests that if a party is submitting that the other side’s proposal to deal with LPP is unreasonable, then evidence will need to be adduced to prove that. 

What was the background?

The claimants sought injunctive relief in relation to material seized from their premises as a result of search warrants granted to the defendant. The relief sought would prevent the defendant from reviewing, making use of, copying or transmitting any of the material.

The search warrants were granted to the defendant as part of an investigation into large-scale alcohol duty evasion and associated money laundering of the proceeds of fraud. The investigation was being conducted together with the French customs authorities and was subject to a joint investigation agreement that provided for the sharing of documents.

Previously, the claimants had unsuccessfully sought to judicially review the application for, and granting of, those search warrants. One on the grounds of review was that during the execution of the warrants, the defendant had exceeded the authority of the warrants by excessive searching and that by virtue of a breach of section 16(8) of the Police and Criminal Evidence Act 1984 (PACE 1984), the entries, searches and seizures were unlawful. This ground was rejected at the judicial review permission stage. The judge found that the evidence in relation to the allegation of excessive searching was not clear and noted that the claimants had a private law remedy for damages which was better suited to determination of factual issues.

After the judicial review was refused, the claimants then brought this private law action alleging that the searches were unlawful due to a breach of PACE 1984, s 16(8), which provides that ‘a search under a warrant may only be a search to the extent required for the purpose for which the warrant was issued’. As part of the claim, they sought injunctive relief.

What did the court decide?

The court refused the application for injunctive relief. It applied the principles of American Cyanamid Co v Ethicon Ltd [1975] AC 396, [1975] 1 All ER 504 and considered whether:

  • There was a serious question to be tried. 
  • Damages would be adequate compensation for the claimants if an interim injunction were refused but they subsequently established at trial their entitlement to a permanent injunction. 
  • Damages would be adequate compensation for the defendants.
  • The balance of convenience favoured the claimants or the defendants.

Serious question to be tried

As to the serious question to be tried, the court considered that the evidence relied on by the claimants was not as powerful as they contended and the court had some concerns as to whether there was a real issue, noting that the judicial review had disposed of the argument as to the legality of the warrants.

The court considered the judgment in R (on the application of Chaudhary) v Bristol Crown Court and another [2015] EWHC 723 (Admin), [2015] All ER (D) 241 (Mar) where Fulford LJ stated that there was no sustainable basis in law for the proposition that whenever there had been more than a de minimis breach of PACE 1984, s 16(8), the entirety of the searches and seizures were unlawful. However, considering the case as a whole, and observing the low threshold to show a serious question to be tried, the court formed the view that the claimants had met that test.

Adequacy of damages

In relation to adequacy of damages, the court noted that there was a cogent argument that damages would be sufficient for the claimants. But as the court entertained doubt, it went on to consider whether damages would be adequate for the defendant and concluded they would not because the defendant’s work in law enforcement would have been seriously damaged and there was no evidence that the claimants could financially compensate the defendant.

Balance of convenience

As to the balance of convenience, the court found the balance firmly in favour of the defendant. The court referred to Eady J’s examination of the balance of convenience in Faisaltex Ltd v Chief Constable of Lancashire Constabulary [2009] EWHC 1884 (QB), [2009] All ER (D) 151 (Aug) and also considered Faisaltex Ltd v Chief Constable of Lancashire Police [2009] EWHC 799 (QB), but noted that each case had to be considered on its own facts.

The court considered the seriousness and extent of the criminality under investigation and it found that the wide terms of the injunction proposed (applying to all material seized from all premises) would impede a lawful investigation. The court also noted that the injunction sought was against a public authority after an unsuccessful judicial review. The court held that it was in the public interest for the defendant to investigate thoroughly, speedily and efficiently. It considered the claimants’ contention that if their claim succeeded it would be practically impossible for them to obtain return of documents as they would have been sent to France pursuant to the joint investigation agreement. But the court expected that if the claimants were successful, then mutual co-operation meant there would be a real possibility that documents would be returned.

Legal professional privilege (LLP)

The court looked separately at the issue of LPP. During the judicial review phase, the parties had corresponded about identification of such material. The defendant had proposed that the claimants identified material allegedly subject to LPP on a rolling basis, to be considered by independent counsel and returned if appropriate. The claimants rejected that proposal, saying that the arrangements were unworkable and prohibitively expensive. The court found that there was nothing before it that indicated the defendant’s proposal did not meet the concerns of the claimants and concluded that the protection of documents stated to be LPP by the blunt instrument of the proposed injunction was too wide and disproportionate.

James Fletcher practises in both civil and criminal law. He is a specialist in Asset Recovery and Proceeds of Crime work. He is instructed on behalf of businesses, by individual members of the public and by Government departments.

James has been featured in Chambers and Partners in the field of Proceeds of Crime and Asset Forfeiture work (all circuits) since 2014 and has been “Top Ranked” since 2016. James is also ranked as a tier 2 leading individual in the Legal 500 for POCA and asset forfeiture (London Bar). He is also ranked in Who's Who at the UK Bar (2017 & 2018 Edition) in the field of criminal fraud work.

This article was first published on 4 January 2019 on LexisNexisPSL.