BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
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ACASTA EUROPEAN INSURANCE COMPANY LIMTED |
Claimant |
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EMMIERA GROUP LIMITED |
Defendant |
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Mr Robert Mundy KC (instructed by Higgs LLP) for the Defendant
Hearing date: 2 May 2025
Draft judgment circulated: 8 May 2025
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Crown Copyright ©
Mr David Halpern KC :
The facts
"In relation to the overall results, it is important to caveat that there has been some disagreement in terms of how many claims should have been recorded against each report. In particular, claims considered either mechanical failure (wear and tear) or stain damage or a combination of both. Since most questions and responses have been captured in writing (by request of the audited entity) there are circumstances where the query has not been fully answered. In circumstances where SX3 and Emmiera have not reached a mutually agreed viewpoint, the report consistently records the outcome as hard leakage. Arguably, the outcome might equally be recorded as soft leakage (or removed all together)."
"There is a significant amount of paperwork relating to the fraud and I'm of the opinion that a face-to-face meeting would be significantly reduce the amount of time invested by both parties."
"Matt [Ross] & Raine [O'Reilly, D's claims manager)] explained that all of the details on the system can be changed except anything financial related included the start date of policies. Matt & Raine explained these policies are all genuine customer policies but that Chris had manipulated a claim on the customers policy and entered his own family and friends bank details. Customers impacted by this. Raine confirmed that all customers had not been notified yet. UKG had also not been notified yet as they wanted to see how we reacted first.
Raine demonstrated the system and jobs booked and explained that the minimal info and the fact the system just shows Chris Whelan concludes this is fraudulent as well as the payout within 48 hours.
Gareth asked if they can they do a control report on the claims paid within 48 hours of the incident date as this could be an indicator of other fraud cases – same day payment fraud risks. Action for EGL to confirm if this is possible as they stated it was but were not entirely sure."
"In the spreadsheet, claims highlighted in red are related to fraud. Kindly note that all other claims are legitimate and have been reviewed to ensure a clear and accurate audit trail is on each claim. Happy to discuss further when you complete an onsite visit."
The spreadsheet attached to the email listed 5,826 claims, of which seven were highlighted in red. It is regrettable that Marcus Smith J was not shown the spreadsheet and was not told that only seven claims had been highlighted in red.
i) C emailed to say that it was "incredibly concerned" that almost 6,000 cases had been closed within 48 hours of being opened, and repeating its request for "a complete data dump" of claims relating to C.
ii) Mr Ross replied on D's behalf saying: "Raine will be responding shortly to your observations on the closed claims timeline – there is a perfectly rational explanation for the volume of transactions." He added that: "The sum of £22,583.50 will be sent across today ref 'claim repayment'". This sum was the amount which D regarded as representing the losses caused to C by Mr Whelan's fraud. The figure has not been challenged by C.
i) Ms O'Reilly sent an email to C providing further information about the 5,826 claims which had been settled within 48 hours of being made. She said that 4,054 had been charged £0. She gave explanations in respect of the remaining claims, including 225 described as "anomaly" claims. She concluded as follows:
"As mentioned before, I would be happy to discuss this in more detail during a site visit, where we can go through each of the cases on the system.
Please feel free to reach out if you need any further clarification in the meantime."
ii) Twenty minutes later Mr Ross sent an email headed "fraud update". He said:
"Following exhaustive investigations, we are as satisfied as we can be at this point in time, that all fraudulent activities perpetrated by Chris Whelan have been identified.
The sum of £22,583.50 that was highlighted as being claimed on the BDX [bordereaux] has been refunded and we await your feedback on claim 241436. [please refer to my email from 23rd January]
The matter is further being investigated by the FCA and the police and moving forward we will deal directly and exclusively with these parties.
If any further fraudulent activity comes to light, we will advise you accordingly but can no longer respond direct to Acasta with any queries on this matter.
In Raine's earlier note, 225 "anomalous" claims were identified, however on review of a representative sample, these were all identified as relating to historic claims that were "reopened".
We do not have concerns of fraudulent activity relating to these transactions, however, there does appear to be several administrative errors pertaining to the sample we reviewed. We will share our findings on these claims during the forthcoming audit.
We apologise for this regretful incident and look forward to drawing a line under the matter."
"Said everyone is involved and reason why Gary Wilkes left and Emma Gowland got involved as financial controller as he didn't like all the corrupt stuff but Emma is evil and the worst person WB [the whistle-blower, i.e. Mr Whelan] has ever met and is so corrupt she finds ways to bury all the evidence in the payments and MI."
For reasons that will become clear in this judgment, I do not regard it as necessary to set out further details of Mr Whelan's allegations. It is sufficient to note that they involve many types of serious fraud and other wrongdoing on a wholesale scale by employees and officers of D.
The proceedings
i) That the order requiring preservation of the imaged documents should continue until trial or further order;
ii) That a gagging order made against D should not continue; and
iii) That C should have disclosure of two classes of documents, viz (i) those in which it claims a proprietary interest and (ii) those to which it claims a contractual right of access.
i) "The Respondent's bank statements showing transactions from November 2019 until the current date that relate in any way whatsoever to the business relationship between the Applicant and the Respondent including (but not limited to) the Respondent's performance of its duties pursuant to the TOBA and CHA"; and
ii) "All emails, SMS messages, WhatsApp, Signal, Slack, Teams or other electronic messages, sent or received from November 2019 until the date of this order, including messages sent by other forms of social media including (but not limited to) LinkedIn, Facebook, Snapchat, Instagram, X (formerly Twitter) or any other form of messaging system whatsoever that are related to the business relationship between the Applicant and the Respondent including (but not limited to) the Respondents performance of its duties pursuant to the TOBA and CHA", including but not limited to "messages sent and received (whether as recipient and/or copied and/or blind copied) by any of the Named Individuals."
Most of the submissions made to me relate to category (ii).
C's submissions in outline
"The most important factor in this application is that there is prima facie evidence of fraud (strongly supported by the statements made by Mr Whelan) and Acasta has no alternative way of determining the full extent and nature of any fraud (and/or conspiracy) without access to the documents. …
This is a point of principle, and it is well established in fraud cases that "the court should do all it can to help innocent people to find out where their money has gone" (see Lord Denning in Bankers Trust v. Shapira [1980] 1 WLR 1274 at 1281G-1282E). We will rely upon this issue of principle."
i) Following the FOS report relating to multiple claims and the email from C which required D to take appropriate steps to avoid this happening in the future, the continuation of the practice of wrongfully treating claims as multiple claims was fraudulent (paragraph 5 above).
ii) The admitted frauds by Mr Whelan in April 2024, which were not reported to C until November 2024 (paragraph 8 above), albeit that he does not allege that there was deliberate concealment in this regard.
iii) The findings in the SX3 report (paragraph 9 above).
iv) The fact that nearly 6,000 claims were settled by D within 48 hours of the claim being made. He submits that the note of the meeting on 15 January ("Raine demonstrated the system and jobs booked and explained that the minimal info and the fact the system just shows Chris Whelan concludes this is fraudulent as well as the payout within 48 hours") shows that Ms O'Reilly regarded this as a "red flag" (paragraph 13 above).
v) The failure to respond properly to requests by C and the refusal of Mr Ross on 27 January 2025 to engage further with C (we "can no longer respond direct to Acasta with any queries on this matter": paragraph 16.ii) above).
vi) The allegations made by Mr Whelan on 7 March 2025 (paragraph 18 above). Mr Benzie submits that there is a striking similarity between the allegations made in the FOS report and the allegations later made by Mr Whelan against D. He submits that disclosure is needed in order to see whether Mr Whelan's allegations are true, but he accepts that none of the allegations made by Mr Whelan were put to D before the application was issued.
D's submissions in outline
i) There is no evidence of any widespread practice within D of wrongfully treating claims as multiple claims.
ii) D admits that there was fraud by Mr Whelan, for which D may be vicariously liable. This fraud was properly reported to C and compensation was duly paid by D to C.
iii) The findings in the SX3 Report are inconclusive, for the reasons set out in paragraph 11 above.
iv) The note of the meeting with Ms O'Reilly on 15 January 2025 is unsatisfactory and does not constitute an admission that the settlement of claims within 48 hours is a "red flag". According to Mr Lane's evidence, Ms O'Reilly confirmed to him that she "simply commented at the end of the meeting that all of these claims had been closed within 48 hours which may be another reason for questioning them." In other words, it is simply a factor to be considered, but does not amount to a "red flag". This is borne out by subsequent events. As requested by C, Ms O'Reilly sent a spreadsheet listing all 5,826 claims which had been settled within 48 hours. Of this total, 4,054 proved to have no value. This could be for a number of reasons, including the fact that the policy in question had expired or did not respond for some other reason. Ms O'Reilly's spreadsheet offers explanations for the remaining claims, which show that only seven were found to be fraudulent.
v) D did not refuse to engage with C's requests in and around January 2025. The email sent by Mr Ross on 27 January 2025 should be read in conjunction with Ms O'Reilly's email 20 minutes earlier. Properly construed, Mr Ross was simply indicating that D had reported Mr Whelan's fraud to the police and the FCA and that D was not willing to correspond further with C about that matter. He was not shutting the door to disclosure of further frauds (if any came to light), nor on further discussions with Ms O'Reilly in relation to her email 20 minutes earlier. Mr Mundy KC added that, with hindsight, the decision not to continue the correspondence with C about Mr Whelan's frauds proved to be a wise one, given that C later met with Mr Whelan without telling D. Mr Mundy KC also relies on paragraph 123 of the Supervising Solicitors' report of the execution of the imaging order, which described D as "cooperative and willing to assist".
vi) Mr Whelan's allegations should not be given any serious weight. In the first place, he is a fraudster and has accepted this by reimbursing D for the amounts which he misappropriated. Secondly, he has an axe to grind, because he is now working for Guardsman, which is a competitor firm. Thirdly his allegations are both unparticularised and intemperate, as is shown by the example given at paragraph 18 above. Fourthly, it is unsurprising that Mr Whelan repeated allegations similar to those in the FOS report, given that he was still working for D when the FOS report came out and, indeed, the report was sent to him. No adverse inferences should be drawn from Mr Lane's failure to engage with each of his wild allegations.
i) The starting point is the decision of Mann J in A v B, which I set out below.
ii) Bankers Trust is not in point. What Lord Denning actually said was: "In order to enable justice to be done — in order to enable these funds to be traced — it is a very important part of the court's armoury to be able to order discovery." This is not a licence to order early disclosure whenever there is an allegation of fraud.
iii) He relies on the following dictum of Lawton LJ in Hytrac Conveyors Ltd v Conveyors International Ltd [1983] 1 WLR 44 at 47H, (with whom Templeman and Fox LJJ agreed):
"It has to be remembered by all concerned that we do not have in this country an inquisitorial procedure for civil litigation. Our procedure is accusatorial. Those who make charges must state right at the beginning what they are and what facts they are based upon. They must not use Anton Piller orders as a means of finding out what sort of charges they can make. They must deliver their statement of claim within the time specified in the rules, unless the court orders otherwise."
iv) He also relies on CBS Butler Ltd v Brown [2013] EWHC 3944 (QB), in which Tugendhat J refused to order disclosure following an imaging order, saying:
"38. In my judgment, an order which would deprive the Defendants of the opportunity of considering whether or not they shall make any disclosure is (in the words of Hoffmann J) an intrusive order, even if it is made on notice to the defendant. It is contrary to normal principles of justice, and can only be done when there is a paramount need to prevent a denial of justice to the claimant. The need to avoid such a denial of justice may be shown after the defendant has failed to comply with his disclosure obligations, having been given the opportunity to do so (as in Mueller). Or it may be shown before the defendant has had an opportunity to comply with his disclosure obligations. But in the latter case it is not sufficient for a claimant such as the employer in Lock v Beswick, or the Claimant, to show no more than that the defendant has misused confidential information or otherwise broken his employment contract. The position is a fortiori where the claimant has not even shown that much. What a claimant must show is substantial reasons for believing that a defendant is intending to conceal or destroy documents in breach of his obligations of disclosure under the CPR. …
40. There is, of course, no dispute that the Claimant is entitled to disclosure of the Defendants' documents. The Claimant is entitled to that at this stage of the action (after service of the Defence) in the course of the normal procedure for disclosure. What is at issue is whether the Claimant is entitled to deprive the Defendants of the opportunity of considering whether or not they shall make any disclosure of any particular documents."
i) The proper way to manage this case is to follow the usual procedures in the CPR, as confirmed in TBD. Mr Mundy KC describes Mr Benzie's approach as "topsy-turvy litigation", which does not promote efficiency or focus.
ii) This would not have been an appropriate case for pre-action disclosure. The disclosure sought (all emails etc "that are related to the business relationship between the Applicant and the Respondent": paragraph 23.ii) above) is very much wider than would be permitted under CPR 31.16(4), which requires C to specify "the documents or classes of documents" of which disclosure is sought.
iii) If there is to be disclosure, it would be appropriate for D (acting by its solicitor) to be responsible for this, as would be the case if disclosure took place in the ordinary way. There were particular factors in the two cases reported under A v B which made it inappropriate for the defendants to conduct the exercise in those cases, but in the present case there are simply unsubstantiated allegations against Mr Lane and D.
iv) There is no force in the point about ADR. The same could be said in most sets of proceedings, i.e. that one party might be unwilling to mediate before disclosure.
v) There is nothing to stop C from making whatever report it considers necessary to the FCA.
Discussion
"21 In my view one should answer the question of what should now happen in relation to inspection by going to the central purpose of a search and seizure order, by reference to the authorities and statute, and carefully considering how it fits into the normal established way of conducting litigation."
22 If one starts from the disclosure end, then the general rule is that the disclosing party has to carry out the disclosure exercise itself, applying a relevance test as best it can. It is assumed in the first instance that it will do that bona fide. In most cases comfort can be taken (at least to a degree) by the fact that solicitors are involved, and they are better placed to assess relevance than the party (and not inclined to suppress a relevant but damaging document). If one party considers that the disclosing party has not carried out its obligations properly then the remedy is an order for specific disclosure which focuses the issue more sharply. That order is not generally an order which involves the receiving party itself conducting a search and assessment of a very large body of the disclosing party's documents in order to see what relevant documents might be found, though I accept that in theory such an order would be possible under the any other order head under CPR r 31.5(7). What is more likely to be ordered than that (if there is a problem which justifies it) is disclosure of a specified class of documents as a whole without any test for relevance being carried out by the disclosing party, though even then the disclosing party is the party which looks for that class in the first place.
23 With that in mind it becomes necessary to look at the problem from the search and seizure end. As pointed out above, the prime reason for making such an order (in relation to documents) is preservation of those documents, in order to avoid the risk that they will not be available at the disclosure stage, whenever that might be. Its main source is not a jurisdiction to give the claimants a form of disclosure exercise which is (a) early and (b) a do-it-yourself form of exercise which would not normally be done as part of standard disclosure. Section 7 is not even aimed primarily at documents, though it undoubtedly covers them.
24 The reason that, to a degree, the old form of SSO in relation to documents seems to involve a disclosure exercise is because the exercise of preservation in relation to physical documents necessarily involves a search and assessment by the claimant. If one is preserving physical documents from a potentially predatory party then there is no other way of going about it. The same is true of digital documents which are not imaged (see the standard form of order). But that should not disguise the fact that the exercise is usually intended to be a preservation one, not (at that stage) a disclosure one.
25 In my view that informs an assessment of what should normally be done with an image of digital data once it is secured. Once the image is taken the documents on it are preserved and safe from the risk of destruction, and it is that wish which the order was primarily intended to meet. It is not necessary to carry out any searching or identification for that purpose; the image is safe. Any searches carried out in relation to those documents cannot be justified on the footing that it is necessary for the preservation of those documents. I can see no justification for a search of those documents being, as a general rule, carried out by the claimant and/or at that stage.
26 I therefore agree with the submissions of the defendants in both cases that if there is to be an inspection of documents on the images at this stage and by the claimants then it needs to be justified as a separate exercise, and analysed in terms of the disclosure jurisdiction. The process of looking for relevant documents is akin to disclosure if it is not actual disclosure (as that process is understood under the Civil Procedure Rules). I do not accept the submissions of [counsel] that the inspection of the image is ancillary to the SSO, or at least it is not ancillary in any meaningful way. If anything, the search and seizure order is ancillary to disclosure, because it enables documents to be preserved for that purpose, but without necessarily determining who should do the disclosure."
Mann J then referred to the dictum in CBS v Butler quoted at paragraph 33.iv) above and concluded this section of the judgment with a non-exhaustive list of relevant factors at [30], including the following:
"(i) The order will have been obtained in the first place on the basis of a strong prima facie case of not only the dishonesty of the defendant but also the propensity of the defendant to cover his or her tracks by destroying evidence. That may mean that the defendant should not necessarily be trusted to carry out the disclosure (inspection) exercise properly, though this factor may be seriously ameliorated by the defendant's solicitors being involved in the process." and
"(vi) On the other side of the argument is the very important factor, which must not be lost sight of, that the whole exercise (including the order itself) is a highly intrusive one, and any digital image of the kind in issue in these cases is likely to contain irrelevant material which is private and confidential (if not privileged) and which should not, if it can be avoided, be seen by the claimant at all."
"The basic safeguard required in imaging orders is that, save in exceptional cases, the images should be kept in the safekeeping of the forensic computer expert, and not searched or inspected by anyone, until the return date. If there is to be any departure from this, it will require a very high degree of justification, and must be specifically and explicitly approved by the court. On the return date, consideration must be given to the timing and methodology of disclosure and inspection of documents captured in the images. The presumption should be that it will be for the defendant to give disclosure of such documents in the normal way, but this presumption may be departed from where there is sufficient justification. Even if the presumption is departed from, there should be no unilateral searching of the images by or on behalf of the claimant: the methodology of the search must be either agreed between the parties or approved by the court."
i) As to whether sufficient grounds have been shown to justify departure from the usual principle that disclosure be handled by the disclosing party (via its solicitor); and
ii) That the order sought was much too wide-ranging and unfocused.
Disposition