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Cite as: [2023] CSOH 63, [2023] ScotCS CSOH_63

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OUTER HOUSE, COURT OF SESSION

[2023] CSOH 63

P426/23

OPINION OF LORD SANDISON

In the Note of

(FIRST) THORNTONS INVESTMENT HOLDINGS LIMITED; (SECOND) MATHESON

CONSULTING LIMITED; and (THIRD) THORNTONS WEALTH MANAGEMENT

LIMITED

Noters

against

(FIRST) RORY MATHESON; (SECOND) LISA MATHESON; (THIRD) MARGARET

McINTOSH; (FOURTH), ROBERT McINTOSH; and (FIFTH) GRANITE WEALTH

CONSULTING LIMITED

Respondents

Noters: MacColl, K.C., Ower; Thorntons Law LLP

First and Second Respondents: McIlvride, K.C.; Blackadders LLP

Third and Fifth Respondents: Tosh; Mackinnons Solicitors LLP

21 September 2023

Introduction

[1]

This is a Note within a pending petition process which was brought to obtain orders

in terms of section 1 of the Administration of Justice (Scotland) Act 1972. The Noters (the

petitioners in the petition process) ask the court to excuse their use, without prior

permission, of documents recovered by way of "dawn raids" authorised by the court under

section 1 of the 1972 Act, and to grant permission for those documents to be used for certain

purposes other than that for which the section 1 order was granted. The first and second

respondents maintain that no such orders should be granted. The third and fifth

respondents go further and ask the court not only to refuse the prayer of the Note, but to

sanction the Noters for their unauthorised use of the documents in various ways.

Statutory Provision and Rules of Court

[2]

Section 1(1) of the Administration of Justice (Scotland) Act 1972 is in the following

terms:

"1.-- Extended powers of courts to order inspection of documents and other property, etc.

(1) Without prejudice to the existing powers of the Court of Session, of the Sheriff

Appeal Court and of the sheriff court, those courts shall have power, subject to the

provisions of subsection (4) of this section, to order the inspection, photographing,

preservation, custody and detention of documents and other property (including,

where appropriate, land) which appear to the court to be property as to which any

question may relevantly arise in any existing civil proceedings before that court or in

civil proceedings which are likely to be brought, and to order the production and

recovery of any such property, the taking of samples thereof and the carrying out of

any experiment thereon or therewith."

[3]

Chapter 64 of the Rules of the Court of Session 1994 deals with applications for an

order under section 1 of the 1972 Act made where a cause is not depending before the court

in which the application is made, and inter alia provides as follows:

"64.3 The petitioner shall lodge with the application

...

(b) an undertaking by the petitioner that he

(i) will comply with any order of the court as to payment of compensation if it

is subsequently discovered that the order, or the implementation of the order,

has caused loss to the respondent or, where the haver is not the respondent,

to the haver; and

(ii) will bring within a reasonable time of the execution of the order any

proceedings which he decides to bring; and

(iii) will not, without leave of the court, use any information, documents or

other property obtained as a result of the order, except for the purpose of any

proceedings which he decides to bring and to which the order relates.

Modification of undertakings

64.4 The court may, on cause shown, modify, by addition, deletion or substitution,

the undertaking mentioned in rule 64.3(b)."

Factual Background

The Parties

[4]

The Noters are a group of companies involved in the business of the provision of

investment advice and financial planning. The ultimate owners of the group are present and

former partners in the firm of solicitors presently known as Thorntons Law LLP. Until

December 2020 the third Noter was not part of the group, but was owned by the first and

second respondents, Rory and Lisa Matheson, and was known as Matheson Financial

Consulting Limited. It changed its name in December 2022 to Thorntons Wealth

Management Limited, and it now trades as "Thorntons Wealth", but I shall refer to it as

"MFC", an abbreviation of the name by which it was known during the period when most

of the events relevant to this dispute occurred. The Mathesons sold their shares in MFC to

the group in December 2020 and entered into certain restrictive covenants aimed at

preventing them from competing with the business of MFC, or attracting away its clients, for

a three-year period after the sale. Mr Matheson also remained employed by MFC on terms

which prevented him disclosing confidential information to others during and after his

employment. The third respondent, Margaret McIntosh, was also an employee of MFC and

her terms of employment likewise contained anti-competition and confidentiality

provisions. The fourth respondent, Robert McIntosh, is Margaret's husband, but his

involvement in the events in issue in the Note is limited and he did not lodge answers or

otherwise participate in the Note process. The fifth respondent, Granite Wealth Consulting

Limited, is a company set up in May 2022, owned by Mrs McIntosh and to which

Mr McIntosh is the company secretary, and which is alleged by the Noters to have been

intended as a vehicle for Mrs McIntosh, with the backing of Mr Matheson, to compete with

MFC and lure away its clients.

The Section 1 Petition

[5]

In April 2022 Mrs McIntosh gave notice of her intention to resign from her

employment with MFC. The following month, Chris Forde, Head of Financial Planning for

MFC, claims to have received a package in the mail from an anonymous sender enclosing a

copy of an email between Mr and Mrs McIntosh suggesting that Mr Matheson was

attempting to put Mrs McIntosh in touch discreetly with an accountant in connection with a

proposal to set up a new company for her to carry on business in the financial services

sector. Later in May 2022, Stephen Webster, the Noters' Chief Executive Officer, is said to

have received a further anonymous package consisting of a note warning him that plans

were well established to transfer clients to a new entity set up, funded and staffed by current

employees, together with emails bringing to light the connection between the McIntoshes

and Granite Wealth and implying that Mr Matheson was providing that company's initial

capital by way of loan to Mrs McIntosh. Documents bearing to be a timeline and business

plan for the new enterprise were also provided, suggesting that it was proposed that other

employees of MFC would in due course leave it and join the new venture, and that existing

clients of MFC would be lured to it as soon as Mrs McIntosh's restrictive covenants expired.

[6]

The Noters, instructing Thorntons Law LLP as their solicitors, then all petitioned this

court under section 1 of the Administration of Justice (Scotland) Act 1972 narrating that they

intended to bring proceedings against the Mathesons based on their alleged breaches of the

restrictive covenants in their share sale contract, and against Mr Matheson and

Mrs McIntosh in respect of their alleged breaches of their employment contracts, as well as

against Granite Wealth, for damages or an account of profits. They narrated that those

intended proceedings would also seek interdict against wrongful actings, and orders for

delivery up of confidential material. It was claimed that, in order to allow the proposed

proceedings to be properly pled, certain types of documents and property should be taken

into the possession of the court, and to that end that authority should be given to

commissioners of the court to enter the homes of the Mathesons and the McIntoshes without

prior notice, to search for and seize material of the relevant description, and to deliver it to

the custody of the court. The material in question was, broadly speaking, any hard copy or

electronic document containing information relating to the business of the Noters obtained

by Mr Matheson or Mrs McIntosh in the course of their employment with MFC; information

confidential to MFC or Matheson Consulting Limited (including client details, terms of

business, financial information, and business, strategy and marketing plans); the identities

of any third parties to whom such confidential information had been disclosed, and the

nature of any such disclosure; the terms on which the Mathesons had provided financial

backing to the McIntoshes or Granite Wealth to facilitate the establishment or operation of

the latter; and generally any communications amongst the Mathesons and the McIntoshes in

connection with the incorporation of Granite Wealth, or communications with clients in

connection with investment, wealth management or financial planning services.

[7]

On 23 June 2022 the court was persuaded to grant the orders sought. It appointed

one senior member of the Bar to attend at the Mathesons' house, and another to attend at the

McIntoshes'. In accordance with Rule of Court 64.3(b)(iii), the Noters were required to

undertake to the court as a pre-condition of the order being made that they would not,

without the court's leave, use any information, documents or other property obtained as a

result of the order, except for the purpose of any proceedings which they decided to bring

and to which the order related - in other words, for the purposes of the particular

proceedings which they had told the court in the section 1 petition they intended to bring, as

described above. That undertaking was given on their behalf by Scott Milne, a solicitor and

partner in Thorntons Law LLP and a member of the boards of directors of all three Noters.

Implementation of the Section 1 Order and its Aftermath

[8]

"Dawn raids" took place at the homes of the Mathesons and the McIntoshes on

24 June 2022. A solicitor from Thorntons Law LLP was present at each raid, as was an IT

expert appointed to assist the relevant commissioner to identify any electronic devices and,

if possible, ascertain on the spot whether those devices contained any material falling within

the terms of the court's order. In the event, electronic devices were seized from the

Mathesons' home so that they might, with the leave of the court, subsequently be examined

in order to ascertain whether they contained any such material. Such devices were seized

from the McIntoshes' home for the same purpose, as were hard copy documents.

Mr McIntosh initially asserted a claim to confidentiality in respect of the contents of a mobile

telephone and a laptop seized from him and used for the purposes of his (unrelated)

employment, but then withdrew that claim. Each of the commissioners subsequently

reported to the court. The commissioner who had attended at the McIntoshes' home

initially did so on 29 and 30 June 2022. Each of his reports was submitted, not only to the

court, but to Thorntons Law LLP. The report of 29 June 2022 outlined in general terms what

had been seized from the McIntoshes' home, both documents in hard copy and electronic

devices, but did not disclose any detail of the content of those items. The report of 30 June

2022 slightly amended the inventory of electronic devices seized and noted the results of an

initial professional examination of Mrs McIntosh's mobile telephone, which suggested that

some deletion of call logs may have taken place, or else that it was not the only such

telephone used by her.

[9]

On 8 July 2022, on the application of the Noters, the court allowed them to inspect,

borrow and take copies of the hard copy documents listed in the McIntosh commissioner's

report of 30 June 2022, and allowed the electronic devices seized during the raids in respect

of which Mr McIntosh had withdrawn his initial claim of confidentiality to be sent to the IT

expert for analysis. It is important to note that the court was not asked to, and did not, allow

the hard copy documents to be used for any purpose other than that specified in the

section 1 petition, viz., for the purpose of raising proceedings against the respondents along

the lines set out in the petition. Equally, the court was not asked to, and did not, allow the

petitioners to have any access to the content of the electronic devices sent in the first instance

for analysis. Rather, it expected the analyst to report to the relevant commissioner, who

would in turn report to the court, which itself would decide, in the absence of consent on the

part of those from whom the material had been seized, whether any of it should be released

to the Noters.

[10]

In his capacity as solicitor to the Noters, Mr Milne attended at court on 8 July 2022

and borrowed the hard copy documents to which the Noter had been allowed access. He

also uplifted the electronic devices in respect of which confidentiality had initially been

asserted to be sent to the IT expert, who already had the other devices seized during the

raids for analysis.

[11]

On 12 July 2022 the Matheson commissioner reported to the Court, identifying the

electronic devices seized from the Mathesons and noting that they were in the possession of

the IT expert in order that he could search them for any material falling within the terms of

the court's original order. He stated that he believed that he had exhausted the court's

commission to him.

[12]

On 14 July 2022 Mr Matheson lodged answers to the section 1 petition. He opposed

a further motion made by the Noters to be permitted to examine the material seized by the

Matheson commissioner, and given that the petition was now a contested one, the court on

4 August determined that any access to that material should wait until the determination of

a hearing on the petition and answers, which was fixed for 27 September.

[13]

The IT expert carrying out the examination of the remaining electronic devices seized

in both raids reported his findings to the commissioners on 11 September 2022. That report

not only stated, inter alia, that material falling within the court's order had been found on

certain devices, but also indicated the nature of that material. Thorntons Law LLP became

aware that this report had been sent to the commissioners and emailed them both on the

morning of 12 September asking to be shown the expert report as soon as possible and

enquiring whether the court's permission was required to achieve that. The McIntosh

commissioner issued a further report dated 12 September, which effectively simply brought

to the court's attention the entirety of the IT expert's report and thus disclosed not only the

existence, but also the nature, of material falling within the court's order found on the

electronic devices seized in the raids. That report was sent to the court and also to

Thorntons Law LLP. The commissioner stated in an email to Thorntons Law LLP that he

did not think it necessary to seek the court's permission to access the content of the expert's

report but that it would be best to check that matter directly with the court. The Matheson

commissioner stated in an email to Thorntons Law LLP that, insofar as he had any

remaining jurisdiction, he was content that the IT expert's report might be released to the

Noters. Thorntons Law LLP then decided, seemingly having consulted counsel, that it

would be in order to disclose the commissioners' reports, incorporating the IT expert's

report, to the Noters without further recourse to the court. The reports were disclosed by

Mr Milne to other solicitors at Thorntons Law LLP, and to Mr Webster and Mr Forde of the

Noters. In consequence of that disclosure, instructions were received for Thorntons Law

LLP to raise on behalf of the Noters the litigations against Mr Matheson, Mrs McIntosh and

Granite Wealth contemplated in the section 1 petition. The petition proceedings were sisted

and the hearing in them scheduled for 27 September did not take place. Summonses in the

actions contemplated by the section 1 petition passed the Signet on 17 October 2022, and are

being defended. The Noters intend to make use of the material recovered in the section 1

petition in those litigations, although objection is taken by at least some of the defenders in

those actions to that use. No attempt was made by any party to obtain an express ruling

from the court in that connection in these proceedings.

Improper Use of Recovered Material

[14]

Winding back the clock for a moment, on the same day as the dawn raids were

carried out, 24 June 2022, Mr Matheson and Mrs McIntosh were suspended from their

employment by MFC (Mrs McIntosh already being on gardening leave after having given in

three months' notice of her intended resignation in April). Matthew Strachan, Chief

Investment Officer with MFC, was charged with carrying out an investigation into

Mr Matheson's conduct in light of the concerns raised by the content of the anonymous

deliveries already said to have been received. Mr Strachan had available to him the

information contained in the recoveries made under the section 1 petition and appears to

have made unauthorised use of it, to an extent that remains uncertain (since the court did

not hear from him), for the purposes of his investigation. Mr Matheson was in due course

summoned to a meeting with Mr Strachan to address matters of concern, but immediately

prior to that meeting, on 3 November 2022, he resigned from his employment with

immediate effect. In January 2023 he raised proceedings in the Employment Tribunal

against MFC, claiming to have been constructively unfairly dismissed and referring in that

regard to the dawn raid having been carried out at his home at MFC's instance, and to the

action raised against him by the Noters, which he maintained was unjustified. In response

to those proceedings, MFC, again acting through Thorntons Law LLP, stated in its defences

to the Employment Tribunal proceedings that:

"A Section 1 petition is not granted lightly - there has to be a strong prima facie case

on the basis of the evidence before the court which is presented on an ex-parte basis

and the court also has to be satisfied that there is a likelihood of proceedings being

raised against the respondent (in this case, the Claimant). The petition being granted

demonstrates that there was such a prima facie case."

It also maintained in those defences that Mr Matheson's suspension had proceeded upon the

anonymous material received:

"and also data, client records, telephonic documents, the business plan and other

data held in digital format, including communications with the Claimant, recovered

from Ms McIntosh's property".

That statement carried the implication that the material seized from Mrs McIntosh was apt

in some unspecified regard to justify the suspension of Mr Matheson. The solicitors at

Thorntons Law LLP who stated that defence did so because they were informed by

Mr Milne that such was the case. In fact, as already narrated, Mr Matheson was suspended

on 24 June 2022 before any recoveries from the dawn raids had been considered. Counsel

reviewing the Employment Tribunal proceedings realised that the claim made by MFC

therein that Mr Matheson had been suspended at least in part because of the content of the

recoveries could not be true. On 21 April 2023 Thorntons Law LLP wrote to the

Employment Tribunal withdrawing MFC's claim that Mr Matheson had been suspended, at

least in part, as a result of the nature of the recoveries made in terms of the section 1 petition,

but went on to state:

"However, whilst this information was not taken into account as part of the

Respondent's decision to suspend the Claimant, and the Claimant resigned prior to

the disciplinary investigation actually taking place, the Respondent considers that

some of this information is relevant to the Respondent's Polkey and contributory fault

arguments (narrated in paragraph 20 of the attached version of the ET3 paper apart).

Therefore, the Respondent would intend to include this information in the bundle.

However, the Respondent does not currently have permission from the Court of

Session to use them for the purposes of this Employment Tribunal claim.

Accordingly, it is seeking such permission now."

That communication plainly carried at least an implication as to the nature of the material

recovered, namely that it was considered by MFC to support a "Polkey" defence (i.e. an

argument that any award to Mr Matheson in respect of unfair dismissal should be

discounted in order to reflect that he might in any event have been fairly dismissed) and to

support a contributory fault argument.

[15]

On 23 April 2023, MFC applied to the court by motion for permission to use the

section 1 recoveries in the defence of the Employment Tribunal proceedings. Given that that

application required to take into account relatively complex facts and was hotly disputed, it

was directed to proceed by way of the present Note. A substantive hearing in the

Employment Tribunal scheduled for May 2023 was postponed to enable the Note

proceedings to be concluded first.

[16]

In respect of Mrs McIntosh, she was also put under investigation pursuant to MFC's

disciplinary processes. On 7 July 2022 Mr Webster wrote to her, stating:

"An external investigation continues following the Discovery Process, and we await

the final report on findings (`the external report') which we anticipate may take up to

4 weeks.

Once we have received the external report, our internal investigation will commence

which forms part of our Disciplinary Procedure. In that regard, we have appointed

Matt Strachan to lead and conduct the disciplinary investigation. The aim of the

investigation is to establish the facts of the matter by gathering as much relevant

information as possible and his investigation will take into account the external

report following the Discovery Process."

The external report referred to in that letter must have been either of both of the

commissioner's anticipated final report to the court, or the IT expert's report on the content

of the recovered devices (the release of which to the Noters the court had not authorised).

Mr Strachan produced a summary report on his disciplinary investigation on 5 October

2022. It noted that his terms of reference were:

"Physical documents and files and digital data (including phone and mail records)

recovered from Margaret McIntosh's home on 24th June 2022 during authorised

Section One recovery process".

The summary report contained an extensive narration of the content of material recovered

by way of the section 1 petition process and stated Mr Strachan's view that it justified the

commencement of disciplinary proceedings. Those proceedings were carried out by

Edward Rosengarten, a non-executive director in the Noters' group. They also relied

extensively on the content of the recoveries. Mrs McIntosh did not participate in the

disciplinary proceedings, which found on 19 October 2022 that she had breached various

duties of fidelity and confidentiality incumbent on her. She was dismissed from MFC's

employment, but on 11 November 2022 appealed that dismissal in terms of its domestic

processes. Her appeal specifically complained of the unauthorised use of the section 1

recoveries for the purposes of the investigation and disciplinary processes which had been

maintained against her. The hearing of that appeal has been overtaken by the current

dispute and the appeal has not yet been determined.

[17]

Further, MFC, Mr Matheson and Mrs McIntosh are subject to regulation by the

Financial Conduct Authority. MFC formed the opinion, assisted by external advice by

compliance consultants, that it required to notify the FCA of the commencement of

disciplinary proceedings against those individuals. On 13 July 2022. Stephen Webster, the

Chief Executive Officer of MFC (to whom, it will be recalled, Mr Milne had shown the

material recovered in terms of the section 1 petition) notified the FCA of those proceedings,

and in doing so stated:

"At the time of writing this notification the court representatives are conducting their

inspections of the various devices and documents seized. I was invited by the court

officials on the 8th July 2022 and 11th July 2022 to inspect two boxes of documents

which were acquired from the home of Margaret McIntosh during the

implementation of the section one order. The boxes contained a significant amount

of client personal and financial information belonging to our firm which has been

taken without knowledge and consent of the business."

Mr Webster also repeated to the FCA the opinion of the IT expert, referred to in the report of

the McIntosh commissioner of 30 June 2022, that Mrs McIntosh's mobile telephone may have

had certain logs deleted from it before being surrendered to the commissioner.

[18]

On 20 October 2022 MFC responded to a request for an FCA regulatory reference for

Mrs McIntosh which it had received earlier that month from a third party. It referred to

Mr Webster's previous report to the FCA and added that:

"following completion of our investigatory process, it was determined that the

individual had committed gross misconduct during her employment and had she

not already left the Company's employment by the date of that determination she

would have been summarily dismissed."

On 28 October 2022 Mr Webster again wrote to the FCA, informing it of the outcome of the

disciplinary proceedings against Mrs McIntosh (which, as already noted, had proceeded

largely on the basis of the section 1 recoveries). He was not aware (because he had not been

told by Mr Milne) that use of the recovered material without the court's permission for the

purposes of reporting to the FCA or giving a regulatory reference was contrary to the

undertaking given to the court on behalf of the Noters in order to enable the dawn raids to

take place in the first place.

[19]

According to affidavits sworn by Mr Milne, there was no deliberate attempt on his

part or on the part of the Noters or their employees to circumvent the undertaking given to

the court. He apologises to the court for what he refers to as a lack of proactivity on his part

which might have avoided a breach of the undertaking.

Noters' Submissions

[20]

On behalf of the Noters, senior counsel moved the court to excuse the unpermitted

previous use of the section 1 recoveries and to permit their use by the Noters in the

Employment Tribunal proceedings and in correspondence with the FCA. The Noters

accepted that their use of the recovered documentation in those contexts should not have

occurred without prior permission of the court: Iomega Corporation v Myrica (UK)

Limited 1998 SC 636, 1999 SLT 796. Although the use of the content of the IT expert's report

for the purposes of the litigations contemplated by the section 1 proceedings had not, strictly

speaking, been in breach of the undertaking given by the Noters to the court, and had

occurred in consequence of what the commissioners had said and done, it was accepted that

the court had not formally pronounced any order permitting the Noters to have access to

that material, and that accordingly its use, even for those purposes, should not have

occurred. The Noters, their representatives and, in particular, Mr Milne, tendered their

sincere apologies to the court for those inadvertent lapses or mistakes on their part. There

had been a failure on the part of Mr Milne to clarify to the Noters the exact uses to which the

recovered material could and could not properly be put. He had not been conscious, when

he provided the Noters with the recovered material, that any use other than the one

contemplated by the section 1 proceedings was under consideration or might come to be so.

The court could now allow such collateral use of the recovered material as appeared to it to

be in the interests of justice: Duff & Phelps Ltd, Minuter [2022] CSOH 16, 2022 SLT 450

at [4] - [6].

[21]

In respect of the Employment Tribunal proceedings, it was accepted that the Noters

had acted in breach of their undertaking to the court. However, Mr Matheson had chosen to

raise those proceedings and to found upon the events of the section 1 petition process as one

of the principal bases of his claim. MFC wished to refer, in its written pleadings, and in any

hearing which took place, to the documents which were recovered in terms of the section 1

order. Reference to those documents was both necessary and in the interests of justice,

because consideration of them gave useful context to whether the execution of the order

gave rise (or could have given rise) to any breach of contract on the part of MFC. It was

likely that, had the Noters sought the court's permission in advance for collateral use of the

recoveries in the Employment Tribunal proceedings, such permission would have been

granted. No true prejudice had been caused to Mr Matheson by the use of those materials.

It was both sensible and desirable that the materials in question should be placed before the

Tribunal.

[22]

In relation to the Financial Conduct Authority, it was equally accepted that the

Noters had acted in breach of their undertaking to the court. However, they were under a

regulatory obligation to inform the FCA if any regulated individual became subject to a

disciplinary investigation. Mr Webster's reference to certain of the recoveries in his

notification to the FCA followed the advice of the Noters' compliance consultants that the

fact that disciplinary and court proceedings based on highly credible and incriminating

allegations had been instituted was sufficient to trigger the notification requirements of the

FCA in relation to potential breaches of its Code of Conduct for those whom it regulated. It

was accepted that Mr Webster's use of the documentation recovered under the order was a

breach of the undertaking given to this court, but again that breach was an inadvertent

mistake. Mr Webster had been unaware that there were limitations on the use of the

recovered material because Mr Milne had failed to explain the matter to him. Again, it was

likely that a prospective application to the court for such use of the recovered material

would have been granted. It would be artificial to cause the Noters to withhold from the

FCA that which it had a proper interest to know, and it was competent for the court to allow

that to happen.

[23]

It was submitted that it was necessary, both in order for the Noters to defend the

Employment Tribunal proceedings and in order for them to continue to comply with their

obligations to the FCA, that they should be permitted to refer to the documents recovered in

terms of the order. The Tribunal and the FCA should be provided with the material

necessary to enable them to perform their functions properly. The respondents had no

proper interest in preventing that. The court should (a) excuse the use, without prior

permission, of the documents recovered in terms of the order, for purposes other than the

use contemplated in the section 1 petition; and (b) grant permission for the use by the

Noters of the documents recovered in terms of the order, including in particular all of the

commissioners' reports, and the recoveries and inventories referred to therein, for the

purposes of the Employment Tribunal proceedings and in order to ensure that the Noters

continued to comply with their obligations to the FCA. It was a matter for the court's

discretion whether to impose conditions on such future use of the recoveries. These were

not appropriate proceedings in which to decide any issue of contempt of court which might

arise.

Respondents' Submissions

[24]

On behalf of the Mathesons, senior counsel submitted that the Noters were not

entitled to the orders sought, and the prayer of the Note should accordingly be refused. The

application for permission to use all of the documents recovered under the order and all of

the commissioners' reports was premature in relation to any documents recovered from

Mr Matheson and any reference to such documentation in the commissioners' reports,

because pending the determination of the section 1 petition which he had opposed, the court

had granted no order entitling the Noters to inspect, copy or otherwise intromit with any

documents or electronic devices recovered from him.

[25]

In any event, the wide-ranging orders sought by the Noters should be refused. The

court should conclude that the Noters had deliberately and consciously breached the terms

of the undertaking, or at least that they had acted with wilful disregard of those terms and of

the obligations owed by them to the court. Their actions amounted to an egregious breach

of the undertaking on the basis of which they obtained the order ex parte, and to a contempt

of court. Such conduct should not be excused.

[26]

The starting point in considering the application for permission for future use of the

recovered material for purposes other than those contemplated by the section 1 petition was

that the court should preserve the integrity of the undertaking given to it. It was for the

Noters to persuade the court that it was necessary in the interests of justice for any collateral

use to be permitted. The Employment Tribunal proceedings were not proceedings of the

same or similar character to those contemplated by the section 1 petition, although it was

accepted that at least some of the recovered material was prima facie relevant to the

determination of those proceedings and that a prospective application to the court for

permission to use it in that context might well have been successful. Reference was made to

Iomega, per Lord President Rodger at 641E and 646A - D, Lord Kirkwood at 651D - E and

Lord Caplan at 654C - D and 656C - D, and to the discussion of various factors of potential

relevance to the grant of prospective permission in Cobra Golf Inc v Rata [1996] FSR 819

at 830 - 832.

[27]

So far as the Noters' application for what in effect was retrospective permission to

use the recovered materials for purposes not contemplated by the section 1 petition was

concerned, there was no Scottish authority on whether the court had power to grant such

permission. In Miller v Scorey [1996] 1 WLR 1122, Rimer J had pointed out at 1132 A - B that

in English law unpermitted use of recoveries of the kind in issue here involved a contempt

of court and in consequence amounted to an abuse of the process of the court. The same

conclusions ought to be drawn in Scotland. That characterisation of prior unpermitted use

of recoveries made it difficult for the court in effect to accede to the suggestion that an abuse

of its processes should be treated as nugatory. In Miller, Rimer J had not found it necessary

to decide whether the court had power to grant retrospective leave for the unpermitted use

of recovered material, observing merely at 1132 C - D that any such jurisdiction could

properly be exercised only in rare circumstances.

[28]

In Lakatamia Shipping Co Ltd v Su [2020] EWHC 3201 (Comm), [2021] 1 WLR 1097,

Cockerill J had concluded at [61] under reference to Miller and to Shlaimoun v Mining

Technologies International Inc

[2011] EWHC 3278 (QB),

[2012] 1 WLR 1276 that a jurisdiction

to grant retrospective permission existed, but would be exercised only in limited

circumstances. In Shlaimoun, Coulson J had considered that questions of whether the breach

of undertaking was inadvertent or not, whether permission would have been granted if

sought prospectively, whether prejudice had been caused to other litigants, and where the

requirements of proportionality lay were relevant to the potential grant of retrospective

permission. In Lakatamia, Cockerill J had adopted a similar approach, noting that the other

proceedings in which retrospective permission to use recoveries was sought were closely

related to the proceedings in which their use was already permitted, and indeed only existed

as separate proceedings by happenstance. The allegations in the other proceedings were

very serious in nature and it was in the public interest that they be tested by consideration of

all relevant evidence, the recoveries being plainly relevant to that exercise. Her Ladyship

noted that the breach of undertaking in that case, though serious, had not been deliberate,

and that no prejudice or harm had been caused by the unpermitted prior use. In those

circumstances, it had been concluded, narrowly, that retrospective permission should be

granted, albeit with a costs sanction and a public admonition to those responsible for the

breach. In the present case, however, if the court was considering the grant of retrospective

permission, it should conclude at the very least that the breaches of the undertaking in this

case, and the unpermitted use of the content of the IT expert's report, were egregious in

nature and the product of reckless indifference to the duties of the Noters and the rights of

the Mathesons and McIntoshes. Mr Matheson had plainly suffered prejudice by the prior

unpermitted use, in that the allegations made to the FCA had resulted in him being unable

to work in the financial services sector for the foreseeable future. In such circumstances the

only effective sanction was for the court to refuse to grant retrospective permission for the

prior use of the recoveries in question.

[29]

On behalf of Mrs McIntosh and Granite Wealth, counsel invited the court to refuse

the Noters the orders they sought and instead to find them in contempt of court and to have

abused the court's processes. He agreed with, and in general terms adopted, the

submissions made for the Mathesons.

[30]

The Noters should be sanctioned for their wrongful use of the material recovered in

terms of the order. In particular:

(i)

the Noters should be ordained to return to the court and to delete all material

recovered in terms of the order;

(ii)

the actions raised against Mrs McIntosh and Granite should be dismissed or

at least the Noters should be ordained to delete any averments which had been made

in reliance upon material recovered in terms of the order;

(iii)

the Noters should be ordained to make reasonable reparation to

Mrs McIntosh for the breach of the undertaking given to the court and the wrongful

use of material recovered in terms of the order and information derived from that

material, and to that end Mrs McIntosh should be appointed to lodge a schedule of

damages and, if necessary, inquiry should be allowed to determine the quantum of

damages;

(iv)

the Noters should be ordained to retract the disclosures made to the FCA

insofar as they wrongly relied upon material recovered under the order or

information derived therefrom;

(v)

MFC should be ordained to allow Mrs McIntosh's appeal against the finding

of gross misconduct made in the disciplinary proceedings brought against her and

thereafter to discontinue those proceedings;

(vi)

interdict should be pronounced against the Noters prohibiting them from

making any further use of material recovered in terms of the order;

(vii)

the Noters should be ordained to take such steps as the court considered

reasonably necessary to draw the terms of that interdict to the attention of their

officers, employees and other staff or contractors;

(viii)

the Noters should be found jointly and severally liable to Mrs McIntosh and

Granite in the expenses of the Note, the section 1 petition, and the action directed

against Mrs McIntosh and Granite on a solicitor-client, client paying basis; and

(ix)

a written judgment should be handed down to give publicity to the court's

decision.

It was clear on the Noters' own averments and from the documents produced to the court

that they had used documents and other property recovered under the section 1 order, and

information derived therefrom, for a number of collateral purposes, namely:

(i)

to carry out an internal investigation into allegations against Mrs McIntosh;

(ii)

to defend a claim brought by Mr Matheson against MFC in the employment

tribunal;

(iii)

to seek advice from external compliance consultants;

(iv)

to prosecute disciplinary proceedings against Mrs McIntosh;

(v)

to make a series of disclosures to the FCA; and

(vi)

to issue a regulatory reference in respect of Mrs McIntosh to a prospective

new employer.

Each of those uses amounted to an obvious breach of the undertaking the Noters had given

to the court. It was clear from Mr Webster's letter to Mrs McIntosh dated 7 July 2022 that the

Noters had intended to use material recovered under the order for such collateral purposes

from a very early stage. Indeed, given that that letter had been issued before the Noters had

been allowed to inspect any of the recovered items, it might reasonably be inferred that the

order was sought, in part, for one or more of the collateral purposes to which the documents

recovered were then in fact put.

[31]

Although the Noters ought to have been aware from the outset that their use of

documents recovered under the order for such collateral purposes was not permitted by the

court and that such use amounted to a breach of the undertaking they had given to the

court, those matters were in any event drawn specifically to their attention in

Mrs McIntosh's appeal, submitted on 11 November 2022, against the outcome of the

disciplinary proceedings brought against her. Those proceedings had nonetheless not been

discontinued, despite the fact that she had given notice of her resignation on 4 April 2022

and her employment had thus in any event terminated on 3 July 2022. That might be

contrasted with the position in relation to Mr Matheson, into whose actions an investigation

by MFC had been terminated upon his resignation. The disclosures made to the FCA about

Mrs McIntosh and the regulatory reference provided to her prospective new employer had

stymied her efforts to secure alternative employment in any FCA-regulated role or

organisation.

[32]

The Noters had in addition originally sought to secure an order for use of material

recovered in terms of the section 1 order by motion, without disclosing that they had already

made use of that material, other than for the purposes of the actions they had raised,

without the permission of the court. The motion failed to acknowledge that the Noters

were, in fact, seeking retrospective permission.

[33]

Further, the Noters' use of information extracted from electronic devices seized in

the dawn raids for the purposes of the actions raised against Mr Matheson, Mrs McIntosh

and Granite Wealth was without the permission of the court. All the court had allowed was

for those devices to be examined by the IT expert. It had never allowed the Noters to

inspect, borrow or copy any forensic image or analysis extracted from those electronic

devices. The IT expert's report should not have been incorporated into the McIntosh

commissioner's report of 12 September 2022 and, despite having been so incorporated,

should not have been used by the Noters. The commissioner had indicated to Thorntons

Law LLP that the court's permission for such use might be required, but no heed had been

paid to that observation, without adequate explanation.

[34]

None of these matters supported the Noters' present position that their unauthorised

use of the material recovered in terms of the section 1 petition was inadvertent or that they

genuinely regretted what had happened. On the contrary, the court should conclude in all

the circumstances that the breaches were contumacious and the apology circumspect.

[35]

Where a company gave an undertaking or became subject to an order prohibiting it

from doing certain acts, the company had a duty to take all reasonable steps to ensure that

its relevant employees and agents were made aware of the requirement to comply with the

undertaking or order. Where the undertaking or order had been breached, the onus rested

on the company to show that it had taken all reasonable steps to ensure that the undertaking

or order was complied with. Where the undertaking or order had been breached as a result

of a failure to do so, the company would have committed a contempt of court. It was not

necessary for any person to have acted with the intention of breaching the order or

undertaking: Beggs v Scottish Ministers 2005 1 SC 342, 2005 SLT 305 at [39]; Smith v Scottish

Ministers

[2015] CSOH 15,

2015 SLT 131 at [13]. The Noters admitted several breaches of the

undertaking that they had given to the court. Other breaches were not admitted but

nonetheless clear. Accordingly, the Noters bore the burden of showing that they took all

reasonable steps to ensure that their undertaking and the court's orders were complied with.

They had failed to discharge that burden. Mr Milne, the experienced solicitor conducting

the section 1 proceedings on behalf of the Noters, accepted in his affidavits that he had

spoken only to Mr Webster about the recovered material, and that he had not advised

Mr Webster that it could not properly be used for purposes other than the raising of the

litigation contemplated in the section 1 petition, without the permission of the court. No

explanation had been given about what steps were, had since been, or in future would be

taken to draw the terms of the undertaking or order to the attention of other directors or

staff of the Noters who had used documents or property recovered under the order, or

information derived from those documents, for a range of collateral purposes. The Noters

had instead, at least in part, tried to blame the commissioners for what had happened. No

attempt had been made to obtain the havers' consent for what the Noters proposed to do

with material belonging to them; the havers had not even been told what was proposed. No

attempt had been made to withdraw what had been said without authority to the FCA.

Against that background, the Noters' approach to ensuring compliance with the

undertaking and order had been "so slipshod and lackadaisical, as ... to constitute heedless

indifference and recklessness": R (Bempoa) v Southwark LBC [2002] EWHC 153 (Admin)

at [46]. The undertaking and order had simply not been taken seriously enough: cf Beggs

at [50]. What was done plainly fell far short of the requirement to take all reasonable steps

to procure compliance contemplated by Beggs. Such failings threatened the right to privacy

and the public interest in the administration of justice engaged by section 1 proceedings:

Lakatamia at [47] - [48]. In those circumstances, it was appropriate that the Noters be found

in contempt of court and punished accordingly for their abuse of the great privileges which

the grant of a section 1 order bestowed.

[36]

Collateral use of documents recovered under the order also constituted an abuse of

process: Cobra Golf at 830 (point 5); Iomega 1998 SC 636 per Lord Caplan at 654C. The court

could exercise its inherent jurisdiction in the case of an abuse of process by way of a

procedural sanction such as dismissal or expenses: Moore v Scottish Daily Record and Sunday

Mail Ltd

[2008] CSIH 66,

2009 SC 178 at [14]. In the circumstances, it was appropriate that

the Noters be found to have committed an abuse of process and that appropriate sanctions

be imposed for that abuse.

[37]

Separately, the court could also order an inquiry as to damages: Moore at [14];

Bempoa at [56] - [57]. Whether a right to damages for contempt of court or abuse of process

arose at common law did not require to be determined. The Noters had expressly

undertaken to comply with any order of court as to payment of compensation if it was

subsequently discovered that the order or implementation of the order caused measurable

loss to the respondents.

[38]

The Noters presented their application as one for both retrospective and prospective

permission to use documents recovered under the order, but in reality, their application was

one for retrospective permission. They had already used the documents and property

recovered under the order, or information derived therefrom, in the Employment Tribunal

proceedings and to make disclosures to the FCA. Mrs McIntosh's interests had been grossly

prejudiced by the FCA disclosures, which effectively and immediately prevented her from

continuing to be employed in the financial services sector despite the allegations against her

remaining unproven. In essence, the Noters were asking the court to permit them to carry

on and finish what they had already started.

[39]

The court could (at least prospectively) grant permission for the use of material

recovered for use in other proceedings. In deciding whether to grant such permission and if

so on what conditions, the court was exercising a discretion and the guiding principle in the

exercise of that discretion was the interests of justice in the circumstances of the particular

case. It was not for a party resisting such an application to advance reasons why permission

should be refused. It was for the party seeking permission to demonstrate cogent and

persuasive reasons why permission should be granted. The various considerations

discussed in Cobra Golf at 830 - 832 and in Iomega at 1998 SC 646B - D and 651B - E were

instructive. There was no compelling reason in the present case to grant the orders sought

by the Noters. That the Noters would find the orders they sought useful for their own

purposes came nowhere near an adequate justification for their grant. They would suffer no

injustice by being kept to the default position in section 1 applications. On the other hand,

the injustice to the respondents were their documents to be used for purposes not

contemplated by the section 1 proceedings was obvious.

[40]

If the court was vested with a power to grant permission retrospectively (which was

not clear on the Scottish authorities), it would be proper to exercise that power only in rare

circumstances, particularly where there had been or would be prejudice to any party.

Whether permission would have been granted, if sought prospectively, was important, but

not sufficient: Miller at 1133C - H; Lakatamia at [61] - [63]. As a general proposition, the

nature and extent of the breaches of the undertaking and order which had already occurred

were sufficient to warrant refusal of the Noters' application. The Noters had shown

repeatedly that they could not be trusted to comply with the terms of the undertakings they

had given or the orders granted by the court.

[41]

In any event, even without having regard to the various previous breaches of the

undertaking, the relief sought by the Noters should be refused. They should not be granted

permission to use the material recovered in the Employment Tribunal proceedings, at least

until the final determination of the litigations which had been brought by them.

Mrs McIntosh and Granite intended to object to the admissibility of any of that material for

the purposes of proof in those litigations on the grounds that the material used to obtain the

order (i.e. that which was said to have been provided anonymously to the Noters) had been

unlawfully obtained and that, as a result, the material recovered in the section 1 proceedings

was similarly tainted and inadmissible. That objection would be defeated or seriously

undermined if the Noters were entitled to examine Mr and Mrs McIntosh in the

Employment Tribunal about the material recovered before they had had the opportunity to

have their objection considered and determined. It was not in the interests of justice for the

permission sought to be granted at this stage.

[42]

The Noters were not entitled to permission (either prospective or retrospective) to

provide information to the FCA. Quite apart from the fact that it was wholly unclear what

further disclosure to the FCA might be called for, the court's power was confined to

permitting the use of material recovered for the purposes of other civil proceedings:

1972 Act, section 1; Iomega; cf Cobra Golf at 831, point 11(b). Any disclosure to the FCA

would not be made in or for the purposes of any proceedings (civil or otherwise). The

Noters' application was, in this respect, incompetent. The position might be different once

the substantive litigations contemplated by the section 1 proceedings had concluded, at least

if the material in question had by then been properly canvassed in open court and findings

relevant to the proper exercise of the FCA's functions had been made.

Decision

Proper Conduct of the Section 1 Process

[43]

The events disclosed by this Note indicate a serious and apparently widespread

misunderstanding of the proper function of a "dawn raid" authorised in terms of section 1

of the 1972 Act. The sole purpose of that process is to take documents or property in relation

to which the court considers a question may relevantly arise in an action likely to be brought

into the custody of the court without giving those in possession of such material an

opportunity to conceal or destroy it. Nothing that is recovered by way of a "dawn raid" is to

be disclosed to or put into the possession of the petitioner in a section 1 application, or the

petitioner's agents, without the consent of the person from whom it was recovered or an

order of the court. The court places considerable trust in petitioners, their agents, and its

own commissioners, to respect that basic principle and all that flows from it. It appears that

that trust may on occasion at least have been misplaced.

[44]

For example, in the present case, Mr Milne states in one of his affidavits that a good

deal of material was recovered from Mrs McIntosh's address and that the solicitor

representing the petitioners at the raid "with the Commissioner's consent, had the

opportunity to view most of that material during the execution of the orders". It is vital to

the proper conduct of a "dawn raid" that the court's commissioner should be, and should

throughout be seen to be, wholly independent of the petitioner and its agents. The sole

purpose for which a representative of a petitioner is permitted to attend a "dawn raid" is to

provide the commissioner, if he or she is in doubt, with more specialised knowledge which

may assist in determining whether or not a particular item being examined by the

commissioner does or does not fall within the description of the material which the court has

ordered may be taken into its custody. Solicitors in attendance at a dawn raid on behalf of a

petitioner should not routinely be shown items which the commissioner is considering

seizing, and should not under any circumstances be shown items which he or she has

already decided to seize. Any examination by the solicitor of a petitioner of an item under

consideration by the commissioner should be limited to the extent strictly necessary in order

to provide the assistance just described. Any knowledge gained by such examination

should be regarded as subject to a duty of confidence to the person originally in possession

of the item. It may be that the court has in the past been too ready to authorise the

attendance of petitioners' representatives on these occasions, and should in future require a

clear demonstration that specialised knowledge may be required, and can be provided by

such a representative, before such authorisation is given.

[45]

Likewise, the court authorises the attendance of IT specialists at "dawn raids" for the

purpose of assisting the commissioner to examine or image, on the spot, electronic devices

or data repositories for the presence of material to which the court's order relates. If no such

examination or imaging takes place, and devices are simply seized and taken away for later

analysis, it is difficult to see that the attendance of such specialists is justified. That is a

matter of concern because the very considerable cost of a dawn raid, particularly if swollen

by the attendance of unnecessary personnel, can easily become an instrument of oppression

in the underlying dispute. Again, that is something in relation to which the court may need

to develop a more robust attitude than has to date been apparent.

[46]

Further, although it is a minor issue in light of the sequence of events which

subsequently ensued, in the absence of agreement from those from whom the electronic

devices had been seized, it should have been one or other of the commissioners, and not the

Noters' solicitor, who ought to have facilitated the transmission of the electronic devices

initially in the custody of the court because of the assertion of confidentiality in relation to

them to the IT expert once that assertion was withdrawn and the court had permitted their

examination by that expert. While there is no suggestion that anything untoward was done

in respect of those devices during that transmission, they simply should not have been in the

custody of the Noter's solicitor at all before they had been released to the Noters by the

court. That they were again betokens a failure to understand the basic principles upon

which the section 1 "dawn raid" facility depends.

[47]

More seriously, when the IT expert reported to the commissioners in

September 2022, by way of a report which contained details of the analysis (and thus of the

content) of the seized electronic devices, that report should not have been provided by the

commissioners to Thorntons Law LLP, but should have been provided to the court alone.

The Noters ought then to have enrolled a motion for disclosure of the expert's report (and

the relevant material) to them, which the court would have determined after giving those

respondents who had entered appearance in the petition process (and, at its discretion,

potentially other interested parties) the opportunity to object. That the IT expert's report

was simply handed over to Thorntons Law LLP with no more than a mild suggestion that

someone might like to check with the court whether that was in order represented a serious

error on the part of the commissioners. That error ought to have been appreciated by

Thorntons Law LLP, who should have returned the report unread to the commissioners, and

it ought to have been appreciated by counsel whom they apparently consulted on the

matter. The question was not an arcane or difficult one; the material seized in the dawn

raids was in the custody, and subject to the control, of the court. Absent the consent of those

from whom it had been seized, no material obtained in the execution of the section 1 order

should have been released to the Noters or their agents without an order of the court

permitting that to occur. That so many of those involved in the process apparently did not

understand its basic principles suggests the existence of a systemic misunderstanding of the

court's procedures which is deeply concerning.

The Noters' Treatment of the Material Released to Them

[48]

It was against that background that the Noters proceeded (a) to use the hard copy

documents seized from the McIntoshes' home for purposes other than the court had

permitted in its interlocutor of 8 July 2022, in breach of their undertaking to the court; and

(b) to use the material in the IT expert's report dated 11 September 2022, without having

been given any permission at all by the court to do so. The uses to which that material was

put included its use for the purposes of the internal investigations into the behaviour of

Mr Matheson and Mrs McIntosh, and the disciplinary proceedings against the latter; for the

defence of the Employment Tribunal proceedings brought by Mr Matheson against MFC,

and for and in connection with the report to the FCA and the regulatory reference given in

respect of Mrs McIntosh.

[49]

It is said by the Noters that these uses of the material in question were "inadvertent",

and are all ultimately referable to the failure of Mr Milne to advise Mr Webster of the

limitations on the use to which material recovered in a section 1 process could properly be

put. However, the suggestion that this was an isolated failure on the part of Thorntons Law

LLP is difficult to reconcile with the series of events in the execution of the section 1 process

set out above. In any event, it is euphemistic in the extreme to describe Mr Milne's failure to

remind the Noters of the content of the express undertaking which he had signed on their

behalf as merely inadvertent. While I do not accept that the suggestion that he deliberately

facilitated the Noters' breach of undertaking or other unpermitted use of the section 1

recoveries, or that he acted recklessly - that is to say, without care for the consequences - in

that regard, his actions were undoubtedly careless, and indeed grossly so.

[50]

Moreover, the error into which the Noters had fallen was pointed out to them

explicitly by Mrs McIntosh in November 2022. That provoked, however, no outward

recognition that any mistakes had been made, nor any outward change in the Noters'

position. It was not until April 2023 that they approached the court to ask permission for

future use of the recovered material, and even then they did not expressly acknowledge that

there was an unresolved issue about its previous impermissible use by them. At around the

same time, while withdrawing from the Employment Tribunal their claim on behalf of MFC

that Mr Matheson had been suspended in part because of the content of the recoveries,

Thorntons Law LLP stated to the Tribunal that MFC considered that the recovered material

was relevant to its Polkey and contributory fault arguments. That was a further breach of

MFC's undertaking to the court, which extends not only to use of recovered material itself,

but also to use of the content of that material (Duff & Phelps at [6], Cobra Golf at 830).

[51]

More generally, the attitude taken by the Noters to the issue of previous unpermitted

use of the recoveries has very much been to downplay its significance, and to suggest that

the matter should be regarded as minor and technical in nature - which it certainly is not.

There is, further, an apparent lack of insight into the undesirable consequences of the

Noters' choice to instruct Thorntons Law LLP in connection with their dispute with the

respondents. The Noters are closely connected with that firm. There is a considerable

overlap in the ownership of the four entities. Mr Milne, who gave the undertaking to the

court on behalf of the Noters, and then failed to give them the advice necessary to enable

them to comply with its terms, is a member of the firm and of the boards of each of the

Noters. It is very difficult to see, in that situation, how an appropriate degree of professional

independence can be shown to have been exercised in the relationship between the firm and

the Noters in connection with the matters in issue. None of these considerations supports

any sort of conclusion that serious consideration has been given by the Noters or Thorntons

Law LLP as to why matters went awry, or as to how repetition of the errors made is in

future to be avoided. While I accept that Mr Milne's apology to the court is a genuine one, it

does not go nearly far enough to meet the situation which he created. The conduct of

Thorntons Law LLP in general, and its member Mr Milne in particular, throughout the

sequence of events in issue, falls far short of meeting the standards to be expected by the

court of its officers. That conduct merits the court's severe censure.

Retrospective Permission/Excusal

[52]

I have no doubt that, in an appropriate case, the court has power retrospectively to

grant permission in respect of the prior use of material recovered under section 1 of the

1972 Act for purposes not initially allowed. That is because the undertaking which restricts

the use of recovered material is one required by the court in the public interest and given to

it rather than to any interested party: cf Iomega, per Lord President Rodger at 641F - G,

646C - D. It is for the court to determine, both at common law and in terms of RCS 64.4,

whether any modification of the standard undertaking is justified, and any modification

may be prospective or retrospective.

[53]

In Lakatamia, Cockerill J also decided at [61] that, in English law, the court had

jurisdiction to grant permission retrospectively, but observed that that jurisdiction would be

exercised only in limited circumstances. I consider that that statement equally represents

the law of Scotland. In Shlaimoun, Coulson J indicated that whether another litigant had

been prejudiced by the unpermitted use, whether that use was inadvertent, whether a

prospective application would have been granted, and where the requirements of

proportionality lay, would be likely to be material to any decision to grant permission

retrospectively. I agree that these may well be matters of significance in determining

whether to grant retrospective permission, but stress that the starting point, even in an

application for prospective permission, will be to recognise the need to preserve the

integrity of the undertaking (Iomega, per Lord President Rodger at 646B - C, following

Lord Oliver of Aylmerton in Crest Homes plc v Marks [1987] 1 AC 829 at 857H) and that a

correspondingly heavy onus will lie on any party seeking retrospective permission. The

same point is made in a slightly different way by Rimer J in Miller v Scorey at 1133C - D.

In the present case, I have already concluded that to describe the unpermitted use of the

recoveries as the result of mere inadvertence would be inadequate. It may be that, had the

Noters been misled by faulty legal advice taken from an independent solicitor, they would

have been better placed to ask the court to grant retrospective permission. Something of

that sort appears to have influenced Cockerill J in Lakatamia at [137]. However, the

unpermitted use by the Noters in the present case occurred despite Mr Milne, a member of

their boards, indeed the person who signed the undertaking on their behalf, being aware of

the restrictions on the use of the recoveries and failing to pass that knowledge on to those

within the organisations who were to be dealing with them. There is no basis for the actions

of the Noters to be regarded as separate and distinct from the actions of Mr Milne in such

circumstances. Prejudice appears also to have been caused to Mr Matheson and

Mrs McIntosh in the form of the reports to the FCA proceeding upon the recovered material,

and the consequent adverse regulatory reference made in respect of Mrs McIntosh. The

Noters come nowhere near to discharging the heavy onus on them in respect of a

retrospective application for permission.

[54]

Perhaps recognising the difficulties inherent in a frank application for retrospective

permission, the Noters adopt the slightly different approach, at least in point of form, of

asking, not for retrospective permission, but to be "excused" in respect of their prior

unpermitted use of the recoveries, leaving the question of whether they are to be permitted

to continue to use the recoveries already unlawfully deployed by them to be dealt with by

the second and prospectively-directed element of the prayer of the Note. It appears that

their request to be excused in respect of the prior use amounts to a request that they should

not be exposed to adverse consequences in respect of that use. Whether that amounts to

anything substantially different to a request to be given retrospective permission seems

debatable at least. In any event, for the same reasons as have already been set out, their

request to be so excused cannot properly be granted. They are not excused, and the prayer

of the Note will to that extent be refused.

Future Use of the Recoveries

[55]

In Iomega, Lord President Rodger observed at 646C - D in the context of prospective

applications for permission to use recoveries that:

"In deciding whether to grant permission and, if so, on what conditions, the court is

exercising a discretion and the guiding principle in the exercise of that discretion will

be the interests of justice in the circumstances of the particular case."

The interests of justice are not, however, considered in a vacuum. The default position is

that the rights of a haver to the peaceful possession of his documents and property is only to

be infringed to the extent necessary to satisfy competing public interests, primarily but not

perhaps entirely exclusively in the determination of civil rights and obligations involving

the haver. As the matter was put by Lord Keith of Kinkel in Home Office v Harman

[1983] 1 AC 280 at 308:

"Discovery constitutes a very serious invasion of the privacy and confidentiality of a

litigant's affairs. It forms part of English legal procedure because the public interest

in securing that justice is done between parties is considered to outweigh the private

and public interest in the maintenance of confidentiality. But the process should not

be allowed to place upon the litigant any harsher or more oppressive a burden than

is strictly required for seeing that justice is done."

(See also Iomega, per Lord Caplan at 654D - F, and Laddie J in Cobra Golf at 824 - 825.) Such

considerations result in the principles already mentioned, that the preservation of the

integrity of the undertaking is in itself an important element of the interests of justice, and

that, accordingly, permission is likely to be granted only where there are "special

circumstances which constitute a cogent reason for permitting collateral use" (per Jackson LJ

in Tchenguiz v Director of Serious Fraud Office [2014] EWCA Civ 1409 at [66]). Each of the

judges in Iomega (the Lord President at 646D, Lord Kirkwood at 651D - E, and Lord Caplan

at 656D) commended the list of factors capable of influencing the relevant decision set out

by Laddie J in Cobra Golf.

[56]

In Cobra Golf at 831, Laddie J re-iterated that the court had a discretion to grant

permission prospectively for collateral use of recoveries and went on to observe, so far as

relevant for present purposes, that:

"11. The circumstances which may be taken into account include the following:

(a) The extent to which relaxation of the undertaking will cause injustice to the party

which provided the discovery.

(b) Whether the proposed collateral use is in court proceedings or outside litigation

(e.g. for disclosure to the press as in Harman). Prima facie if it is for use outside

litigation, it is not the court's function to release for that purpose.

...

(d) In so far as the satellite proceedings are in this country:

...

(ii) If the collateral use is for civil proceedings, the court should take into

account:

(a) whether the hub proceedings and the satellite proceedings are

similar in character;

(b) whether the parties in the two sets of proceedings are the same;

would be able to obtain discovery by another route and, if so, which

route is likely to be cheaper or quicker;

(d) whether the effect of the relaxation of the undertaking will have

the effect of generating new proceedings or whether it will merely

help in pursuing a claim or defence which already exists or could be

run anyway;

(e) prima facie it is not in the interests of justice to hinder a party from

advancing a good claim or defence in other proceedings;

..."

In Duff & Phelps at [5], Lord Tyre made the additional point that the court could attach

conditions to any grant of permission for collateral use in the exercise of its discretion.

[57]

In the present case, permission is firstly sought for the future use of the recovered

material in the Employment Tribunal proceedings raised by Mr Matheson against MFC.

Those are other domestic civil proceedings which are already in existence. They arise out of

the employment relationship between those parties and bear a close relation to the subject-

matter of the litigations contemplated in the section 1 petition, although there is no exact

correspondence between the two disputes. The recovered material may well be relevant in

the Employment Tribunal proceedings, in that it may cast a certain light on Mr Matheson's

claim that the section 1 petition directed against him was a breach of the relationship of

mutual trust and confidence between him and MFC, or in any event enable MFC to state a

defence to his claim which it might not otherwise be able to maintain. I understood counsel

for the Mathesons to concede that the court might well have permitted at least some

recovered material to be used in the Employment Tribunal proceedings had an application

to do so been made prospectively, an assessment with which I agree. In these specific

circumstances I consider that cogent reasons exist for permitting the use of an element of the

recovered material, in the interests of justice, in the Employment Tribunal proceedings.

However, that conclusion relates only to material seized from the Mathesons, and not from

the McIntoshes or Granite Wealth. It is Mr Matheson who has raised the proceedings in the

Employment Tribunal and thus put in issue the question of whether the section 1 petition as

directed against him was in breach of an implied term of his employment contract. That

consideration overrides any claim to claim to peaceful possession of his own documents

insofar as their content may cast light on the proper resolution of the claim which he has

stated and insisted upon. While I appreciate that material recovered from the other

respondents may also be relevant to the just disposal of Mr Matheson's claim, those other

respondents have done nothing to waive their right to peaceful possession of their

documents and property outwith the context of the litigations contemplated by the section 1

petition. Further, given the unfortunate history of the use by the Noters of the recovered

material without permission, I do not consider it appropriate to allow the material seized

from the Mathesons to be used, even within the context of the Employment Tribunal

proceedings, for whatsoever purpose may ultimately commend itself to the Noters, That

material is only be used in that context, and then only for the purposes of defending the

claim made by Mr Matheson against MFC and for providing the Tribunal with the means

necessary to determine the quantum of any sums properly due to him by MFC in respect of

that claim.

[58]

In relation to communications between the Noters and the FCA, I reject the

submission made on behalf of Mrs McIntosh and Granite, that the court has no power to

permit recoveries to be used other than for the purposes of civil proceedings. Although the

court has to be persuaded before granting a section 1 order outwith the context of existing

proceedings that the material sought is material in respect of which a question may

relevantly arise in civil proceedings which are likely to be brought, once that material is in

the custody of the court it may be used for such purposes as the court sees fit, in accordance

with the principles already discussed. I accept, however, that an application for permission

to use such material other than for the purposes of civil proceedings is inherently likely to

face greater difficulty in furnishing the court with the cogent reasons required to enable it to

conclude that collateral use should be permitted in the interests of justice, or in the public

interest more widely. That is the point which I understand Laddie J to have been making at

point 11(b) in Cobra Golf at 831, set out above. That is the position in respect of the Noters'

application to be permitted to use the recoveries in this case for the purposes of regulatory

correspondence with the FCA. Properly viewed, there is no regulatory requirement

incumbent on the Noters to furnish the FCA with material or views formed on the basis of

material which is either not lawfully in the possession of the Noters at all, or else is in their

possession for a strictly circumscribed purpose not including the fulfilment of any

regulatory reporting duties which might otherwise be incumbent upon them. There was no

need for the Noters to report to the FCA as they did, and there remains no such need. There

are no cogent reasons, whether in the interests of justice, or in the public interest more

generally, justifying such a collateral use of the recovered material in advance of a

determination by the court in the course of the litigations already before it as to exactly what

conclusions of potential relevance to the FCA that material justifies. The Noters' application

to be permitted meantime to use the recoveries for the purposes of communication with the

FCA is refused. Indeed, as a function of my refusal to excuse the Noters in respect of their

prior unpermitted use of the recoveries, they shall be ordained to write to the FCA within

two weeks of the date of issue of this opinion stating that their prior communications,

insofar as based on those recoveries, were in breach of their obligations to the court, and that

they unreservedly withdraw such communications. They shall be ordained to write in

similar terms and within the same timeframe to the party to whom they provided the

unfavourable regulatory reference in respect of Mrs McIntosh. The terms of those

communications shall be agreed amongst the parties, which failing shall be settled by the

court.

Remedies Sought by the Third and Fifth Respondents

[59]

I deal with the remedies sought by Mrs McIntosh and Granite as follows:

(i)

That the Noters be ordained to return to the court and to delete all material recovered

in terms of the order.

An order in such wide terms would not be justified. Material properly in the hands

of the Noters (i.e. the hard copy materials seized by the McIntosh commissioner and

listed in his report of 30 June 2022) may subject to resolution of the objection to

such use on different grounds which Mrs McIntosh and Granite have stated be

retained and used by them for the purposes of the litigations contemplated by the

section 1 petition and currently in dependence before the court. The further material

seized from the Mathesons which I have determined the Noters shall be allowed to

be used for the specific purposes identified above in the context of the Employment

Tribunal proceedings may be retained by them for those purposes. Any material not

falling within those categories shall be returned by the Noters to the custody of the

court, and no copies in any format shall be retained, nor shall the content of such

material be used in any manner by them.

(ii)

That the actions raised against Mrs McIntosh and Granite be dismissed, or at least

the Noters should be ordained to delete any averments which had been made in reliance upon

material recovered in terms of the order.

Dismissal of the substantive action raised against those parties would be a

disproportionate response to the Noters' actions. However, it is only the material

properly in the hands of the Noters, as identified above, which is capable of being

used for the purposes of that action (and the related action against Mr Matheson) as

matters stand. Insofar as there are averments in those actions which flow from other

recoveries, the Noters shall apply for permission to use those recoveries in those

actions, if so advised, within two weeks of the date of issue of this opinion, failing

which the court shall, on the application of the relevant respondents, strike such

averments from the relative Record. I further observe that any residual issue as to

the extent to which the Noters may competently use recovered material in these

actions should be resolved in advance of the proof diets in them, by way of motion at

the instance of any interested party.

(iii)

That the Noters be ordained to make reasonable reparation to Mrs McIntosh for the

breach of the undertaking given to the court and the wrongful use of material recovered in

terms of the order and information derived from that material, and to that end Mrs McIntosh

should be appointed to lodge a schedule of damages and, if necessary, inquiry should be

allowed to determine the quantum of damages.

I understand that this remedy is said to flow from the submission that unsanctioned

collateral use of section 1 recoveries constitutes an abuse of process and a contempt

of court (see Cobra Golf, at 830 point 5), which in turn justifies the court in ordering

the payment of a sum of money to a haver who has suffered loss in consequence of

the making or implementation of a section 1 order (cf RCS 64.3(b) (i)).

However, there are a number of problems with that submission. Firstly, this Note is

not an appropriate vehicle for reaching any final conclusion about whether the

Noters ought to be regarded as being in contempt of court. That is a matter which

ought to proceed on the basis of a form of process specifically directed at the issue

(such as a further Note in the section 1 petition process), so that averments may be

made and answered in that specific context. It certainly appears from what was said

in Beggs and re-iterated in Smith (both of which were specific contempt processes)

that, were the pleadings in the present Note to be replicated in such a process, there

would be little answer to a complaint that a contempt had been committed. One of

the consequences of my refusal to excuse the Noters in respect of their unpermitted

prior use of the recoveries is that it remains open to the respondents to make such a

complaint.

Further, although there has been a ready identification in English law between the

commission of this type of contempt and an abuse of process, it is less than clear to

me that the same conclusion would necessarily fall to be drawn in Scots law. In

particular, it is not immediately obvious to me that one can abuse the processes of the

court other than deliberately or recklessly. I would require much more detailed

submission, again in proceedings specific to the issue, before being able to decide

whether the Noters have abused the processes of the court.

Even had I been prepared to find the Noters in contempt of court and to have abused

its processes, there would still have remained the question of whether such contempt

and abuse can result in a liability to pay damages to havers in the position of the

respondents. I do not find any support for the suggestion that it does in Moore,

where the court at [14] indicated that an order for payment of money, other than

expenses, to a party to an action was a matter of substantive right rather than a

procedural sanction. Nor does RCS 64.3(b)(i) assist. It contemplates a situation in

which the making of a section 1 order, or its implementation, has caused loss, and the

court makes an order for compensation in respect of that loss. It is not clear to me

that that rule was intended to deal with a situation where the limits on the use of

properly recovered material are exceeded by a petitioner, as opposed to the

situations where the order is obtained in breach of a petitioner's obligations of

candour in the ex parte application for its grant, or where the execution of the order

exceeds what it was intended to encompass, for example in the seizure and

potentially lengthy retention of electronic devices which were not reasonably

supposed to contain material of interest to the enquiry. None of these matters was

the subject of detailed argument before me. In the event, I shall do as Munby J did in

Bempoa; identify issues which require resolution, decide nothing, and leave it open to

the respondents to bring forward a specific application in this regard if they so wish

and argue the matter fully.

(iv)

That the Noters be ordained to retract the disclosures made to the FCA insofar as they

wrongly relied upon material recovered under the order or information derived therefrom.

What is to occur in this regard has already been set out.

(v)

That MFC be ordained to allow Mrs McIntosh's appeal against the finding of gross

misconduct made in the disciplinary proceedings brought against her and thereafter to

discontinue those proceedings.

Again, I do not consider that such an order would be necessary or proportionate.

The Noters are aware that their prior use of the recovered material for the purposes

of Mrs McIntosh's disciplinary process was unpermitted and remains unexcused,

and that their future actions in connection with the use of that material will be the

object of intense scrutiny, if necessary by the court. It will be for the Noters in the

first instance to decide to what extent the disciplinary process against Mrs McIntosh

has been tainted by the unpermitted use of the recoveries, and what should be done

in that regard. They will do so in the knowledge that the court will be

metaphorically looking over their shoulder and will not hesitate to intervene

decisively if the wrong decisions are made.

(vi)

That interdict be pronounced against the Noters prohibiting them from making any

further use of material recovered in terms of the order.

For the reasons just mentioned, I do not consider that any further order of that kind

is presently justified. Should it transpire that the Noters continue to act in disregard

of their obligations to the court, a condign response may be expected.

(vii)

That the Noters be ordained to take such steps as the court considered reasonably

necessary to draw the terms of that interdict to the attention of their officers, employees and

other staff or contractors.

The same considerations, leading to the same conclusion, apply in this context.

(viii)

That the Noters be found jointly and severally liable to Mrs McIntosh and Granite in

the expenses of the Note, the section 1 petition, and the action directed against Mrs McIntosh

and Granite on a solicitor-client, client paying basis.

I shall find the Noters jointly and severally liable to the respondents in the expenses

of this Note on an agent and client, client paying basis. Decisions on the awards of

expenses in the section 1 petition and the substantive litigations will be for the judges

ultimately disposing of those causes to make, and the actions of the Noters herein

described may or may not be considered relevant to those decisions as and when

they require to be made.

(ix)

That a written judgment be handed down to give publicity to the court's decision.

This is that judgment.

Conclusion

[60]

For the reasons stated, I shall grant the prayer of the Note in part, and otherwise

refuse it. Ancillary orders as set out above will also be made.