In JSC Mezhdunarodniy Promyshlenniy Bank -v- Sergi Viktorovich Pugachev  EWHC 4336 (Ch) Mr Justice Mann made some important observations in relation to the need for a witness statement to identify the sources upon which it is based.
The defendant was applying for the discharge of a worldwide freezing order made against him. There were several grounds for the application. One of the arguments related to the inadequacy of the witness statement in support of the application.
- It is inevitable that some witness statements will contain information about opinion.
- It is important that the source of that information and opinion is given.
- A party making such a statement cannot rely on privilege as a reason for not disclosing a source.
- A failure to disclose the grounds of information and belief can undermine the overall credibility of a witness statement (and in some cases render it inadmissible).
(On the facts of this case the rules were found to be broken, however these breaches were regarded as technical [the original omissions being largely corrected in later witness statements] however in some of the cases set out below the failures to comply with the rules had a major effect on the outcome of the case).
Evidential inadequacies – failure to identify the source of hearsay statements
- Mr Tregear makes a basic point about the general quality of Mr Roberts’ evidence used in support of the original application for the freezing order. He complains that it contains an enormous amount of hearsay evidence but generally does not identify its source. His point is that it is unacceptable to base an application for a worldwide freezing order as serious as this one (or indeed any freezing order) on evidence which does not conform to the requirements for identifying sources. The point comes down to one of weight, and without an identified source much of Mr Roberts’ evidence should be given much less weight. He submits that this is not a pointless (or point-scoring) quibble; the requirements to identify the source are an important part of the protection provided to the other side, and unless it is done it is all too easy to use unattributed statements to create a generalised impression intended to smear (which is my summary of his point, not his word) Mr Pugachev. Mr Tregear does not deploy this as a standalone knockout blow, but says it has to go into the scales with the other points that he relies on.
- The requirement to identify the source of hearsay statements comes from the Practice Direction to CPR 32 at paragraph 4.2:
“4.2. An affidavit must indicate –
(1) which of the statements in it are made from the deponent’s own knowledge and which are matters of information or belief, and
(2) the source for any matters of information or belief.”
The same thing is repeated in the Chancery Guide and, in relation to witness statements, CPR 32 PD.18.
- Mr Tregear points to the Civil Evidence Act 1995 section 4 as demonstrating how to weigh hearsay evidence:
“4. Considerations relevant to weighing of hearsay evidence.
(1) In estimating the weight (if any) to be given to hearsay evidence in civil proceedings the court shall have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.
(2) Regard may be had, in particular, to the following –
(a) whether it would have been reasonable and practicable for the party by whom the evidence was adduced to have produced the maker of the original statement as a witness;…
(c) whether the evidence involves multiple hearsay;
(d) whether any person involved had any motive to conceal or misrepresent matters;…
(f) whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight.”
Mr Tregear sought to point out that one could only conduct that sort of assessment if the obligation to disclose sources was complied with.
- I have already indicated the length of Mr Roberts’ original supporting affidavit. Since Mr Roberts is an English solicitor at Hogan Lovells he has no first-hand knowledge of anything relevant. Everything he says must come from a source provided to him by his clients. It is certainly the case that much of it depends on documentary evidence, and the documents, or their nature, are obvious from the narrative. However, that is not true of all his evidence. As to his sources he says this:
“3. The facts and matters stated in this affidavit are either within my own knowledge and are true or are based on information or documents supplied to me and are true to the best of my knowledge, information and belief.” [He then refers to two specific exhibits containing documents to which he goes on to refer.]
- The same formulation is used in the affidavit of the other deponent who provided evidence in support of the original application, Ms Chudutova, a Russian lawyer acting for the DIA. It is plain from those formulations that neither deponent provides even a generalised statement as to the source of material (where that source is not otherwise obvious – not even in the more generalised form which one often sees such as “employees or managers concerned in the administration of the liquidation”).
- This point was taken up in correspondence between Fried Frank, solicitors acting for Mr Pugachev, and Hogan Lovells. They wrote on 10 September 2014 in terms asking for the names of the individuals involved in providing Mr Roberts with the information contained in his witness statement. In their response of 12 September 2014 Hogan Lovells pointed out that at least one individual is identified (Ms Medvedeva) as the author of a report from which some information is drawn, and they also seek to point out that Mr Roberts identified and referred to the evidence of a number of individuals who were involved at the relevant time and who have since been interviewed by the Russian criminal authorities. That is presumably a reference to documents recording such matters. The letter then goes on:
“As you will appreciate, the preparation of Mr Roberts’ First Affidavit, and indeed the Claimants’ Particulars of Claim, was a significant undertaking which entailed discussions with a number of other representatives of the DIA. While we do not consider it necessary (or at all relevant) to identify all such individuals, not least as privilege issues would necessarily arise, we are nevertheless willing to confirm that this includes the members of the “Confidentiality Club” which has since been put in place, i.e. Dmitry Bogorodsky at the DIA, and Maya Chudutova and Yulia Basilieva at Yakovlev & Partners [Moscow lawyers]. We have explained their roles in past correspondence relating to the “Confidentiality Club””.
The letter goes on to justify not identifying certain enquiry agents because of the risk of prejudice to ongoing investigations.
- I would observe at this point that the reference to privilege would seem to me to be misplaced, as Mr Smith was eventually constrained to accept. If it were a good point then any lawyer giving hearsay evidence for his client in an interim application would be able to decline to identify the source of information. The position is that giving hearsay evidence in those circumstances is an opportunity afforded to a litigant but it comes at the price of identifying individuals who are the source of the evidence (usually). Once the information has been disclosed then no privilege can exist, and there can be nothing objectionable in terms of the law of privilege in requiring a solicitor to identify the source of what has become non-privileged information. A litigant has a choice. If he wishes to rely on this information then the price is that the source is no longer privileged. If he does not want to identify the source then he cannot rely on the information and at the same time maintain the claim to privilege.
- That response did not satisfy Fried Frank and they took the point up again in a further letter of 15th September 2014. In a letter of 17th September 2014 Hogan Lovells corrected their reference to the class of individuals which “included” the individuals referred to by adding one and re-ordering them. It expressed the view that there was “no merit in your criticisms” but in order to rebut a suggestion that individuals within the DIA were “hiding behind Mr Roberts” it confirmed that:
“references to the DIA’s understanding, or to specific confirmations given by the DIA, are based on information provided by Yulia Medvedeva and Dmitry Bogorodsky of the DIA.”
That was a reference to complaints made about Mr Roberts’ fourth affidavit and the letter went on to decline to provide a “source and attribution guide” sought by Fried Frank. It denied that there was any defect in Mr Roberts’s evidence but went on:
“Nevertheless, and again without prejudice to our clients’ position that there is no defect in Mr Roberts’ evidence, we are willing to consider any specific references in Mr Roberts’ affidavit which, Mr Pugachev may contend, give rise to legitimate concerns. As matters stand, no such examples have been provided.”
- On 19th September 2014 there was a hearing in this matter before Rose J in relation to fortification for the claimants’ cross-undertaking. During the course of the hearing the same point as is now taken before me was taken before her. In the course of a judgment Rose J referred to the correspondence and the requests from Fried Frank and said:
“The upshot was a rather grudging and partial response which, from what I have seen, still falls short of stating the source of the various allegations of misconduct. The two people who are now named as being the source of the information in Mr Roberts’ witness statement are people who work for the DIA and so have only been involved in this matter since the liquidation. They could not have been the source of the information about the conduct of the bank. Particularly, where serious allegations of misconduct are made in a witness statement, the deponent should give a more specific indication of the source, rather than simply referring generally to the source being the claimant entity.”
- Mr Tregear made the point that the failure to provide the source of information could hardly have been accidental, an impression which he says is reinforced by the fact that Hogan Lovells declined to correct the matter in correspondence. He complains that the point was not drawn to the attention of Henderson J, and no explanation was given to the judge.
- Fried Frank returned to the point in a letter of 22nd September 2014. The claimants attempted to rectify the position in evidence from Ms Medvedeva of the DIA’s Expert and Analytical Department. She seeks to deal with the allegation that the DIA was bringing these proceedings on the “direction” of the CBR and describes the processes undertaken by the DIA and its relationship with a creditors committee. She then goes on to indicate some of the procedures which operated after the liquidation of the bank and identifies members of a working group involved. She describes the creation of a report by the DIA and eventually gets to a heading: “The DIA’s claims in England”. At paragraph 39 of her witness statement she says that: “My team and I provided extensive information and documentation to Hogan Lovells in order to assist in the formulation of the DIA’s claims” and she identifies three particular individuals as being closely involved.
- That evidence does not provide the source attribution of all the material relied on by Mr Roberts (insofar as his material is not obviously based on documents) but it does go some way towards identifying sources in that it makes it plain that information has come from other members of the DIA team who themselves cannot be expected to have had first-hand experience of the events in question. That is a significant advance in that it does indeed make it plain that Mr Roberts’ evidence is itself based on evidence which is likely to be largely hearsay as it came to him.
- The real force of Mr Tregear’s point can only be judged by reference to those parts of Mr Roberts’ evidence about which a real and legitimate complaint can be made as to the absence of a source. While he was on his feet I asked Mr Tregear to identify three points at which Mr Roberts’ failures (and I find that they were at least technical failures) had some sort of impact. His immediately chosen three did not seem to me to be highly significant, but in due course Mr Tregear produced more instances. The matters he complains of can be grouped into three categories (as Mr Tregear himself analysed them).
- The first category is various statements of relevant fact, usually preceded by the words “The DIA understands” or “the DIA suspects”, or similar words. Thus paragraph 169 reads:
“169. … At the auction, the state owned [USC] (the same state-owned entity with which Mr Pugachev had previously been negotiating for the sale of the Shipbuilding Assets and which the DIA understands was the only bidder) paid RUR2.6 billion (approximately US$ 80 million) to acquire the majority of the shares in Northern Shipyard and Baltic Wharf…The DIA understands that the price ultimately paid by [USC] reflected the poor condition of Northern Shipyard’s and Baltic Wharf’s assets.”
Paragraph 182 contains:
“182. Given what it has since uncovered at the Bank, the DIA suspects that the Bank’s ABS was deliberately tampered with to delete historic data, and that the back-up copy maintained by OPK Management was then either deleted or simply withheld from the DIA in order to frustrate its investigations.”
- There are 9 or 10 similar examples. They are all statements of purported fact preceded by statements of the understanding of the DIA about those statements, without any individual in the DIA being identified or without any original source (if another individual) being identified. The facts are generally facts of real significance to the case. Thus the statement about USC’s price goes to the heart of Mr Pugachev’s assertion in this case that the shortfall for which he is sued was contrived because the shipyards were sold at an undervalue. I do not need to set out the other instances complained of. They are of a similar nature. Mr Tregear’s complaint was that, without a source, Mr Pugachev cannot properly investigate the points, nor can the court evaluate them, and that they often amounted to a smear.
- One has to approach this case by bearing in mind what the DIA is. It is a liquidator whose officers have no first hand knowledge of the background to the claims of its subject company. In carrying out its functions it will inevitably have to form views, via its agents and officers, as to what happened in order to be able to decide how to discharge its functions. There is nothing wrong with such expressions of views being made, and it is likely to be of little consequence which particular officer or officers formed the view in question. The failure to identify such an officer may well therefore be a technical failure, but not much more. Of more significance may be the failure to identify the source of that officer’s belief, and that is a more significant failing in this case. However, it is likely that in many cases the conclusion arrived at by the liquidator is the synthesis of his/its inquiries, and it may be unrealistic to expect, in every case, a detailed exposition of how the conclusion is arrived at. Whether the identification is really needed will depend on the significance of each individual disclosure. The more significant the fact, the greater the significance of any failure to identify the source.
- Bearing that point in mind I find that there was at least a technical failure in at least some of the instances relied on. The failure lay in not identifying Mr Roberts’ source of information within the DIA, and then not identifying any further sources (if any) relied on by the DIA source. The significance of each instance varies, but not all of them have any real significance at all. The two paragraphs cited above are examples. In paragraph 169, the reference to the DIA’s understanding as to the only bidder actually coincides with Mr Pugachev’s positive case that it was. The failure to identify sources in relation to this paragraph seems to me to be immaterial. In paragraph 182 the reference to the suspicion of the DIA can only be a reference to the suspicion of one or more officials of the DIA. The identity of the officials seems to me to be largely irrelevant. It is plain that this paragraph is not seeking to give second-hand hearsay evidence of another source. The second sentence of that paragraph is actually an express reference to non-evidence rather than evidence.
- I have taken those two examples to show that there were technical failings in some, but not all, cases, and that they were not all significant. I have carefully reviewed all Mr Tregear’s paragraphs falling within this category and find that the failings were either immaterial in the circumstances or, if more material, the shortcomings in the evidence would be obvious to any tribunal reading the evidence and the effect of it modified accordingly. Furthermore, so far as the complaint is a failure to attribute a source in the DIA, that has been remedied by the correspondence and further evidential material referred to above.
- Mr Tregear’s second category are expressions of purported “beliefs”, “doubts” or “concerns”. These are the sort of references that Mr Tregear says are likely to give rise to a smear, or “are calculated to colour the court’s perception of Mr Pugachev and/or the merits of the case.” He complains that without any attempt to attribute them, Mr Pugachev cannot investigate any such beliefs or test their validity, or even know whether they are in fact genuinely held by any individual within the DIA at all.
- I am afraid I regard this as a rather unreal criticism. It may have technical merit, but on the facts of this particular case, and bearing in mind the huge amount of research and effort that has gone into Mr Pugachev’s evidence in any event, it is, on the facts, unrealistic to suppose that Mr Pugachev’s case would be advanced at all by knowing which individual in the DIA held the belief in question. In any event, again, this partial void has been filled by the material referred to above.
- The third category of cases is statements that the DIA is not aware of certain matters, or that it cannot comment on them. It is said that without knowing who it was at the DIA Mr Roberts spoke to, or what enquiries those individuals made, the evidence is at best worthless and at worst positively misleading. Without knowing who Mr Roberts’ sources are, they may have been other individuals who had no relevant knowledge. Alternatively, enquiries may have been made of the appropriate people and those people might not have told Mr Roberts the truth. Mr Tregear says that it is impossible to penetrate such matters without a proper attribution of sources.
- I will give a couple of examples of what it is that Mr Tregear complains of. Paragraph 231 deals with certain payments out of an account at the bank in favour of three companies which are said to be Mr Pugachev’s companies. The payments purported to have been made pursuant to various agreements. Mr Roberts goes on:
“Although copies of these agreements appear to have been available to the Central Bank at the time the Inspection was undertaken, the DIA has as yet been unable to locate copies.”
- This is not a statement of lack of awareness of a matter. It is a statement that the DIA has not been able to find something. It may be that technically Mr Roberts should have said who it was in the DIA who told him that, but anything else would be superfluous and excessive in the circumstances.
- Again, in paragraph 609 Mr Roberts refers to a possible need to ascertain when the DIA acquired knowledge of sufficient facts to support a cause of action against Mr Pugachev (for limitation purposes). He goes on:
“Given the scale and complexity of the task facing the DIA once it was appointed, the DIA respectfully suggests that it was not in such a position by July 2011 (despite having acted with reasonable diligence).”
- This is not a clear statement that the DIA did not know something at a certain point in time. It is a submission as to what is reasonable. I do not consider that Mr Tregear’s complaint in this respect has any foundation.
- Paragraph 592 was a particular focus of Mr Tregear’s attack on this point. The first sentence of that paragraph reads:
“The DIA is necessarily not in a position to address the conduct of the Central Bank, or Russian authorities more generally, including as regards the Shipbuilding Assets.”
- There may be various reasons for questioning this statement, but they do not include the sort of source attribution point relied on by Mr Tregear. It is a form of submission on the facts, whose strength or weakness can be judged (for interlocutory purposes) without ascertaining whether there was any DIA source for it.
- It is not true to say that there is nothing in Mr Tregear’s overall complaint under this head. There were, in my view, technical failings, but in the light of subsequent evidence, and putting them in their context, they plainly do not invalidate what Mr Roberts had to say, and any evidential deficiencies can be taken into account in weighing the pieces of evidence in question. At the end of the day I do not think that this point advances anyone’s case.
THE NEED TO GIVE EVIDENCE OF THE SOURCE OF INFORMATION AND BELIEF
This case highlights the need for anyone drafting a witness statement to give careful consideration to the need to comply with CPR and give adequate details of the source of the information and any belief.
THE REQUIREMENT IN THE CIVIL PROCEDURE RULES
The requirement for a witness to give information as to the source of the information or belief is set out in Practice Direction 32.18.2.
“A witness must indicate –
(1) which of the statements in it are made from the witness’ own knowledge and which are matters of information or belief, and
(2) The source for any matters of information or belief”.
Note that this is a mandatory obligation. A witness “must” state which matters they “know” and which matters of “information or belief”. The witness must then give the source of this information or belief.
This is an obligation often ignored in the drafting of witness statements. However in some cases this can give rise to profound difficulties for the litigant and the witness.
THE CASE LAW
The duty to identify the source of information was explored in the case of Consolidated Contractors International Company SAL and Others v Munib Masri  EWCA Civ 21 which although concerned the use of affidavits, is useful in the context of witness statements (the duty being identical within the CPR). The claimant was bringing an application for contempt of court and affidavits filed in support referred, in general terms, to evidence obtained by enquiry agents,
Aikens LJ commented at para 32
“ 32. In my view the aim of that paragraph of the Practice Direction is to ensure that a person against whom serious allegations are being made can identify the source of any information or belief that is not within the deponent’s own knowledge so that the facts deposed to on the basis of information or belief can be investigated. That is only fair to the person against whom the evidence in the affidavit is directed. Therefore, I would interpret the phrase “must indicate….the source of any matters of information or belief” as meaning that, save in exceptional cases, the deponent must identify the source of the relevant information or belief. If the source is a person, that person must, save in exceptional cases, be identified with sufficient certainty to enable the person against whom the affidavit is directed to investigate the information or belief in accordance with the rules of court or other relevant legal principles.
33. I recognise that there may be particular occasions where the “source must not be specifically identified, e.g. where confidentiality is in issue; and there may be other circumstances which I will not attempt to define. In such cases the wording of the Practice Direction is sufficiently flexible, by using the word “indicate” to ensure that justice can be done
35 However, for the reasons I have given, it is my view that Mr Masri must identify the source of the information concerning the enquiry agents’ activities in gathering documents from the rubbish of the companies set out in paragraph 11 of his first affidavit. I assume that source was a person or persons; in which case he or they must be identified by name. Mr Salzedo, for Mr Masri, did not submit that there were exceptional circumstances which meant that the names of personal sources of information should not be given in this case if the principle I have set out above applies. Because the information set out in Mr Bartlett’s affidavit was provided by a person who was engaged in a professional activity upon the instructions of Mr Masri’s solicitors, I think it right that the name of the enquiry agents who employed the source of the information should also be given.
36 I emphasise that this order does not mean that Mr Masri is obliged to identify anyone else, eg. anyone else who was engaged in the actual work that was undertaken by the enquiry agents, unless such a person was the source of the information given to Mr Bartlett.”
Clarke –v- Marlborough Fine Art
Clarke –v- Marlborough Fine Art (London) Ltd  1 W.L.R 1731 the court considered whether the information concerning the source of the information does not have to be based on the recollection of the witness. One of the claimant’s witnesses’ could not remember who had told him about a number of alleged threats mentioned his witness statement. He stated that on reflection it seems more likely that it was a named individual who gave him the information about the threats. The defendant contended that this evidence of attribution was inadmissible because it was the expression of an opinion by a non-expert on a question of fact. They argued that the paragraph should be disregarded and that the claimant was in breach of paragraph 18.2 of the Practice Direction.
Patten J disagreed, holding that it was irrelevant whether the statement of the source was based on recollection or reconstruction. He went on to state at para 36:
“An expression of opinion on a factual matter by a witness of fact is clearly inadmissible subject to the limited exception contained in s.3(2) of the Civil Evidence Act 1972. But the provisions of paragraph 18.2 of the Practice Direction under CPR Part 32 are not concerned with evidence of primary fact. They are simply procedural provisions requiring the deponent to identify the source of the hearsay evidence he will give. They do not require that attribution to be based only on admissible evidence. They merely require it to be stated so that the party affected by the evidence knows who is the alleged source of the information.”
Dar Al Arkan
Dar Al Arkan Real Estate Development Company and Ors –v- Mr Majid Al – Sayed Bader Hashim Al Refai and Ors  EWHC 3539 para 19. The Court was considering an application by the defendant’s to set aside an ex parte order obtained by the claimant on the grounds that the claimant had failed to give full and frank disclosure. Andrew Smith J observed of one of the claimant’s witnesses:-
“I observe that Dr Almajthoob did not properly state the source of his information: the reference to enquiry agents engaged by the claimants was not adequate: see Masri v Consolidated Contractors International Co SAL,  EWCA Civ 21 , White Book, 32.15.4. This is a recurrent deficiency in the claimants’ evidence, both that adduced at the ex parte hearings and later affidavits and statements although all the witnesses have routinely and inaccurately stated that they give the source of the information about facts and matters not within their own knowledge. This has much detracted from the quality of their evidence”
(The ex parte order was set aside, overall witness credibility playing an important part in this determination).
Barclays Bank –v- Piper
In Barclays Bank –v- Piper (CA 23rd May 1995), the Court of Appeal considered a technical argument about the provisions under RSC Order 14 (the previous rule for summary judgment).
“The third head relates to defects in the Affidavit of the bank’s solicitor Mr Harper. Those defects are first a failure to identify the source of his information or belief. Second a failure to assert that the facts pleaded in the Statement of Claim are true. Third, a failure to depose to a belief that there is no defence to the bank’s claims.”
“Mr Stanton relied on the Notes at para 14/2/7 and 14/2/8 of the Supreme Court Practice. Mr Stanton accepted that these objections to the form of Mr Harper’s Affidavit were technical but submitted that a Defendant may show cause against a Plaintiff’s application for Summary Judgment under Ord 14 by a preliminary or technical objection, for example that the Affidavit in support is defective because it does not amount to a due verification of the claim. Mr Stanton drew the court’s attention to the note at para 14/3-4/3 in Vol. 1 of the Supreme Court Practice, 1995.”
The plaintiff’s solicitor swore a second affidavit which attempted to rectify the omissions made in the first affidavit. Roch LJ stated:
“In my judgment the second Affidavit of Mr Harper concedes the technical defects in his first Affidavit without correcting them. The second Affidavit does not make clear from which source Mr Harper received particular information. I would accept the submissions of Mr Stanton that Ord 14 Proceedings, because they may deprive a defendant of his opportunity to defend a plaintiff’s claim and in particular the opportunity of hearing and cross examining the plaintiff’s witnesses, make it all the more necessary that the technical requirements of an Affidavit in support of the application for Summary Judgment should be observed, so that a defendant and the Court can assess whether the information or belief as to the material matters on which the plaintiff’s claim is based were derived directly or indirectly from persons who could be expected to have the necessary knowledge or be the keepers of the necessary documents. Order 14 proceedings are quite unlike applications for Interlocutory Injunctions in which liberty to the defendant to apply to set aside the Order will be a standard term. An Ord 14 Judgment finally disposes of the Action, in a summary manner. The purpose of the rules relating to the contents of the affidavit in support is to ensure that the plaintiffs have demonstrated that the case is a proper case for summary judgment. In this case it should have been simple for the Bank’s solicitor to obtain the necessary information from persons having first hand knowledge of the appellant’s loan account.”
Thomas Cook -v- Louise Hotels
The Barclays Bank case may seem irrelevant in that it pre-dates the CPR. However similar points were taken by the defendant in the case of Thomas Cook –v- Louise Hotels EWHC 2139 (QB) disussed in detail in the previous post at https://civillitigationbrief.wordpress.com/2013/11/04/the-importance-of-drafting-witness-statements-that-comply-with-the-rules/ . It is notable that the judge felt the need to order that a third witness statement be served by the claimant with someone from the claimant company who could give direct evidence of the material.