Data protection – Serious fraud cases – Transfer of data in the public interest

In the matter of Madoff Securities International Ltd: ChD (Mr Justice Lewison): 27 February 2009

The applicant joint provisional liquidators (H) of a UK company (Y) applied for various directions relating to the transfer of data to the trustee in bankruptcy (T) of its US parent company (X).

T had been appointed, by the New York court, as officeholder of trustee in bankruptcy concerned with X’s liquidation following its involvement in a complex and large-scale fraud investigation. H had been appointed as joint provisional liquidators over Y, a UK-based subsidiary of X. The instant application was concerned with whether information relating to Y, that was in the possession of the joint provisional liquidators, which could be relevant to T’s own investigations, could be transferred to T and whether such a transfer was contrary to the act. It was common ground that the US did not ensure an adequate level of protection for the rights and freedoms of data subjects for the purposes of the act.

The joint provisional liquidators also sought an order requiring T and his advisers to participate in interviews initiated pursuant to section 235 of the Insolvency Act 1986. The parties submitted that the transfer of information was necessary in order to unravel the alleged fraud for the purpose of recovering the companies' assets.

Held: (1) It was clearly in the public interest that large-scale, complex fraud be subject to thorough investigation. In the instant case, the transfer of information was, on that basis alone, clearly necessary for reasons of substantial public interest, pursuant to the exception in paragraph 4(1) of schedule 4 to the 1998 act. Moreover, the unravelling of the fraud would undoubtedly require the initiation of legal proceedings and the establishment of legal rights such as to further justify the transfer of information under paragraph 5(a) of schedule 4 to the 1998 act.

(2) There was nothing in section 235 of the 1986 act that limited the joint provisional liquidator’s ability to require the attendance of company officeholders at interviews. However, an interviewee was only required to answer questions about the company in which he was officeholder; on that basis, nothing would be served by ordering that T attend the liquidator’s interviews.

Judgment accordingly.

Lexa Hilliard (instructed by Dundas and Wilson) for the applicant; Robin Dickes QC (instructed by Lovells) for the respondent.