Feature
'Tlic only sure way In which such an offence
can be avoided is if the banker avails
himself of [333] .sub-s 2(c) and procures
his professional legal adviser to make
the relevant disclosure and then only to a
person in connection with legal proceedings
pursuant to sub'S 3[b).'
Section 333(2)(c) provides that no oiFence is
committed if the disclosure is by a professional
legal adviser and falls within subsection (3).
Sub-section (3) provides that the disclosure is
made (a) to a client (or client's representative)
of the adviser in connection with giving legal
advice or (b) to any person in connection
i
Biog box
Peter de Verneuil Smith is a barrister practising in commercial litigation at 2 Temple
Gardens. His specialisations include banking, money laundering and commercial fraud.
H e has in-depth involvement in banking/money laundering litigation. H e represented
NatWesr in SquirrcR Lul v Nalionj! Weslmmster Bunk Pk (2005) 2 Lloyd's Rep 374 and
was junior counsel for S O C A / H M R C in Re K L/mireJ [2006] 2 Lloyd's Rep 569. He has
advised the British Bankers' Association on POCA-rclared issues. Email: pdv(fl>2tg.co.uk
with legal proceedings or contemplated legal
proceedings. It would seem to follow that
when a bank makes a disclosure under s 338
Of 330 it may use its own lawyers to inform
the customer's lawyers that such a disclosure
has occurred and no offence under s 333 will
be commirted. It is suggested that this is not
correct and these obiter tomments ate nor
likelj' to be followed in the future. First, the
language ofs 333 (3) is very similar to that
of s 93D of the Criminal Justice Act ('CjA)
1988 which was construed as being limited
to providing ptotection equivalent to legal
professional privilege (see Woolf LJ in C v S
(p 1557 B) and in Bank ofScodand v A Ltd
(para 7)). Second, if this construction were
correct then the interim declaration procedure
was and is wholly unnecessary. Third, there
IS no suggestion in the Hansatd debates that
333(3) was intended to offer such a significant
departure from the ptevious money laundering
regime under the CJA 1998. Fourth, it is
conttary to the underlying policy of POCA
to permit banks to engage in disclosures to
the customer which might cause serious and
irreparable harm to SOCA investigations or
operations elsewhere. Accordingly, the view of
the author is that banks would be well advised
not to risk making disclosures in tcliance upon
the 'protection' offered by s 333(3).
B
FINANCIAL ASSISTANCE
Corporate Development Partners LLC v E-Relationship Marketing Limited [2007] EWHC 436 (Ch) (Rimer J).
Whether a fee payable under a consultancy agreement infringed the
'financial assistance'provisions ins 151 of the Companies Act 1985,
BACKGROUND
Corporate Development Partners LLC ('CDP') provided
management consultancy services and advised companies on
business development straregies. E'Relation ship Marketing Limited
{'ERM') supplied markering technology and services. CDP and
ERM entered into an agreement (the 2004 Agreement) under which
C D P introduced ERM to another company, RE, as a possible target
for takeover by ERM. Instead, RE itself made an offer to ERM's
shareholders to buy their shares. ERM subsequenrly terminated the
2004 Agtcement with CDP and renegotiated the terms,
The new agreement {the 2005 Agreement) superseded and
replaced the 2004 Agreement and contained a specifically reduced
fee structure for any divestiture of ERM to RE. RE then acquired
ERM. Later, ERM alleged the clause entitling CDP to payment in
consequence of the acquisition amounted to the provision of financial
assistance by ERM for the purchase of its shares. ERM therefore
refused to pay any transaction fee to CDP.
CONCLUSION
The 2005 Agteement involved no infringement ofs 15J- E R M was
obliged to pay the fee to CDP.
Rimer J identified the commercial realities of the 2005
Agteement and guarded against straining to interpret it as involving
the giving of illegal financial assistance if that could not fairly be
regarded as encompassed within it. He also had regard to the
general mischief against which s 151 is directed. Did, as a matter of
May 2007
commercial reality, ERM's commitment in the 2005 Agreement to
pay CDP a transaction fee if RE wete ultimately to acquire ERM,
amount to the provision of any financial assistance to anyone, being
assistance which, either directly Of indirectly was 'for the purpose o f
or'smoothed thepath'to that acquisition? In any particular case, the
answer was likely to be fact sensitive.
C D P did not introduce RE to ERM as a company with ambitions
to take ovet ERM; C D P introduced RE as a possible target for
acquisition by ERM. RE realised this was not a serious possibility.
RE and ERM promptly engaged in early discussions. C D P played
no part in these discussions which led to RE's offer. CDP and ERM
then entered into the 2005 Agreement, C D P conrinued to play no
role in the negotiations.
The commitment by ER to pay a fee to CPD did not facilitate the
acquisition. Once the introduction had been effected, it was foe ERM
and RE to decide what, if any, commercial association they chose to
negotiate. At no point after the introduction did C D P contribute to
those negotiations.
The commitment to pay the transaction fee was not going to, was
not intended to and did not in fact assist or advance the acquisition
at ail. It was not a condition of the takeover, it did not reduce RE's
acquisition obligations, not did it smooth the path towards any
ultimate acquisition. The reason for the commitment was not 'for the
purpose' of the acquisition.
Jonathan LawreiKe
K&-L Gaus
jonathan.laivrence@k!ga!ei.[Bm
www.khatei.com
Butterworlhs Journal of International Banking and Financial Law