Males: Conduct was clearly an abuse of process
The Court of Appeal has strongly condemned ‘privilege hunting’ – illicit methods to obtain information from litigation opponents – in a case where a law firm partner was successfully duped.
Lord Justice Males said yesterday that operations such as occurred in the case before him “should have no place in litigation in the courts of England and Wales”.
The claimants, a wealthy Mexican businessman and one of his companies, employed private investigation firm Black Cube, which is staffed by former Israeli intelligence officers, to target a partner at DWF in a covert sting operation (known only as ‘X’).
By pretending to be a potential new client, a Black Cube operative induced X to attend meetings in Amsterdam, at which, plied with alcohol, he revealed sensitive information about the case, including perceived weaknesses in his clients’ case, litigation strategy and settlement strategy.
Males LJ said: “Such litigation may be hard fought, but it must be fought fairly in accordance with the substantive and procedural rules which are designed to ensure a just result.
“Although I have reached no final decision whether the conduct of Black Cube amounted to the commission of a criminal offence under English law, it is clear that this conduct was a serious abuse of the process of the court for which the claimants are responsible.
“Solicitors in other cases who are presented by clients with the fruits of such ‘privilege hunting’ operations will need to consider carefully, not only their professional responsibilities, but also the possibility that by making use of such material they may be encouraging, or assisting their clients to benefit from, the commission of criminal offences.”
The case concerns allegations that the claimants were deceived into concluding a stock loan agreement in 2021 involving some $415m worth of shares.
As we reported last November, before Stephen Houseman KC, sitting as a deputy High Court judge, the claimants accepted that the methods employed by Black Cube to obtain the illicit knowledge from X were unethical. But they said they gained no unfair advantage.
The claimants applied for summary judgment, exhibiting the covertly obtained recordings, while the defendants argued the claim should be struck out as an abuse of process.
Judge Houseman held it was an abuse but that striking-out would be “disproportionate” given the claimants had “a decent prospect” of succeeding on their deceit claim at trial.
Instead, he ordered the defendants to forfeit their summary judgment application and pay costs.
A hearing on the evidential status of the material is due in November.
Both sides appealed. Males LJ, giving the unanimous judgment, stressed that the sting was carried out without the knowledge of the claimants’ then solicitors, Enyo Law.
“When they were told about it, Enyo refused to look at the video files or listen to the audio files. That resulted in them being sacked and the claimants’ current solicitors [LK Law] and counsel being instructed.”
Males LJ agreed that the conduct did constitute an abuse of the process and the deputy judge was right to refuse summary judgment.
However, he did not go far enough with the sanction and Males LJ said the “appropriate and proportionate response” was to discharge freezing orders obtained by the claimants and to leave it to the trial judge to decide whether the claimants’ abuse should affect any entitlement they may otherwise have to the equitable or discretionary relief they sought.
The ruling showed that Black Cube was paid a retainer of £1.14m, plus a fee of £220,000 in the event that it made a witness statement, a further £250,000 if its intelligence led to a criminal investigation against any of the defendants in any jurisdiction, and a success fee of 4% of the total amount received by the claimants in the event that intelligence it sourced was used.
It also revealed that X was a partner at DWF Law. “Whether or not as a result of the psychological profiling which was part of its services, Black Cube had picked its target well. The operation was successful,” Males LJ said.
“The consequences of this covert operation have been dramatic. For X personally, who now faces disciplinary proceedings before the Solicitors Regulatory Authority and professional ruin, they have been disastrous.
“For the defendants, they have led to a change in their representation, with PCB Byrne LLP replacing DWF, no doubt as a result of the breakdown in trust and confidence caused by X’s revelations.”
The judge said it was “extraordinary” that it was the claimants who referred X to the regulator, rather than his clients.
Males LJ gave the argument that there was no abuse of process short shrift: “Some things are so obvious that they do not need much analysis.”
He said: “It makes no difference that the solicitor, X, was obviously at fault in revealing information that he should not have revealed. That was the whole object of the Black Cube operation, which the claimants sanctioned and of which they now seek to take the benefit.
“It is absurd for the claimants to submit, as they submitted forcefully before the deputy judge and rather more faintly in this court, that their conduct should not be regarded as abusive because the operation should have been unsuccessful…
“Nor would it make any difference if it should transpire that some of the information obtained by Black Cube falls within the iniquity exception to legal professional privilege.” They were not to know that at the time the sting was initiated.
Males LJ said it was “surprising” that Judge Houseman proceeded on the basis that there was nothing unlawful or illegal about the way illicit information was obtained.
It was “obviously a civil wrong” and may well have been the criminal offence of fraud by false representation
“Similarly, the promise of lucrative new business with which to impress X’s new partners at DWF in order to induce him to reveal confidential information obtained in the course of his functions as a solicitor may have constituted an offence under section 1 of the Bribery Act 2010, although we did not hear submissions about this.”
The court also said the explanation given by Andrew Ford, a principal of LK Law, for believing that it was appropriate to review the material, namely that he believed privilege had been waived by X, “does not hold water”.
Males LJ said: “It is elementary that the privilege is not the solicitor’s to waive. However, there was no application before the judge to cross-examine Mr Ford and it must therefore be accepted that this was his genuine – albeit obviously untenable – belief.”
The question was how the court should respond to such an abuse. As “other equally culpable forms of abuse” – such as suppressing disclosable documents, perjured evidence or obtaining information by unlawful hacking – did not lead to strike-outs, there was no reason this should either, Males LJ said.
But the deputy judge was wrong to regard striking out the summary judgment application as a sufficient response to the abuse, “and wrong also to overlook an alternative effective response, which was to discharge the freezing orders obtained by the claimants”.
This was a “particularly appropriate” as Black Cube’s first approach to X was made at a time when Mr Justice Calver had not yet handed down his judgment on the defendants’ application to discharge the freezing orders.
Had Calver J been made aware of the operation, it was “certain” he would not have continued the freezing orders.
Further, one of the insights which the claimants obtained from the operation was how the freezing orders were causing serious pressure on the defendants’ banking relationships. “There was, therefore, a real nexus between the freezing orders and the claimants’ abusive conduct.”
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