Royal Courts of Justice
Rolls Building
Fetter Lane
London EC4A 1NL
Before :
THE HONOURABLE MR. JUSTICE MARCUS SMITH
(1) MX1 LIMITED (a company incorporated in Israel) (2) SES S.A. (a company incorporated in Luxembourg) | Claimants |
- and - | |
FARDAD FARAHZAD | Defendant |
Mr. Michael Lazarus (instructed by PCB Litigation LLP) for the Claimants
Mr. Jonathan Cohen Q.C. (instructed by Kingsley Napley LLP)for the Defendant
Hearing date:30 April 2018
JUDGMENT
Mr. Justice Marcus Smith:
INTRODUCTION
This matter was last before the Court on 28 March 2018, when the Chancellor declined to accede to the Claimants’ application for a search order against the Defendant.
The Chancellor did, on that occasion, make an order – sealed on 29 March 2018 – that certain information and documentation, identified in Schedule B of that order, be preserved.
By an application notice issued 4 April 2018, the Claimants sought:
A continuation of the preservation order; and
The provision of certain information and documents which – so the Claimants contended – they sought to obtain pursuant to the Court’s power, where appropriate, to order “Norwich Pharmacal” relief.
In response to the Claimants’ application, the Defendant issued his own application seeking to strike out the Claimants’ statement of case pursuant to CPR 3.4(2), on the ground that no reasonable grounds for bringing the claim were disclosed alternatively for summary judgment pursuant to CPR 24.2 because the Claimants had no real prospect of succeeding on the claim and there was no other compelling reason why the case should be disposed of at trial.
In the event, neither aspect of the Claimants’ application proceeded to a substantive hearing:
The Defendant indicated, at an early stage, that he was prepared to accede to the continuation of the preservation order. This aspect of the application was therefore not effective.
During the course of the hearing, Mr. Lazarus, counsel for the Claimants, indicated that the Claimants were not minded to pursue the application for “Norwich Pharmacal” relief and that the application should to this extent be dismissed. The Claimants took this step, according to Mr. Lazarus’ submissions, because:
Of an acknowledgement by the Claimants that, if the Defendant’s application succeeded, they would not be able to obtain “Norwich Pharmacal” relief.
If, conversely, the Defendant’s application failed, the Claimants would be able to seek and obtain, if so advised, the “Norwich Pharmacal” relief they sought in some other way.
Of an undertaking expressed orally before me by counsel for the Defendant, Mr. Cohen, Q.C., that the Defendant would undertake not to publish or facilitate the publication of tweets harming the Claimants.
Provided that the Claimants would not be prejudiced in any future disclosure application by the dismissal of the present “Norwich Pharmacal” application (which point I formally note here), (Footnote: 1) this was the course Mr. Lazarus invited me to take.
Accordingly, subject to an appropriate order being drawn recording (i) the continuation of the preservation order, (ii) the undertaking offered by the Defendant and (iii) the dismissal of the application for “Norwich Pharmacal” relief, I need deal no further with the Claimants’ application. I should note that the question of costs in relation to this application remains at large. Unless agreed, this can be dealt with either on the papers or at a consequential hearing.
The only effective application before me was, therefore, the Defendant’s application to strike out the claim alternatively for summary judgement. Before I describe the basis for the application, it is necessary briefly to set out the facts.
THE FACTS
The facts of the case are helpfully stated in the judgment of the Chancellor dated 28 March 2018, which I draw upon in the following paragraphs.
The Second Claimant is one of the world’s largest communications satellite owners and operators. It is publicly listed on the Luxembourg Stock Exchange and on Euronext in Paris. It is part-owned by the government of Luxembourg.
The First Claimant is an indirect subsidiary of the Second Claimant. It provides content management delivery and digital media services. The First Claimant is an Israeli-based company formerly called RR Media (“RRM”), which was acquired by a subsidiary of the Second Claimant in July 2016.
The application before me today results from some 57 tweets (the “Tweets”) published by a Twitter account going under the title “@MX1 Leaker” (the “Twitter Account”) between 13 January 2017 and 13 March 2018. The Tweets make various allegations of bribery and corruption against the First Claimant.
The Claimants maintained that the Tweets had the potential to cause serious damage to their business, because they operate in a highly regulated sector. The Claimants are subject to anti-bribery laws, both in the United Kingdom and in other countries, and they have many customers who are sensitive to such matters and to such allegations being made against them. The Claimants also submit that the Tweets disclose various documents and information that are confidential to them. Some details of these confidential matters are set out in Schedule 3 of the Claimants’ draft Amended Particulars of Claim. The draft Amended Particulars of Claim were circulated before the hearing. Given that a pleading will not, in general, be struck out if it can be rescued by amendment, the draft Amended Particulars of Claim were referenced by both parties during the course of their submissions.
The potential for serious future harm has, of course, significantly been ameliorated by the undertaking described in paragraph 5(c) above. Nevertheless, as I describe further below, the Claimants allege that the Tweets have already caused them damage.
At the time of the application before the Chancellor, it was asserted by the Claimants that the Twitter Account had been created and was operated by the Defendant. It is unnecessary to rehearse the evidence that the Claimants adduced in support of this assertion, because the Defendant has – in his witness statement dated 16 April 2018 – admitted these facts.
The Claimants contend that the Defendant could not – in publishing the information contained in the Tweets – have acted alone and would – in making the Tweets – have required assistance from others. As to who those others might be, the draft Amended Particulars of Claim plead as follows:
“16. The Defendant cannot have known sufficient about the business of the Claimants and in particular the confidential matters set out in Schedule 3 hereto to post the Tweets without the assistance of senior current or former employees of [the First Claimant] (or RRM). Accordingly, some such persons must have acted in combination with the Defendant in relation to the publication of the Tweets.
17. The most likely such persons are or include one or more of three former employees of RRM/the First Claimant against whom the Claimant (and related parties) have been engaged in two sets of civil proceedings…since December 2016...”.
Pausing there, the names of these former employees are then pleaded: nothing turns on their precise identity, and I shall refer to them as the “Former Employees”. I shall refer to the litigation between them as the “Litigation”. Paragraph 17 then provides the following particulars:
“(a) The Former Employees have a motive to seek to injure the Claimants in retaliation for being sued in the [Litigation];
(b) They have had access to almost all the information necessary to produce the Tweets...
(c) In the [Litigation] they have made general allegations of corruption by the First Claimant but with virtually none of the details that were included in the Tweets.
(d) The Twitter Account was set up and the first Tweet was posted (in January 2017) shortly after the [Litigation] commenced (in December 2016).
(e) No Tweets were posted on the Twitter Account between August and October 2017 when the parties to the [Litigation] were seeking to settle.
(f) No Tweets were posted on the Twitter Account between 7 January and 19 February 2018 during which period there was a mediation in relation to the [Litigation]…”
The Claimants allege a conspiracy (the “Conspiracy”) between the Claimant and the Former Employees to injure the Claimants “by publishing highly damaging allegations about the Claimants and/or information confidential to the Claimants, in particular via Twitter” (paragraph 1(a) of the draft Amended Particulars of Claim).
The causes of action pleaded by the Claimants lie in conspiracy. The Claimants rely upon lawful means conspiracy in relation to the damaging allegations in the Tweets; and unlawful means conspiracy insofar as the Tweets publish confidential information.
THE DEFENDANT’S APPLICATION
The Defendant’s application to strike out alternatively for summary judgment is based upon three grounds:
First, it is said that the cause of action founded upon lawful means conspiracy is defectively pleaded in that no sufficient object is set out in the draft Amended Particulars of Claim.
Secondly, it is said that if and to the extent the Claimants or either of them have suffered loss or damage as a result of the Conspiracy, the place of that loss or damage was not England. According to Regulation (EC) No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (the “Rome II Regulation”) the applicable law was not English law. The applicable law identified by the Rome II Regulation did not – according to the Defendant – recognize the lawful means conspiracy pleaded by the Claimants as a cause of action.
Thirdly, the Defendant contended that the unlawful means founding the unlawful means conspiracy cause of action had been defectively pleaded, in that no proper case had been articulated as to whether:
The information in the Tweets was indeed confidential;
The Defendant knew this.
These three grounds for the Defendant’s application are considered in turn below.
IS THE LAWFUL MEANS CONSPIRACY PROPERLY PLEADED?
In Crofter Hand Woven Harris Tweed Co. v. Veitch [1942] AC 435 at 441-442 (per Viscount Simon LC), the House of Lords said that “[a] combination of two or more persons wilfully to injure a man in his trade is unlawful and, if it results in damage to him, is actionable”. (Footnote: 2)
Lawful means conspiracy requires a claimant to plead and, in order to succeed, in due course establish, three things:
First, an agreement or combination between two or more parties (the “combination”).
Secondly, the combination must be to effect an unlawful object.
Thirdly, the combination must result in damage to the claimant.
It was in relation to the second of these requirements that the Defendant contended that the Claimants’ pleading was defective. Before turning to the pleading itself, it is necessary to state what, exactly, the law requires in relation to this second element:
Often, in the case-law, the terms “purpose” or “motive” are used interchangeably with the term “object”. Significantly, the formulation of Lords Simon and Cave, quoted in paragraph 21 above, avoids each of these terms, but exactly what was meant was considered in a number of passages in Crofter. In particular, Lord Simon said: (Footnote: 3)
“On this question of what amounts to an actionable conspiracy “to injure” (I am assuming that damage results from it), I would first observe that some confusion may arise from the use of such words as “motive” and “intention”. Lord Dunedin in Sorrell v. Smith appears to use the two words interchangeably. There is the further difficulty that, in some branches of the law, “intention” may be understood to cover results which may reasonably flow from what is deliberately done, on the principle that a man is to be treated as intending the reasonable consequence of his acts. Nothing of the sort appears to be involved here. It is much safer to use a word like “purpose” or “object”. The question to be answered, in determining whether a combination to do an act which damages others is actionable, even if it would not be actionable by a single person, is not “did the combiners appreciate, or should they be treated as appreciating, that others would suffer from their action”, but “what is the real reason why the combiners did it?” Or, as Lord Cave puts it, “what is the real purpose of the combination?” The test is not what is the natural result to the plaintiffs of such combined action, or what is the resulting damage which the defendants realize or should realize will follow, but what is in truth the object in the minds of the combiners when they acted as they did. It is not the consequence that matters, but the purpose…”
This important passage highlights two points:
The object, purpose or motive is, obviously, subjective, to be discerned from the minds of the parties to the combination. Inevitably, state of mind is a matter to be inferred from facts that can be established before a court.
Whilst there is no presumption that a person intends the natural and probable results of his or her actions, (Footnote: 4) in many cases a state of mind can be inferred from the natural and probable consequences of an act. In the case of lawful means conspiracy, it is necessary to be extremely careful about the drawing of such inferences. This is because the fact that (i) damage to another ensues as a result of the combination and (ii) is the natural and probable result of that combination is not of itself sufficient to make out the tort. If the object of the combination is not to injure another, but some other legitimate object, then no wrong is committed.
Of course, a combination may have several objects. Indeed, where it is clear that the natural and probable consequence of the combination is injury to another, it may be hard to resist the inference that this was an object of the combination. However, this is not enough to establish the tort. Where there are several objects or purposes “liability must depend on ascertaining the predominant purpose. If the predominant purpose is to damage another person and damage results, that is tortious conspiracy. If the predominant purpose is the lawful protection or promotion of any lawful interests of the combiners (no illegal means being employed) it is not a tortious conspiracy even though it causes damage to another person”. (Footnote: 5)
Self-evidently, a combination cannot have a state of mind. The relevant states of mind will be those of the two or more persons party to the combination. Whilst it may be that there is an identity of object amongst the parties, in that they all share the same object or purpose, that will not always be the case. It may be that a party to the combination lacks the purpose of the other parties. This may be because such a party has a different purpose or simply because such a party – because he or she lacks certain information – cannot be said to have as his or her object or purpose the effecting of an unlawful object. In such a case, that party commits no tort. (Footnote: 6)
It is an open question whether a party to the combination, who knows of and countenances the unlawful object of the other parties, can be said him- or herself to have an unlawful object in mind. The view of Clerk & Lindsell on Torts (Footnote: 7) is that this is sufficient. In my judgment, provided that party lacks another legitimate object, the inference that he or she is adopting the unlawful object of the others must be hard to resist.
Whilst a combination cannot have a state of mind, it can have an object or a purpose. (Footnote: 8) Whether that object or purpose is predominantly legitimate or predominantly unlawful must be gleaned from an assessment of the states of mind of the various parties to the combination. (Footnote: 9)
I turn, then, to the lawful means conspiracy pleaded in paragraphs 19-21 of the draft Amended Particulars of Claim:
“19. The sole or predominant purpose of the Conspiracy and accordingly the sole or predominant purpose of each of the conspirators including the Defendant is to injure the Claimants because the publication of the Tweets in the terms in which they were published cannot fulfil any other purpose.
20. In relation to the Defendant’s sole or predominant purpose to injure the Claimants:
(a) His journalistic activities do not include any particular focus on corruption;
(b) Very little of the information in the Tweets has been disclosed in the [Litigation], so the Tweets cannot amount to legitimate reporting of that litigation or even of facts that have emerged in that litigation;
(c) The content and language used in the Tweets seeks to denigrate the Claimants; there is no attempt at journalistic objectivity;
(d) Certain of the Tweets contain no factual allegations or information but are merely innuendo…;
(e) The author of the Tweets purports to be an insider not a journalist or other external reporter;
(f) The Defendant cannot have been purporting to act in the public interest as there are many more appropriate and effective way to pursue that course, such as contacting the Second Claimant or regulators;
(g) The Defendant has concealed his involvement with the Twitter Account…;
(h) The Defendant has tagged or hash-tagged many of the Claimants’ customers and agents…; the obvious purpose of this is to prejudice the Claimants’ business relationships by bringing the Twitter Account to their attention;
(i) While the Tweets are largely expressed in the present tense, they often relate to historic matters that occurred while the Former Employees were employed by RRM/the First Claimant. Such distortion (a) tends to conceal the Former Employees’ responsibility for the matters alleged and (b) tends to mislead the reader into thinking that the wrongdoing alleged is continuing.
21. The Claimants infer in the premises that in participating in the Conspiracy the Defendant’s sole or predominant purpose is to assist the Former Employees whose sole or predominant purpose is to damage the Claimants in retaliation for being sued in the [Litigation]. In the premises, the Defendant shares their said sole or predominant purpose.”
A number of criticisms can properly be made of this plea:
Paragraph 19 derives the object or purpose of the parties to the combination from the purpose of the Conspiracy. That, as it seems to me, puts matters the wrong way round. The purpose of the combination can only be derived from the subjective states of minds of the parties to the Conspiracy. Pleading the case in the way they have has enabled the Claimants to avoid making any clear plea as to the state of mind of the Defendant and of the other alleged conspirators, namely the Former Employees.
The opening words of paragraph 20 do not state sufficiently clearly to what point the particulars contained in sub-paragraphs 20(a) to (i) go. It is not apparent, on the face of the pleading, what these are particulars of. As to this:
If it is being averred that the particulars are all particulars of the fact that the Defendant’s object or purpose was to injure the Claimants, then I do not consider that the particulars are properly in support of that averment. With the possible exceptions of paragraphs 20(h) and 20(i), the particulars seem to me to be directed to an altogether different proposition, namely that the Defendant’s object or purpose was not to report on matters in a journalistic way.
If what is being averred is this negative proposition, then the opening words of paragraph 20 need to say so.
Paragraph 21 is an extremely confused paragraph, deficient in a number of respects. More particularly:
Paragraph 21 appears to contain an averment that the other parties to the combination – the Former Employees – had, as their sole or predominant purpose an unlawful purpose, namely that of damaging the Claimants in retaliation for being sued in the Litigation. No particulars are provided for this plea.
Because of the difficulties in relation to paragraphs 19 and 20, it is not clear whether it is being asserted against the Defendant that his object or purpose was the unlawful one alleged in relation to the Former Employees. Paragraph 21, however, strongly suggests that this averment is not being made, because (as against the Defendant) it appears to plead only that the Defendant passively adopted this object, without actually holding it himself. It may be that such an averment is sufficient – see paragraph 23(5) above – but in order to be sufficient at the very least the Defendant’s knowledge of and countenancing of the purpose of the other parties needs to be set out.
The failure properly to set out the purposes of the parties to the Conspiracy means that there is no proper plea of the purpose or predominant purpose of the Conspiracy.
For these reasons, I find the Claimants’ plea of lawful means conspiracy to be defective, and I am minded to strike-out paragraphs 19 to 21 of the draft Amended Particulars of Claim. During the course of submissions, Mr. Lazarus indicated that his pleading might be susceptible of further improvement. I consider that – although the Claimants have had a number of goes already – they should have the opportunity, within 14 days of this Ruling, to make an application to amend (it is an application to amend because the present pleadings are draft Amended Particulars of Claim), if they are minded (in light of the totality of this Ruling) to do so.
THE APPLICABLE LAW
Even if a cause of action is governed by a foreign law, English law allows the parties to have the matter determined by English law, simply by both parties omitting to plead the foreign law. (Footnote: 10) Of course, if the point is an issue on the pleadings, then it must be determined, and determined as a question of fact.
In this case, the Defendant has yet to plead his defence. However, the question of which law is applicable to the causes of action pleaded by the Claimants has squarely been raised by the Defendant in his application. It is contended that the lawful means conspiracy cause of action is governed by a law other than England (specifically, Israeli law) and that the law of the State of Israel does not recognize this cause of action. Accordingly, the Claimants’ claim must fail. (Footnote: 11)
Assuming, for the moment, that the Defendant is correct, and the lawful means conspiracy cause of action pleaded by the Claimants is indeed governed by the law of another jurisdiction, then in my judgment it is unnecessary for me to determine what foreign law applies or whether that cause of action is recognized under that law.
It is sufficient for the Defendant to succeed simply to show that there is an applicable foreign law. If the Defendant can demonstrate this, then it is incumbent upon the Claimants to plead the relevant facts and matters that constitute the foreign cause of action, and the fact is that the Claimants have not done this.
Accordingly this Ruling confines itself to the question of whether the lawful means conspiracy pleaded by the Claimants is governed by English law (as the Claimants contend) or by a foreign law (as the Defendant contends).
It was common ground between the Claimants and the Defendant, and I so hold, that the applicable law is determined by the Rome II Regulation and that, within that Regulation, the relevant Article is Article 4. Article 4 provides as follows:
“(1) Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.
(2) However, where the person claimed to be liable and the person sustaining the damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.
(3) Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.”
Neither the Claimants nor the Defendant sought to rely upon Articles 4(2) or 4(3) in support of their contentions. Each relied upon Article 4(1), and I proceed on the basis (which seems on the face of it to be right) that the derogations from Article 4(1) contained in Articles 4(2) and 4(3) have no application in the present case.
The damage pleaded by the Claimants is as follows:
“23. Unless restrained by the court, the Defendant will cause damage to the business of the Claimants in England and Wales and elsewhere by publishing or facilitating the publication of harmful tweets pursuant to the Conspiracy.
24. Further, unless the Defendant is ordered by the court to delete the Tweets, the Claimants will suffer damage to its business in the future by reason of the continued public existence of the Tweets.
25. By reason of the matters aforesaid, the Claimants have suffered loss and damage. The best particulars which the Claimants can currently give are that:
(a) The Claimants have incurred the costs of investigating the Conspiracy in approximately the sum of US$350,000 including costs of at least £100,000 incurred in England in respect of the services of Kroll and of the Claimants’ lawyers which are not recoverable as part of the costs of this claim;
(b) The Claimants have also incurred additional costs investigating the allegations made in the Tweets.”
Given the undertaking offered by the Defendant, referred to in paragraph 5(2)(c) above, it is difficult to see how the future loss pleaded in paragraph 23 of the draft Amended Particulars of Claim can now be sustained. In any event, I regard the nebulous plea that damage will be caused to the Claimants “in England and Wales and elsewhere” as unhelpful in determining what might be the applicable law under Article 4(1). If the Claimants were contending that future damage to their businesses would inevitably be caused to them in England and Wales, then I would expect that averment to be pleaded. As it stands, the plea is speculative.
As regards paragraph 24 of the draft Amended Particulars of Claim, there is at present no order requiring the Tweets to be deleted and I assume that they are still visible to third parties. However, the paragraph makes no averment as to where any future damage occurring by reason of the non-deletion of the Tweets might be sustained. It therefore does not help in terms of applying Article 4(1).
Article 25 contains the most specific averment of loss and damage, and identifies costs of at least £100,000 incurred in England. Both the Claimants and the Defendant focused on this loss in support of their contentions on applicable law, and I shall begin with a consideration of the law applicable to this particular loss (the “£100,000 loss”) as if it were the only loss claimed by the Claimants. I consider separately the significance of that fact that the £100,000 loss represents only a part of the loss and damage claimed by the Claimants.
The statement of Mr. Blunt – in response to the statement of the Defendant – says a little more about the £100,000 loss: (Footnote: 12)
“…I wish to state that the costs incurred in England alone by Kroll and by the Claimants’ lawyers in uncovering [the Defendant’s] tracks as the person behind the Twitter Account were well in excess of £100,000. There are in addition substantial costs incurred in the US. On 19 April 2018, [the Defendant’s] solicitors asked for confirmation regarding which of the two Claimants had incurred such costs to date. I am making enquiries of the relevant accounting personnel. Subject to the outcome of those enquiries, my understanding is that (i) both entities have a primary liability in respect of at least the costs and disbursements of the Claimants’ lawyers in England; and (ii) in practice, the Second Claimant has been paying the costs, which are then charged back to the First Claimant.”
I appreciate that these points do not appear in the Amended Particulars of Claim. I refer to them since, should they prove to be material to the question before me, they could be incorporated by amendment.
I turn to the application of Article 4(1) to the £100,000 loss:
Article 4(1) was set out in paragraph 32 above. The Recitals in the Rome II Regulation, so far as material, provide:
“(7) The substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No. 44/2001 of 22 December 2000 in jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“Brussels I”) and the instruments dealing with the law applicable to contractual obligations.
…
(16) Uniform rules should enhance the foreseeability of court decisions and ensure a reasonable balance between the interests of the person claimed to be liable and the person who has sustained damage. A connection with the country where the direct damage occurred (lex loci damni) strikes a fair balance between the interests of the person claimed to be liable and the person sustaining the damage, and also reflects the modern approach to civil liability and the development of systems of strict liability.
(17) The law applicable should be determined on the basis of where the damage occurs, regardless of the country or countries in which the indirect consequences could occur. Accordingly, in cases of personal injury or damage to property, the country in which the damage occurs should be the country where the injury was sustained or the property was damaged respectively.”
The explanatory memorandum accompanying the Commission Proposal in relation to what became the Rome II Regulation states: (Footnote: 13)
“The place or places where indirect damage, if any, was sustained are not relevant for determining the applicable law. In the event of a traffic accident, for example, the place of the direct damage is the place where the collision occurs, irrespective of financial or non-material damage sustained in another country. In a Brussels Convention case, the Court of Justice held that the “place where the harmful event occurred” does not include the place where the victim suffered financial damage following upon initial damage arising and suffered by him in another Contracting State.
The rule entails, where damage is sustained in several countries, that the laws of all the countries concerned will have to be applied on a distributive basis, applying what is known as “Mosaikbetrachtung” in German law.”
As Recital (7) implies, there is a close relationship between the Rome II Regulation and what is now the Recast Brussels I Regulation. (Footnote: 14) In Case 21/76, Bier v. Mines de Potasse d’Alsace SA [1976] ECR 1735, [1978] 1 QB 708, the European Court of Justice held that for the purposes of jurisdiction in the case of matters relating to tort, the courts of the place where the harmful event occurred would have special jurisdiction. (Footnote: 15) The place where the harmful event occurred is:
The place where the event which gave rise to the damage occurred; and/or
The place where the damage occurred.
Self-evidently, a regime determining applicable law must select a single law to apply to a single issue, and it is clear that the Rome II Regulation has opted for the second of these alternatives.
So far as the second limb of Bier is concerned, it is clear that like all of the “special jurisdictions” enumerated in the Brussels regime, this jurisdictional base constitutes a derogation “from the principle that jurisdiction is vested in the courts of the State where the defendant is domiciled and as such must be interpreted restrictively”. (Footnote: 16) In accordance with the restrictive treatment of the “special jurisdictions”, a court having jurisdiction pursuant to Article 5(3) only has jurisdiction in respect of damage, if any, actually suffered in that territory. (Footnote: 17)
Article 2 of the Rome II Regulation defines “damage” in the following terms:
“(1) For the purposes of this Regulation, damage shall cover any consequence arising out of tort/delict, unjust enrichment, negotiorum gestio or culpa in contrahendo.
…
(3) Any reference in this Regulation to:
(a) an event giving rise to damage shall include events giving rise to damage that are likely to occur; and
(b) damage shall include damage that is likely to occur.”
Clearly, this definition is wide enough to embrace the £100,000 loss.
Article 4(1) distinguishes three different laws:
The law of the country in which the damage occurs.
The law of the country in which the event giving rise to that damage occurs.
The law of the country in which the indirect consequences of that event occur.
It is clear from the express wording of Article 4(1) that the applicable law is the first of these three alternatives.
Whereas in the case of personal injury and physical damage to property it may be more straightforward to discern the country in which the damage occurs, and hence the applicable law, the fact that financial and non-material loss (such as the £100,000 loss) lacks an immediate physical manifestation presents real problems in discerning the applicable law.
The touchstone, in cases of financial and non-material loss, for identifying the applicable law, appears to be reversibility. The point is put thus in Dickinson, The Rome II Convention: (Footnote: 18)
“If, however, the victim performs, or fails to perform, some act towards a third party, whether by entering into a contract or by transferring an asset, resulting in a diminution in the victim’s assets or in his incurring liability to that third party then that act or omission should be considered to have caused him “damage” at the moment, and in the country, where the act or omission becomes irreversible by his own actions. In the case of entry into a contract, the country of damage should be that of the country in which the contract was concluded. Although this fact may be open to manipulation and does not in any event appear to provide a particularly powerful connecting factor, it can be objectively ascertained and seems preferable (for example) to the place where the third party may enforce the contract or the place of performance of the victim’s obligations towards the third party.”
Reversibility appears to be the test applied in Hillside (New Media) Ltd v. Baasland [2010] EWHC 3336 (Comm). Hillside provided facilities for on-line gambling. In order to avail themselves of this facility, gamblers had to register and open an on-line account or (as it was called) “wallet” from which bets could be made. Funds transferred to the wallet were held by a bank in England. Mr. Baasland placed bets through his on-line account/wallet from various jurisdictions – Germany, Norway, the Czech Republic and Denmark –, made substantial losses and threatened (but did not bring) proceedings in Norway against Hillside. These proceedings would have alleged that Hillside was liable in tort or delict for allowing him to gamble without appropriate warnings. Hillside commenced proceedings in England seeking a negative declaration that it was not liable. The question arose as to the applicable law. Andrew Smith J. considered the nature of the on-line account that Mr. Baasland had with Hillside and concluded that when Mr. Baasland deposited money into the account: (Footnote: 19)
“…the deposit created a debt owed to Mr. Baasland, and Mr. Baasland suffered no loss simply as a result of transferring funds to the wallet. He suffered loss only when he was allowed to use those funds to place bets. At that point, the loss that he suffered was that the value of the chose in action represented by the funds in the wallet was reduced, if not exhausted. This, as it seems to me, was the immediate loss that Mr. Baasland suffered as a result of being allowed facilities to gamble…”
Andrew Smith J. went on to consider the significance of the (now repealed) s.18 of the Gaming Act 1845: (Footnote: 20)
“The effect of s.18 of the Gaming Act was that any contract between Mr. Baasland and Hillside was null and void, and Mr. Baasland could not under the law of England bring proceedings to recover the money deposited in his wallet. There was, therefore, no chose in action represented by the funds deposited in the wallet. Does this mean that Mr. Baasland’s loss was suffered not in England but in Norway? I do not consider that it does. Although Mr. Baasland had no claim in debt for the sum in the wallet, in substance he confidently and reasonably expected that he could have repaid to him the monies referable to his wallet which were in bank accounts with RBS. The reality is he suffered loss when the monies referable to his wallet were reduced because he placed bets, and so that the immediate damage that he suffered as a result of the alleged wrong was in England.”
Payment by Mr. Baasland into the wallet did not result in damage to him, because that transaction could be reversed. Equally, mere payment out of the wallet might, or might not, result in damage to Mr. Baasland. That would turn on the circumstances. In this case, it was the fact that the payment out of the wallet was to gamble that was generative of the damage. The money was gone, and Mr. Baasland could not reverse it. In short, the location of the damage in this case was determined by the combination of the payment and what that payment was for. The payment alone says nothing.
It was noted in paragraph 40(3) above that there is a distinct resonance between the Brussels regime and Article 4(1) of the Rome II Regulation. It is significant that, in Brussels regime cases considering jurisdiction based on the place where the damage occurred, the same “reversibility” test appears to be applied. Raiffeisen Zentral Bank Österreich AG v. Tranos [2001] ILPr 9 concerned a contract (a credit facility) entered into as a result of various alleged misrepresentations. Longmore J. held that damage occurred when reliance on the misrepresentations resulted in some concrete transaction that gave rise to the loss, rather than when the representation was made to any given officer of the bank. The damage thus occurred in London, where the credit facility was arranged, rather than in Greece or Austria where the representation was received and given approval for further action: (Footnote: 21)
“In a case of this kind, the loss cannot be said to have been suffered until the reliance had itself resulted in a concrete transaction that gives rise to a loss. In this sense, the initial damage was suffered when the credit facility was agreed…”
Longmore J. is plainly using the term “concrete” as meaning “irreversible”.
Looking at the way the £100,000 loss is pleaded in paragraph 25(a) of the Amended Particulars of Claim, it would appear that irreversible or concrete loss – in the form of entering into an agreement with Kroll and with the Claimants’ lawyers – occurred in England and Wales. Again, the pleading is not entirely clear, but (if my understanding is right) the pleading can be clarified by amendment.
That leaves the question – raised in paragraph 37 above – of whether the fact that the £100,000 loss represents only a part of the loss and damage claimed by the Claimants is significant. The Defendant contended that for English law to be applicable it was necessary that the damage located in England be where the Claimants’ damage predominantly occurred.
The issue is identified – but not decided, because it did not arise for decision – in Hillside: (Footnote: 22)
“It is not clear how Article 4 of the Rome II Regulation applies where a claimant has suffered financial loss in more than one country. The Explanatory Memorandum (Footnote: 23) that accompanied the Commission’s original proposal suggests that in such cases “the laws of all countries concerned will have to be applied on a distributive basis, applying what is known as “Mosaikbetrachtung” in German law.” I do not need to decide whether the proper approach is to attempt some such fragmentation of the law governing an obligation, or whether the court should decide in which country the damage predominantly occurred…”
In this case, the issue does arise. There is obviously a strong argument that the £100,000 loss is not the Claimants’ predominant loss.
In my judgment, the applicable law pursuant to Article 4(1) is not the place where the damage predominantly occurs. That is not what the Article says. Article 4(1) refers to “the law of the country in which the damage occurs”. The natural reading is that where damage occurs across several jurisdictions, there will be several applicable laws. This is, of course, also consistent with the Explanatory Memorandum.
What is more, this construction of Article 4(1) is the same as the construction of the similar (jurisdictional) rule in the Brussels regime: see paragraph 40(4) above. If the “place where the damage occurred” is relied upon as the jurisdictional base for a claim, then the court’s jurisdiction is limited in respect of the damage actually suffered in that territory. In short, precisely the same fragmentation occurs.
Subject to the amendment described in paragraph 41 above, the second ground advanced by the Defendant in his application fails.
UNLAWFUL MEANS CONSPIRACY
The Defendant contended that the unlawful means conspiracy was defectively pleaded in that:
There was no proper plea that information in the Tweets was confidential.
There was no plea regarding the Defendant’s knowledge that the information in the Tweets was confidential.
Paragraph 22 of the draft Amended Particulars of Claim avers:
“…the Defendant and the other conspirators have sought to injure the Claimants by publishing confidential information as set out in Schedule 3 hereto and the Conspiracy is to that extent a conspiracy to injure the Claimants by unlawful means, namely breach of confidence.”
Schedule 3 provides what is said to be a summary of confidential information disclosed in the Tweets. It states:
“1. The identity of suppliers, commercial partners and sales agents, which must be kept confidential to protect these relationships from competitors. Such information is referenced in the Tweets posted on 13 January 2017, 22 February 2017, 19 March 2017 (six Tweets), 29 May 2017 and 24 November 2017.
2. The invoice included in the Tweet posted on 25 January 2017.
3. Confidential emails in the Tweets posted on 22 February 2017 and 22 April 2017.
4. The confidential letter sent to agent Bashe Omar terminating the agreement between [RRM] and the Mr. Omar in the Tweet posted on 15 June 2017.”
I have no doubt that the unlawful means conspiracy claim should be struck out. Significantly, Mr. Lazarus indicated at the beginning of his oral submissions that the Claimants would not address me on this third ground. The Defendant’s criticisms of the pleading, on this point, thus went unanswered.
The unlawful means conspiracy plea is defective for the following reasons:
How the obligation of confidence – which is said to have been breached – arises is unstated in the pleading. It may be that it arises pursuant to the contracts of employment between RRM and the Former Employees, in which case English law is unlikely to be applicable to the issue of whether an obligation of confidence arises. But the pleading fails to plead any of the facts material to this question.
This means it is impossible to know by what test the information in the Tweets is to be assessed as confidential. Assuming – and it is not a safe assumption – that English law applies, the basis upon which the information set out in Schedule 3 would attract a duty of confidence under English law is also unpleaded. (Footnote: 24) It is simply asserted, without more, that the Schedule 3 tweets contain confidential information.
The Defendant also relied upon the fact that there was no plea that the Defendant appreciated that the information set out in Schedule 3 was confidential. It was said that this was a necessary element of the tort that is unlawful means conspiracy, relying upon the decision of the Supreme Court in Vestergaard Frandsen A/S v. Bestnet Europe Ltd [2013] UKSC 31 and the decision of the Court of Appeal in Campbell v. Mirror Group Newspapers Ltd [2003] QB 633. I was not addressed on these cases by the Claimants and I note that the Defendant’s contention as to the law is not supported (or, at least, not clearly supported) by the description of the tort in Clerk & Lindsell. (Footnote: 25) Since I have concluded that the unlawful means conspiracy plea is defective for the reasons set out in paragraph 52 above, and because I did not have the benefit of argument on this point from the Claimants, which does not seem straightforward, I express no view on this point.
For the reasons given in paragraph 52 above, the unlawful means conspiracy plea should be struck out.