MX1 Ltd & Anor v Farahzad

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.

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 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:

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 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.

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 )

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:

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.

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:

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:

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 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:

The explanatory memorandum accompanying the Commission Proposal in relation to what became the Rome II Regulation states: (Footnote: ¹³ )

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.

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:

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.

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 )

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 )

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 )

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 )

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.

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:

Schedule 3 provides what is said to be a summary of confidential information disclosed in the Tweets. It states:

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.