The ECU Group Plc v HSBC Bank Plc & Ors

This judgment concerns documents (the ‘Disclosed Documents’) provided by the respondent HSBC companies to the applicant (‘ECU’) by way of pre-action disclosure under CPR 31.16, pursuant to an order dated 8 December 2017 of HHJ Waksman QC (as he was then) sitting as a judge of this court, as varied by consent orders of Popplewell J and Cockerill J dated 5 February 2018 and 19 March 2018 respectively. The disclosure was ordered for the reasons set out in a judgment handed down by HHJ Waksman QC on 24 November 2017, [2017] EWHC 3011 (Comm).

The Disclosed Documents in ECU’s hands are subject to the very important rule of law that they may be used “only for the purpose of the proceedings in which [they were] disclosed” (CPR 31.22(1)). Since this was pre-action disclosure, the ‘proceedings’ for present purposes are proceedings to be commenced in this court against one or more of the respondent companies. As I describe below, ECU sought permission for certain collateral uses of the Disclosed Documents (i.e. uses other than for the purpose of these proceedings).

At the start of the hearing, I directed under CPR 31.22(2), and repeat here, that although reference to the Disclosed Documents has necessarily been made in the course of this permission application, the prohibition on their collateral use by ECU is still to apply, notwithstanding CPR 31.22(1)(a). I also made clear, as in my view should generally be the procedure, that if it were necessary to refer to the content of the Disclosed Documents in order to argue the permission application, I would sit in private for that part of the argument so as to protect the confidentiality at this stage of that content.

The permission application was made by Application Notice dated 14 August 2018. ECU sought under CPR 31.22(1)(b):

That fourth statement (‘Alexopoulos 4’), dated 1 March 2018, was made to support the application, also dated 1 March, for a further order in relation to pre-action disclosure that was disposed of by the consent order of 19 March. It included a detailed description of some of the contents of some of the Disclosed Documents and conclusions ECU may say should be drawn from them. Providing a copy of Alexopoulos 4 to a journalist was perfectly obviously prohibited collateral use. That was accepted in unqualified terms at the hearing, and an unreserved and unqualified apology was given on behalf of ECU and Mr Alexopoulos that I am happy to accept. Ms Tolaney QC for the respondents submitted that any acceptance of breach or apology was previously not so unequivocal. I accept that submission below, but that does not cause me to doubt the sincerity of the unqualified admission and apology given at the hearing.

To the extent that retrospective permission was sought, in all three respects, the Application Notice said it was sought “on the basis that any breach [of CPR 31.22(1)] was inadvertent, and [ECU] has taken immediate steps to remedy the position upon notice to the [respondents]”.

It is inappropriate to say anything about the prospective merits of the possible claims to be brought if substantive proceedings are now commenced. ECU has indicated, by reference inter alia to the Disclosed Documents now in its possession, that it will assert serious wrongdoing on the part of individuals at HSBC in connection with certain ‘stop loss’ FX orders placed by it. HSBC firmly refutes any wrongdoing. I add, simply to explain one of the orders I made by consent at the hearing, that ECU’s stop loss orders were related to FX positions generated by the financial affairs of its clients; and that such clients being party to any proceedings ultimately brought here was well in mind in the making and granting of the original pre-action disclosure application (see [2017] EWHC 3011 (Comm) at [6]).

By the time the application came on for argument before me, the nature and detail of the prospective permission sought had been modified and it had also been the subject of proposals and counter-proposals between the parties. The upshot was that:

The apparently open-ended references to possible defendants in the US other than the respondents or HSBC Holdings Plc was, it seemed, intended only to refer to individuals at HSBC responsible (as ECU may wish to say) for any actionable conduct. However, for reasons I gave during the hearing, I concluded that it was not appropriate to grant any permission under (iii) above, or to adjourn, but to record (for the avoidance of doubt) that ECU had liberty to apply if there were a material change of circumstance. In that regard, I had in mind particularly that as things stand ECU appears to be able (if so advised) to include in the proceedings here any claims it might want to make against HSBC Bank USA, N.A., or relevant individuals. If a difficulty were to emerge as to that (e.g. as to jurisdiction), that would be a new circumstance in which a fresh application could be made. I should not be taken as proposing that such a fresh application will necessarily have merit. That may or may not be the case, to be judged on the facts as they may be if and when any such application is made.

At the hearing, therefore, I granted prospective permission to the extent and on the terms that had ultimately been agreed, and otherwise refused any such permission at this stage (see [2018] EWHC 2972 (Comm)). I reserved any decision on costs, to be made as part of this judgment dealing with the application for retrospective permission.

It was common ground that I have power to grant permission retrospectively in respect of a prior use of documents in breach of CPR 31.22(1). Nor did I understand Mr Lissack QC for ECU to dispute Ms Tolaney QC’s proposition, stated at a high level of generality, that such permission will only rarely be granted (see Miller v Scorey [1996] 1 WLR 1122 at 1133C-D, per Rimer J).

Whether permission for the use of documents in fact made would have been granted will be a very important factor, although it cannot be said in the abstract to be either necessary or sufficient. It cannot be sufficient, else the requirement to seek permission for collateral use would be undermined. A good illustration that persuading the court that permission would have been granted if sought prospectively is not sufficient is Miller v Scorey, supra (and see IG Index Ltd v Cloete [2014] EWCA Civ 1128 at [54], per Christopher Clarke LJ). It cannot strictly be necessary either, since that would be to invent an absolute condition not found in the CPR. However, it will require something unusual about the particular facts of a case, and so in practice it will be very rare, for permission to be granted retrospectively that the court would not have granted if it had been sought prospectively.

In that latter regard, one submission of Mr Lissack QC’s was that it was better, so as to emphasise the importance of the rule, to grant permission after breach, whereby (so the argument went) to reinforce that it was always and only for the court to authorise any collateral use. I do not agree. Depending on the facts, there may not be such a direct sanction for breach as the striking out of the claim in Miller v Scorey, supra; and if the breach can be marked in other ways, it may be felt unnecessary to consider contempt proceedings. But I reject the idea that there is a risk to the sanctity of the rule in declaring unauthorised use to have been a breach and imposing a sanction just in respect of the costs generated by that use, where the case lends itself to nothing more. The specifics of the case may lend themselves to other orders too, though, effectively by way of sanction, and that should always be considered.

It was also common ground that since what is done is done, in the absence of a (cross-)application seeking the imposition of some identified sanction, whether to grant retrospective permission is primarily a matter between the party in breach of CPR 31.22(1) and the court.

All the above said, in the present case, as regards the limited communication there has been to date with UK and US authorities, as explained in Mr Alexopoulos’ evidence, in my view permission would have been granted if sought prospectively, the respondents have indicated that they would be content for permission to be granted retrospectively if the court were minded to do so, and that is in my view the just outcome. I therefore grant that aspect of the application for retrospective permission, subject to any detail as to the wording for an order.

ECU’s use of the Disclosed Documents in obtaining advice from US attorneys has been as follows:

I am clear that in relation to both Kellogg Hansen and Mr Little there has been unauthorised collateral use. But there are subtleties.

Firstly, in relation to Mr Little only, I see no reason to distinguish his involvement in advising ECU as to its dealings with US authorities from those dealings themselves. I would therefore wish to grant permission for that use, unless that is impracticable because permission is not to be granted for the balance of his involvement and the two cannot be separated.

Secondly, Ms Tolaney QC submitted that the court should not contemplate any grant of permission retrospectively without much more detail as to the content of the US attorneys’ advice. In the particular circumstances of this case, I do not agree. I am clear that the court could not order ECU’s privilege to be waived, either as a sanction or as a matter of case management in the application. The logic underlying Ms Tolaney QC’s submission is sound, however. ECU takes the risk in applying for permission only retrospectively that the court may not find it possible to be satisfied that such an exceptional grant of permission is justified without more detail. ECU cannot be required to waive privilege, if that would be necessary to the provision of greater detail, but then it might find it cannot persuade the court to grant its application. That logic does not involve the drawing of an adverse inference from a decision not to waive privilege, or speculation as to the content of privileged communications. It merely applies the incidence of the burden of persuasion on the application. As will be seen, however, in this case I do feel able to judge the merits of the application on the evidence as it stands.

Thirdly, there is a subtlety created by the fact that CPR 31.22(1) operates by reference to the purpose for which there is to be or has been use. That means it is possible, at least in the current, specific, context of an English litigant taking advice, via its English solicitors in the litigation, from (other) external advisers, for the obtaining of the advice and the advice obtained to involve a breach of the collateral use rule, because of ECU’s purpose, though the self-same advice, upon materially the same brief to the external adviser, could have been sought legitimately, without breach (i.e. without needing permission), for the purpose of the proceedings here.

That third subtlety has persuaded me, on balance, in the particular circumstances of this case, to grant retrospective permission (subject again to any detail on the wording of the order) for the past use of the Disclosed Documents in ECU’s dealings with Kellogg Hansen and Mr Little. There will, however, be terms attached to that permission that are necessary, in my judgment, to mark the fact that that use was in fact collateral use without permission, because of ECU’s purpose, for which permission would not have been granted. There must be no prospect of ECU gaining advantage from the degree to which its purpose was improper. That requires inter alia that Kellogg Hansen’s and Mr Little’s existing retainers be terminated and that (unless permission be granted hereafter upon application made) they not be instructed again in connection with the subject matter of these proceedings and their advices not be provided to anyone else at any stage (including to any other US attorneys ECU might at any stage, legitimately, instruct to advise or act). I explain my reasoning below.

The tenor of Mr Alexopoulos’ evidence explaining the dealings with Kellogg Hansen and Mr Little (leaving aside the regulatory authorities aspect of Mr Little’s brief) is that ECU’s purpose in seeking their advice was for it to consider and in due course (if so advised) prepare and commence US proceedings (probably in New York) against HSBC Bank USA, N.A., and/or US domiciled individuals.

That is reinforced by the prospective permission application made and the reason given for it. The permission sought extended to, and was focused upon, the possible bringing of US proceedings, not just their availability in principle. The reason given for seeking permission, echoing a fundamental misconception under which Mr Alexopoulos appears to have been acting, was that whilst Kellogg Hansen had been able to provide advice upon the basis of a brief derived in part from the Disclosed Documents, they could not prepare or commence proceedings without themselves having sight of (copies of) those documents.

Thus, it is admittedly collateral use to make use of Disclosed Documents for the purpose of (actual or contemplated) proceedings in another jurisdiction; and it is plain Mr Alexopoulos appreciated that throughout. His fundamental error was to believe that making use of his or his client’s knowledge of the content of the Disclosed Documents, or of analysis thereof, or sharing with others conclusions he or his client thought could be drawn from that content, is not use of the Disclosed Documents. Of course it is. It is astonishing that so experienced a litigation solicitor should have had such a basic lack of understanding of the import of the prohibition on collateral use. For example, it was stated at the highest level as long ago (now) as 1987 that “this must … clearly be right – that the implied undertaking applies not merely to the documents themselves but also to information derived from those documents whether it be embodied in a copy or stored in the mind”: Crest Homes plc v Marks [1987] 1 AC 829 at 854A-B, per Lord Oliver.

I am not invited by Ms Tolaney QC to consider finding that Mr Alexopoulos is being other than honest, however, and I do not in fact consider that he is. If I thought he was or might be being dishonest, so that he had deliberately flouted the rule against collateral use and was now lying to avoid such a finding, that would be a very different case. As it is, I judge the case on my acceptance that the breach of the rule was unintentional on Mr Alexopoulos’ part (and therefore on ECU’s part).

The breach was, however, negligent to a high degree and that is not the most promising of starts for the retrospective request for permission. Enter, however, the third subtlety I explained above. The fact is that one of the HSBC entities said to be involved is in the US. Likewise certain of the HSBC individuals against whom ECU wishes to contemplate proceeding. The case has that international element. The question of where in principle ECU might bring a claim against HSBC Bank USA, N.A., or US-based individuals, and in the light of that where ECU might in preference choose to do so, is in my judgment a question ECU, via Mr Alexopoulos, might properly investigate for the purpose of taking final decisions on what claims to bring (including what defendants to name) in the proceedings to be brought here. Such an investigation would naturally include the taking of advice from US attorneys, on the facts of this case. If the purpose in obtaining advice as to US law were thus confined, there would be no collateral use. If Signature had a substantial New York office housing appropriate expertise, it would not be a breach of the rule against collateral use for Mr Alexopoulos to bring that office into the case on an appropriately explained and limited brief to advise. The position cannot be different because Signature in fact engaged independent correspondent firms in New York.

On Mr Alexopoulos’ description of the advice actually sought and obtained, notwithstanding Ms Tolaney QC’s criticism of its lack of detail in the absence of a waiver of privilege, it seems to me likely that it has in fact gone no further than it might have done if ECU had limited itself to a proper purpose. In the event, Mr Lissack QC made clear on instructions:

I am conscious that since ECU in fact sought the US law advice it sought with a view to considering bringing proceedings in the US, rather than for a permitted purpose, it may be that no US law advice would have been sought legitimately, without permission, in the absence of Mr Alexopoulos’ skewed understanding of the law. I am also conscious that, privilege in respect of the advice obtained not having been waived, I cannot judge finally that indeed it went no further than it would or could have if sought for a proper purpose. Finally, I am conscious that (as reflected in my refusal of prospective permission at this stage) permission would not have been granted, if sought, so long as the purpose was or extended to the improper purpose.

On the other hand, it seems to me highly likely that if permission had been sought, as plainly it should have been given ECU’s purpose, the debate we had as to what could be done even without permission would naturally have arisen. Whilst permission would not have been granted as sought, the upshot could well have been the obtaining of something very like the advice actually obtained, either legitimately without permission or with some order granting permission if and to the extent required.

In that rather unique set of circumstances, nonetheless I could decline permission, because I cannot be clear whether the advice in fact obtained went further than could have been permissible, but in my judgment that would not be the just solution. In relation to the US law advice obtained, on balance I prefer the approach Mr Lissack QC sought to elevate to a general proposition, even if I have rejected it as such (paragraph 13 above). Furthermore, the grant of permission allows me to attach conditions to ensure that the improper purpose for which the US law advice was in fact sought and obtained does not have any persistent effect in the litigation here and cannot create an advantage for ECU in the US if, hereafter, any claim were in fact pursued there.

Those conditions will be the following (as to which I shall enlist the assistance of counsel after this judgment has been handed down for more precise wording):

Save that again I am not asked to, and do not, doubt Mr Alexopoulos’ honesty, there is really nothing that can be said to soften the criticism of ECU, and of Mr Alexopoulos, merited by the FX Week episode.

It starts with, and is underpinned throughout by, Mr Alexopoulos’ failure to appreciate that showing someone Alexopoulos 4 would constitute use of the Disclosed Documents. But it does not stop there.

Alexopoulos 4 is dated 1 March 2018, a Thursday. It was made in support of an application issued that day for a further order in the pre-action disclosure process, ECU wishing to argue that there had been incomplete compliance by the respondents. The application was served by ECU the following afternoon, Friday 2 March 2018, by email and hard copy delivery to the respondents’ solicitors. No hearing date was obtained that day. Although it is said that ECU hoped to obtain a prompt date, there is no evidence that any step was actually taken before Monday 5 March towards getting the application listed (and even then, the date suggested by ECU’s counsel’s clerk was 16 March). In due course, the application was in fact listed, on 12 March, for hearing on 13 April, but was then disposed of by consent on 19 March, so the April hearing was vacated.

In the meantime, however, without notice to either the respondents or the court, ECU tipped FX Week off about the application. It does not appear that the FX Week journalist in question was given any detail, but she was told, I infer, that ECU thought she would be very interested to read Alexopoulos 4. I did not hear argument on this specifically, so I make no final ruling, but it is not easy to see why that tip-off was not itself a breach of CPR 31.22(1).

Though Mr Alexopoulos did not believe CPR 31.22(1) was engaged, he does appear to have thought, at least initially, that it was impermissible or inappropriate for the FX Week journalist simply to be given a copy of Alexopoulos 4, as she was told that she would need to make an application at court to obtain a copy. She seems to have interpreted this as an invitation simply to attend the Rolls Building and ask Commercial Court office staff for sight of Alexopoulos 4. But there was no prospect of that achieving anything.

The journalist did attend the Rolls Building, on 2 March. It is not clear what she asked, of whom, although there is a suggestion that matters were complicated or confused by an absence of Commercial Court staff that day due to snow and ice affecting London. Come what may, she did not make any proper application, under CPR 5.4C or otherwise. It is not apparent to me that she had any intention of doing so.

Having not obtained sight of Alexopoulos 4 at court, the journalist went to Signature’s office, which is near to the Rolls Building, prompted by Mr Petley of ECU to do so. There, at Mr Alexopoulos’ direction, she was provided with a hard copy. Mr Alexopoulos has offered no real explanation for this, and indeed it seems to me inexplicable, given that earlier that day it had been his view that she would need the court’s permission and he was not told permission had been granted or even sought.

In his evidence for the present application, Mr Alexopoulos spoke of wanting the journalist to be able to read Alexopoulos 4 to prepare for the hearing of ECU’s 1 March application. But she had no need for that, even if there was an imminent hearing, i.e. a hearing within the next working day or two, which there was not. Fair reporting of the hearing (if in due course there was one) could only properly be based upon what was said during it, in open court. At the hearing, if it proved to be necessary to refer to any of the detail in Alexopoulos 4 describing the content of, or deriving from, the Disclosed Documents, the court could be expected to sit in private for that part of the argument. On any view, the court should have been in a position to consider doing so. The provision of Alexopoulos 4 to the press in advance would have directly undermined the right and ability of the court to manage these proceedings and to decide whether to preserve the confidentiality of the content of the Disclosed Documents.

When she collected the copy of Alexopoulos 4 from Mr Alexopoulos, it is his evidence that he made clear to her that FX Week should not run any story relying on it until after the hearing of the 1 March application. Mr Alexopoulos does not appear to have obtained (or sought) any written undertaking to that effect; nor does he say in his evidence that the journalist expressed any acceptance of his condition, although she took the copy statement and it is not suggested she told Mr Alexopoulos that she would not comply with his condition. I do not have any evidence from her as to any of that. Whatever passed between her and Mr Alexopoulos when the copy statement was handed over, in fact FX Week ran a prominent story in its online edition on Monday 5 March almost entirely derived from it and indirectly, therefore, from the Disclosed Documents.

Mr Alexopoulos became aware of the FX Week article that day, 5 March. He did nothing to protest at what was, on his own account, a serious breach of trust and confidence by the journalist (even if it still did not occur to him that CPR 31.22(1) had been breached). He made no effort to have the article taken down. He did not tell the respondents what had happened. He did not tell the court. ECU itself, far from taking offence at FX Week’s haste, provided a responsive comment for them at c.11 am on the day of publication, 5 March, which FX Week were pleased then to add to their online publication of the story. The next hard copy edition of FX Week on Monday, 12 March, carried the article as its main front page splash.

FX Week were finally asked to take the article down only in August, after the penny dropped for Mr Alexopoulos, in the course of correspondence in the present application, that CPR 31.22(1) may have been breached. I say ‘may have been’ to echo Mr Alexopoulos’ language in his witness evidence, not because there is in fact any room for doubt over whether there was a breach. In that evidence, and in the ill-judged tone of some of his correspondence, as Ms Tolaney QC submitted, it is not clear that Mr Alexopoulos really took on board that giving Alexopoulos 4 to FX Week was improper, unarguably and seriously so, until the hearing before me last week.

All in all, the provision of a copy of Alexopoulos 4 to FX Week in this case was a very serious breach, neither sensibly explicable nor remotely excusable. There is no prospect whatever that the court would have granted permission for it had it been sought prospectively. I do not think a solicitor with a competent, basic knowledge of the rule against collateral use, or who took a cursory glance at the White Book commentary on CPR 31.22, could reasonably have advised otherwise. I see no reason at all to grant retrospective permission and I refuse ECU’s application for such permission.

I have already identified part of my view as to costs, in setting out the conditions on which retrospective permission is to be granted in relation to ECU’s dealings with Kellogg Hansen and Mr Little. It will come as no surprise in light of my conclusions about the FX Week episode that ECU must bear its own costs and pay the respondents’ costs on an indemnity basis in relation to it, including the part it played in the present application.

As regards the application for prospective permission, it essentially failed, to the extent it was contested. Furthermore, one reason why the contentious aspects did not succeed was that ECU had already obtained, by unauthorised collateral use, at least as much in the way of advice as to US law as it might properly need at this stage. I also have real doubt that it would be practicable to separate costs as between different parts of the application in a way that would allow different bases of assessment to be applied.

The just order in all the circumstances, in my judgment, is that ECU pay all of the respondents’ costs of the present application, assessed on the indemnity basis if not agreed.