Imerman v Imerman

On 11th December 2009, I gave judgment in respect of three applications. As set out in that judgment [para. 1], the principal application was that made by the husband for the return of seven files of documents containing information belonging to him, which information had been secretly obtained by, or on behalf of, one of the wife’s brothers from a computer system used by the husband, and for consequential orders prohibiting the wife or her legal representatives from making any use of that information. The second application was made by the wife for an order that the parties file and serve Forms E. The third recent application was an application made by the wife for the preservation of other confidential information, which had been obtained from the husband’s computer files, but was not within the seven files of documents to which I have just referred.

The representation at this hearing is the same as for the previous hearing. This hearing has been fixed to deal with consequential matters arising out of my judgment, including the issue of costs.

It is agreed between the parties that my judgment of 11th December can be published and reported without anonymisation. I agree with this proposed order, largely because judgments have been given in parallel proceedings in the Queen’s Bench Division without anonymisation, and it would be wholly unnecessary to seek to anonymise my judgment.

The issues which I have to deal with today are: (i) the form of the order of 11th December; (ii) the form of today’s order; (iii) whether I should give further directions in respect of information/documents contained within the seven files which the husband claims are privileged; (iv) the issue of costs; and (v) finally, applications, principally made on behalf of the husband, for permission to appeal, and consequential orders sought by him for a stay of one of the provisions of the order of 11th December, and for the continuation of the order made by Coleridge J. on 23rd March 2009 pending the determination of any prospective appeal.

(i) Turning first to the form of the order of 11th December: it became clear, during the course of the hearing, that there are no substantive issues between the parties as to the form of that order. The only possible disagreement relates, first, to a part of the preamble, which is sought to be added by Mr. Turner, which contains a definition for the words “confidential information”. I do not consider it necessary to have such a definition in the order. The second is as to the wording of para.1, which states that, “Save as provided below, the husband’s summons is dismissed”. Mr. Turner points out that that is subject to orders made on 11th December, and the orders to be made by me today. This is not a controversial issue.

The third arises out of slight differences between the drafting of para.4, in the draft prepared on behalf of the husband, and para.3, in the draft prepared on behalf of the wife. I do not see any material differences between them – the draft prepared on behalf of the wife refers to pagination but that on behalf of the husband does not. As this is not a material difference, I propose that the order should be made as set out in para.4 of the husband’s draft order.

(ii) Turning next to the form of the order for today: going through the paragraphs in turn, I propose to deal with them relatively summarily. I am working from the draft prepared on behalf of the husband. Paragraph 1 requires the wife to delete permanently from her computer systems any documents or part(s) of documents in the Withers files, and cause for her solicitors, all her counsel, and anyone else holding such material on their computer systems on her behalf, permanently to delete those documents, without reading or rereading them. It is submitted on behalf of the wife that that has been done, insofar as it can reasonably be done.

The issue arises in this way. In common with many other organisations including firms of solicitors, the wife’s solicitors, Withers, back up their electronic information. They do so daily, weekly, monthly and annually. As a result, there are considerable volumes of backup tapes. In so far as any of the documents in the Withers files were held electronically, they would, at some stage, have been backed up.

Mr. Howard, on behalf of the husband, seeks an order that this material (on the backup tapes) should also be deleted. He submits that it is wrong in principle, in particular, that privileged documents should be retained, and that, up to today, he or the husband had received no categorical assurance as to the number of documents contained within the Withers files which had been held electronically and so would feature in a backup tape or tapes.

Mr. Turner opposes the deletion of the material from the backup tapes, and relies on a letter which has been provided today and is dated 13th January 2010. The letter is from the Director of Risk and Compliance at Withers. This seeks to set out the practical difficulties which, it is said, would arise if an order were made that the relevant material in the backup tapes had to be deleted. I quote:

“In order to comply with any request to delete relevant emails, we would therefore need to find, isolate and selectively delete emails from the backup tapes. I am advised that such a task would be highly complicated and would involve a senior IT consultant, possibly for a number of months. This would also require the restoration of the backup tapes to the live IT environment, which in itself would compromise the security of all the data on each tape. Even after such a task, the firm would not be in a position to make an absolute statement that no copies of the relevant emails or the attachments to those emails were held in any location for the relevant client”.

Then there is reference to the fact that even deleted material can, in some circumstances, be recovered.

Mr. Howard submits that the difficulties referred to in this letter are exaggerated and that it is wrong that the husband should run the risk that his material might be divulged in due course, as a result of it being held on the backup tapes. He submits that the material can be relatively easily identified by electronic search and deleted.

I am persuaded by the letter from the Director of Risk and Compliance that there would be significant practical difficulties encountered if I were to make an order that the offending material held on the backup tapes had to be deleted. In my view, the husband’s position and his information and documents can be properly protected if I make an order that no-one is to be permitted to access any document or any part of any document in or from the Withers files held on any backup file without the permission of the court.

Paragraph 2 of the draft order seeks an order requiring the wife and her solicitors to deliver up to the husband any document or any part of any document, which were held electronically in the husband’s computer files and were copied by the wife’s brother or on his behalf, but are not within the Withers files. As I understand the wife’s case, it is that there are no such documents and no parts of any such documents, because the only documents which she and her solicitors received were the documents in the seven files.

However, having regard to the history of this matter and to the extensive information that was taken from the husband’s computer files, in my view, it is appropriate for me to make an order broadly in the terms of para.2, provided (as was made clear by Mr. Howard during the course of his submissions) that it replicates para.1, in that it refers only to documents or parts of documents - in other words, primary documents - and does not apply to derivative or subsidiary documents containing information derived from those primary documents. If that is made clear, it is a justifiable order.

The third provision about which there is a dispute is that contained in para.3, which requires the wife, and requires her to cause her solicitors, to prepare affidavits setting out the steps taken to comply with paras.1 and 2 of today’s order, and para.3 of my order of 11th December (which requires delivery up of the seven files).

Mr. Turner submits that such an order is unnecessary because he has made submissions, and so has gone on record, to the effect that the terms of the order have been effectively complied with. In my view, the husband, in the circumstances of this case, is entitled to have that fact clearly expressed in a sworn document. Accordingly, I propose to make an order in the terms of para.3. If Mr. Turner is correct, it will not be a very onerous obligation to impose on the wife or her solicitors and should be capable of being implemented speedily. I propose to make the order, as set out in para.3, save that I am going to require the affidavits to be filed and served by 4 o'clock next Tuesday, 19th January.

I think that leaves the other issues that I have identified; namely the issues of privilege, costs and permission to appeal.

(iii) Dealing, first, with the issue of privilege. It is part of the husband’s case that a proportion of the information contained within the seven files is privileged. In my substantive judgment I required the wife to return the seven files that she had received from or through her brother to enable the husband and his advisors to remove the material which was said to be privileged, and then subsequently to return the balance of the seven files to the wife’s solicitors.

I said, and I quote from para.155, that the material (that is the material which was said to be privileged) must be preserved and held by the husband’s solicitors, pending the determination of the wife’s ancillary relief application. That was a provision proposed by the husband. I also indicated that, if it became necessary for any issue of privilege to be resolved, it appeared to me that the provisions of the Civil Procedure Rules, rule 31.19, (3) to (7), provided an appropriate procedure.

The order which is sought on behalf of the wife is that that procedure should be activated immediately and that I should require the husband, by 4 o'clock on Friday, 22nd January, to produce an affidavit identifying each document or part of each document in respect of which he claims he has a right to withhold inspection on the grounds of legal professional privilege.

These provisions are opposed by Mr. Howard. He submits that it is wrong, in principle, that the wife should be able to gain any advantage as a result of this information having been irregularly obtained. He submits that, if I were to make an order requiring the husband now to identify grounds on which he claimed a right to withhold inspection, I would be affording to the wife an advantage. He also makes consequential or ancillary submissions in respect of the timing of the provisions proposed on behalf of the wife, including that there is insufficient time for the matter to be addressed at the first appointment.

21 Mr. Turner submits that, absent the privilege point, the wife would not have been required to return the seven files to enable the allegedly privileged documents to be extracted. So, he submits, it is for the husband to establish the claim to privilege. Otherwise, he submits, I would be undermining my substantive judgment, in that I would be adhering to or giving effect to the husband’s ‘clear line’ argument.

I do not propose to make any further directions in respect of the information or documents which are claimed to be privileged. Paragraph 2 of the draft order sought by the wife requires the husband to identify each document or part of each document in respect of which he claims he has “a right to withhold inspection”. The reason that the husband’s application and my judgment are framed as they are, is because the information and documents were irregularly obtained by or on behalf of the wife. By that, I mean that she took receipt or her solicitors took receipt of information which had been irregularly obtained for her by her brother.

In my view it would be wrong to put the wife in a better position than she would be in if she had not received the irregularly obtained information/documents which are alleged to be privileged. It is for her, in due course, to seek to satisfy a court that discovery or inspection of the relevant documents should be afforded, and then (and only then), if the husband seeks to assert a claim to privilege, would the court have to go on and determine whether or not that claim was made out. I do not consider that the wife should be put in an advantageous position in respect of a claim to privilege as a result of the information having been irregularly obtained.

(iv) Next, I propose to deal with the issue of costs. As I said in the course of my substantive judgment, one of the frequent consequences of information being irregularly obtained is to inflame the litigation process. I might also have said that it creates or can create a very tangled web, and a very expensive tangled web. The costs which have been incurred to date in these proceedings by the parties combined total almost £1 million – and, effectively, nothing substantive has happened in the course of the wife’s ancillary relief application because Forms E have not been filed and, as a result, there has been no First Appointment. The husband’s estimate of costs is just over £570,000, and the wife’s estimate of costs is just over £400,000. It is a staggering sum of money to contemplate at this stage of these proceedings.

The husband seeks an order that the wife should pay the costs incurred in determining his application and also in determining the wife’s application on an indemnity basis. He seeks an additional order that the wife should make an interim payment.

Mr. Turner, on behalf of the wife, submits that the costs of both parties’ applications should be reserved to the judge determining the final ancillary relief hearing, or alternatively, that there should be no order for costs. If there is an order against the wife he submits it should be for standard costs. He also identifies elements of the costs which he submits the wife should not in any event have to pay: the costs of what he calls “privilege checking”, on the basis that this would have had to happen at some stage in any event; the costs of the hearing in front of Coleridge J., as that hearing was unnecessary; and the costs of two leading counsel for the husband. Finally, he submits that, if I do make an order for costs, it should not be enforced until after the substantive ancillary relief proceedings.

The husband seeks an order, as I have indicated, that the wife should pay his costs and that those costs should be assessed on an indemnity basis. Pursuant to my judgment of 11th December he also incorporates an order to this effect, namely that the order for costs would be subject to:

“The court at the final hearing of the wife’s application for ancillary relief, retaining the specific ability to take such liability into account when determining its award and/or making any further order for costs, if he considers it appropriate to do so, as part of its assessment of the conduct of the parties in respect of the litigation”.

Mr. Howard submits that the wife should pay the costs of this exercise because she decided to hold onto and seek to make use of the information provided to her by or on behalf of her brother. He submits that costs should be awarded against the wife both (a) to mark the court’s disapproval of the information having been irregularly obtained, and (b) to deter others from engaging in such conduct or from causing or permitting others to engage in such conduct on their behalf.

In support of his submissions, he relies on passages from the judgment of Jones v. Warwick, which I referred to in my substantive judgment, to the effect that the court should not acquiesce in, let alone encourage, a party to use irregular means to obtain information. As to the Wife’s involvement, Mr Howard says it is “notable” that the Wife has never maintained that she was not aware of her brother(s) activities. He also submits that the information was obtained by force, in that it was password protected, and that it was not disclosed to the husband or his advisers as soon as it came into the wife’s possession. He relies on the fact that the material was received, and was then “privilege checked”, before the husband’s solicitors were notified of the receipt of the material even though they had previously expressly asked for disclosure of all “Hildebrand” documents.

Mr Howard submits that there was no justification for the invasion of the husband’s material, which commenced on and from 6th January 2009, and that, if the wife had considered it appropriate, she could have made an application to the court, and indeed, could have made an application and sought directions from the court forthwith upon or following the receipt by her of the seven files from her brother. As I have indicated, he refers to and relies on Jones v. Warwick, and he has also referred me to passages from the judgment of King J. in M v. M [2009] EWHC 1941 (Fam).

Mr. Turner submits that the starting point is the general rule set out in rule 2.71(4)(a) of the Family Proceedings Rules, namely that there should be no order as to costs. Secondly, he submits that, if the issues which I have determined are considered, the wife has had a significant measure of success. The husband failed on the issue of principle that he raised – the “clear line” argument - and he also failed to procure an order restraining the wife from making any use of the material (apart from that which is said to be privileged) for the purposes of her ancillary relief application. He acknowledges that the wife has also failed on some issues – the preservation of the memory sticks and privilege - but submits that these were subsidiary issues. Looking at the outcome of the hearing overall, he submits that the wife has been more successful than the husband.

Based on that assessment, Mr Turner submits that the wife could have made an application for costs in her favour. But she does not do so, in recognition of the fact that costs can properly be used as a discouragement to parties to proceed in an irregular fashion. He submits that I ought properly, in the interests of justice, reserve the costs. It will not be until the conclusion of the final hearing that a proper assessment can be undertaken as to whether or not the conduct of the wife and of her brothers was justified, or whether it was conduct such as should result in the order for costs being sought by the husband. He submits that I am not - which I am obviously not - in a position to analyse, by reference to all the evidence, whether or not the steps taken by the wife and her brothers were justified. The sanction of costs should not be imposed now, because it might turn out that the steps taken by the wife and her brothers were justifiable.

Mr Turner also submits that the judge determining the ancillary relief application will have to take into account all the financial circumstances, including any liability in respect of costs, and make consequent global orders. He points to the fact that sanctions have been imposed against those who were primarily responsible for the information being obtained irregularly, because orders for costs have been made against the wife’s brothers in the proceedings in the Queen’s Bench Division. Finally, he submits that to make an order for costs in these circumstances might create a disincentive to anyone who had obtained material irregularly to comply with the Hildebrand rules.

In support of his subsidiary application, that I should make no order as to costs, Mr Turner submits that I should balance what he submits is the wife’s prima facie entitlement to costs and the fact that she has her own very substantial costs to pay. In respect of the application that the costs should be assessed on an indemnity basis, he submits that the threshold for such an order has not been reached, and again, that it should depend on an assessment of the reasonableness of the steps taken by the wife and her brothers. He repeats the submission that this cannot be judged properly until the final hearing.

On the question as to whether or not I should make an interim payment, Mr Turner submits that I do not have sufficient information as to the wife’s financial circumstances to enable me to assess the impact of such an order on her. He submits that she does not have ready access to liquid funds, which would enable her to meet any order for an interim payment.

When determining what order to make in respect of the costs of the applications determined in my judgment of 11th December 2009, I start with rule 2.71 of the Family Proceedings Rules. This provides:

“4(a) The general rule in ancillary relief proceedings is that the court will not make an order requiring one party to pay the costs of another party; but

(b)

the court may make such an order at any stage of the proceedings where it considers it appropriate to do so because of the conduct of a party in relation to the proceedings (whether before or during them).

(5)

In deciding what order (if any) to make under para.4(b), the court must have regard to …”

a number of matters, including “any failure by a party to comply with these Rules”, “whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue”, “the manner in which a party has pursued or responded to the application or a particular allegation or issue”, “any other aspect of a party’s conduct in relation to the proceedings which the court considers relevant”, and “the financial effect on the parties of any costs order”.

During the course of my substantive judgment, I referred extensively to the Court of Appeal decision of Jones v. Warwick, including the following:

“If the conduct of the insurers in this case goes uncensured there would be a significant risk that practices of this type would be encouraged. This would be highly undesirable”.

Secondly:

“A judge’s responsibility today in the course of properly managing litigation requires him, when exercising his discretion in accordance with the overriding objective contained in CPR Pt 1, to consider the effect of his decision upon litigation generally”.

Thirdly:

“While not excluding the evidence it is appropriate to make clear that the conduct of the insurers was improper and not justified”.

Lord Woolf then refers to weapons in the court’s armoury:

“In particular [the court] can reflect its disapproval in the orders for costs which it makes”.

In that particular case, the Court of Appeal made an order that the defendants should pay the costs incurred in determining the admissibility issue, because (and I quote again):

“… the conduct of the insurers gave rise to the litigation over admissibility of the evidence which has followed upon their conduct”.

Finally:

“In giving effect to the overriding objective, and taking into account the wider interests of the administration of justice, the court must, while doing justice between the parties, also deter improper conduct of a party while conducting litigation.”

In the present case, the wife’s brother or brothers conducted a pre-emptive strike, which I described as being extreme. The wife has sought to take advantage of that pre-emptive strike by being permitted to make use of the information contained within the seven files. It is always open to a party who considers that what I am calling a pre-emptive strike is necessary to make application to the court for orders for information to be disclosed or for information to be protected from destruction. As I indicated in the course of my judgment, parties should respect the fact that the proper route for obtaining another parties’ confidential information is by the means permitted by the rules, including by one of the orders available to the court.

The fact that, in this case, the original invasion of the husband’s files was not undertaken by the wife, or even possibly at her request, does not, in my view, meet the point. She has, as I have indicated, retained the material, read it, without making any application to the court, and seeks to take advantage of it.

I regard the conduct which resulted in the husband’s information being obtained irregularly and the volume of that information which was obtained as being at the extreme end of the range of behaviour which I have seen during the course of the last 30 years. In my view, the order for costs that I make should primarily reflect my assessment of the conduct which has led to the substantial sum of £1 million being spent in order to determine the issues which, in my judgment, have resulted from the husband’s information being obtained as it was. I also place substantial weight on the matters referred to in Jones v. Warwick.

It is true that, in substantive respects, the wife has been successful in opposing the application that was made by the husband. However, that does not, in my view, lead to the conclusion that the husband was not entitled to respond in the way that he did, and was not entitled to make the application which he did, consequent on the information having been irregularly obtained.

I have no doubt at all, having regard to matters to which I have referred, the factors set out in rule 2.71(5) and to the interests of litigation generally, that I should make an order that the wife should pay the costs of and incidental to the two applications that I have determined in my judgment of 11th December. There is, I remind myself, what might be called the safety valve contained in para.9 of the draft order, so that the court at the final hearing can properly reflect in the orders made by that court, the overarching assessment reached during the course of that hearing.

44. I am also not persuaded by Mr Turner that I should exclude the matters to which he has referred. I do not consider that privilege checking would have had to happen at some stage, nor that the hearing before Coleridge J was unnecessary. I also do not consider that I should specifically exclude the costs of two leading counsel.

Two consequential issues arise. First, should I order any assessment to be on the indemnity basis or the standard basis? Mr. Howard, during the course of his submissions, referred me to passages from the judgment of Excelsior Commercial & Industrial Holdings Limited v. Salisbury Hammer Aspden & Johnson & Ors., a decision of the Court of Appeal of 12th June 2002 and, in particular, two passages. First, from the judgment of Lord Woolf, in which he said, and I quote from para.32:

“In my judgment it is dangerous for the court to try and add to the requirements of the CPR which are not spelt out in the relevant parts of the CPR. This court can do no more than draw attention to the width of the discretion of the trial judge and re-emphasise the point that has already been made that, before an indemnity order can be made, there must be some conduct or some circumstance which takes the case out of the norm. That is the critical requirement”.

Second, from the judgment of Lord Justice Waller at para.39:

“The question will always be: is there something in the conduct of the action or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs?”

Although that judgment was referring to the Civil Procedure Rules, the provisions of rule 2.71 clearly reflect the same approach, because something which takes the case “out of the norm” is required before the court, first, can make any order for costs at all, and secondly, in addition, can decide that they should be assessed on an indemnity basis. Mr. Turner submits that any assessment should take place by reference to the standard basis.

Largely for the reasons that I have already given for making an order for costs, I consider that I am also justified in making an order for those costs to be assessed on an indemnity basis. That, in my view, properly marks my assessment of the manner in which the information was irregularly obtained, and also, is necessary or reasonable in the circumstances of this case, in part, to discourage similar conduct in the course of other ancillary relief applications.

The final part of this application is the order sought by the husband that the wife should make an interim payment on account of costs. I do not consider that I am in a position properly to assess the impact of requiring the wife to make an interim payment. I do not, therefore, propose to make any order for any interim payment in respect of the substantive order for costs that I have made.

(v) The final area that I must deal with is the application that is made by the husband for permission to appeal. The rules provide that permission to appeal may be given where (a) the court considers that the appeal would have a real prospect of success, or (b) there is some other compelling reason why the appeal should be heard.

Mr. Howard submits that both grounds are establish, in that the husband’s appeal has a real prospect of success, and also or alternatively, that there is a compelling reason why I should give permission to appeal. In support of that application, he relies, in particular, on passages from the judgment of Lord Justice Wilson in White v. Withers, from paras.83 and 85. In para.85, Lord Justice Wilson said:

“The present proceedings, whether at this preliminary stage or at substantive trial, are not those in which actions within the Hildebrand ‘rules’ fall to be tested, whether against the law of tort or otherwise. Other such proceedings may arrive in this court; in my view, if now only in the interests of legal clarity, they should do so.”

Mr. Turner also makes an application for permission to appeal, but only in the event that I give the husband permission to appeal.

I consider that I have set out in my substantive judgment the appropriate principles applicable to the applications I have determined. I also consider, contrary to Mr. Howard’s submission, that I have made discretionary decisions based on the application of those principles to the circumstances of this case. In my view, I was justified, by reference to the circumstances of this case, in reaching the discretionary decisions that I did.

I also do not consider there is any “compelling” reason why an appeal should be heard in this case. In my view, if the Court of Appeal decides that this is the appropriate case or vehicle for the determination of issues of broader principle, that is a matter that can be determined by the Court of Appeal. So I reject the application made on behalf of the husband for permission to appeal, and I also reject the application made subsidiarily on behalf of the wife for permission to appeal.

That raises two consequential matters. Mr. Howard seeks a stay of para.4 of my order of 11th December, which requires the husband’s solicitors to return to the wife’s solicitors the documents in the seven files, save for those in respect of he claims a privilege, by 4 o'clock on Friday, 22nd January. In addition, he seeks a continuation of the order made by Coleridge J., to the effect that the wife must not make any use of any of the information in the seven files, pending the determination of the husband’s prospective application for permission to appeal and any consequent appeal.

Time is very tight. I have required the parties to file and serve Forms E by 4 o'clock on Friday, 22nd January. The first appointment is fixed for 26th February 2010. It has been made clear during the course of this hearing that the wife would wish to make use of the material which is, pursuant to my order, due to be returned to her, in part for the purposes of the first appointment, including for the purposes of preparing a questionnaire on the husband’s Form E.

If I were to order a stay and if I were to continue the provisions of Coleridge J.’s order, I would be further inhibiting the proper progress of the ancillary relief proceedings. As I said in my substantive judgment, I consider that sufficient time and costs have been expended on the issues raised by these applications. Further, the wife and her advisers have already had possession and knowledge of the material for a substantial period and the use proposed, as referred to previously, will be of limited prejudice to the husband. I do not, therefore, consider a stay of my order or the continuation of Coleridge J’s order justified. Additionally, if the Court of Appeal is going to address the issues raised in my judgment, then in my view, the sooner the matter is put before the Court of Appeal, the better. The route, in my view, which permits or enables that to occur is for me to refuse the husband’s application for a stay of para.3 and for a continuation of the order of Coleridge J. If my judgment stands the effect of acceding to the husband’s submissions would be substantively to inhibit the proper progress of the ancillary relief proceedings. Any application can be made expeditiously to the Court of Appeal. Having regard to the resources that have been expended so far, I do not see that being a hurdle which would create any substantial difficulties for the husband and his legal advisers.